SAVE Is Ending. Most People Are Missing This Key Decision

When I graduated I chose save and then put my head in the sand. Now I have to actually think about PAYE versus IBR because my payment is going up so much. This is a mistake that millions of people are making and I'm not talking about putting your head in the sand because that's a major mistake and I'm not referring to making the choice between PAYE versus IBR. I'm talking about a bigger mistake than that and in this video I'm going to show you what that mistake is and also how you can fix it. With that being said, let's jump into it. You see when save came out people could put their head in the sand and go on save because the payments were so low. For a lot of people it was a no-brainer to use it but now those individuals will see their payments going up and the mistake they're making is saying well I'm going on loan forgiveness I'm choosing the lowest monthly payment and the reason why that's a mistake is because the payments are increasing so high for some people that it actually would make sense to look at paying off your loans versus going on loan forgiveness and they're ignoring that choice completely. Those of you that are new to the channel at Fitbucks we help young professionals with their financial management and we've helped young professionals manage over two billion dollars in student loans and in the last month those of our members that were on save now that are getting kicked off and having their payments go up about 50% of those that we've helped have actually decided not even to pursue loan forgiveness anymore. They've actually completely switched over and said I'm just going to pay off my loans instead because my payments have gone up so much. Now before we get into showing you how to figure out should you be paying off your loans or going on loan forgiveness I'm going to share with you two examples one for Sarah who was pursuing regular loan forgiveness and one of John who was actually pursuing public service loan forgiveness. All right we will start with Sarah's situation first. She was pursuing regular loan forgiveness and her monthly payments on save were $350 a month. Now when she first entered repayment if she stayed on the standard 10-year plan her payments were going to be $1,250 a month so that like $900 difference it was a no-brainer to pursue loan forgiveness in her situation but now that save is gone the only plan that she would qualify for is IBR and her payments are going to jump to $850 a month so like many others Sarah scheduled a call with her Fitbox finance expert and try to figure out what to do and what she can qualify for with all this noise going on. However on that call the Fitbox expert showed her some numbers and reframed her perspective by switching to paying off her loans instead of pursuing loan she would end up with almost $100,000 more in the long run and this happens because the payments between IBR and her paying off her loans in 10 years was not that drastic of a difference but now if she paid off her loans sooner in 10 years she would then be able to reinvest that money and that's what gives her that almost six-figure difference during that time period and actually when Sarah saw that difference she decided to reprioritize her other goals in life as well and said you know what I'm actually going to not pay this off in 10 years I want to do it more aggressively so her new game plan is actually to pay off the loans in five years or less and then save the money afterwards but she would have never have saved that $100,000 if she didn't even actually think about paying off her loans instead of going on loan forgiveness. Now let's talk about John he had been pursuing public service loan forgiveness aka PSLF for three years which means he had seven years left to go and he had been on the save student loan repayment plan the most recently and just like Sarah he was going to see his payments increase dramatically and in John's case he was actually still going to save about $10,000 by pursuing public service loan forgiveness but the way he looked at it was $10,000 over seven years is not that much money and he had a lot of uncertainty around PSLF because he didn't even know if he was a stay at the non-profit or not so he also decided hey I'm going to switch over to paying off my loans not necessarily because he was saving tens of thousands of dollars but because it made more sense for him in his personal situation and the benefits of public service loan forgiveness were now going to be very minimal compared to what they had been when he was on the save plan. Now you've seen how Sarah and John started off like millions of others right now save is gone should I go on IBR or pay as you earn to stay on loan forgiveness but you've also seen how they took it one step further by then saying well wait a second should I actually be paying off my loans instead of going on loan forgiveness so that's the big question for you to think about is how much could you be potentially leaving on the table by not analyzing should I be paying off my loans or should I be going on loan forgiveness and that's what we're going to talk about next is how do you decide which one is the right one for you. Hey guys real quick if you're still watching this video it's because you're getting value from it we enjoy making these videos and when you subscribe to the channel it helps us grow which allows us to keep making more and more videos so if you get a chance please hit the subscribe button with that being said let's jump back into the video and there's two ways to figure this out there's a general rule of thumb and there's there's the recommended way let's jump into the general rule of thumb first for regular loan forgiveness the general rule is this if your debt is 1.5 times or less that amount of your income most of the time it's going to make sense to pay it off so for example if my income is $80,000 a year and I owe $120,000 or less in federal student loans chances are I'm going to benefit by paying off my loans now on the other hand if that same ratio is 2.25 times or more most of the time from a financial perspective it's going to make sense to go on loan forgiveness so again if I make $80,000 a year if my student loan debt is $180,000 or higher most of the time it's going to make sense for me to pursue loan forgiveness just because of how much money I end up saving now if you're in between those two ratios you're in this gray area and really any way would work for you as long as you actually follow a plan and do it over time you should end up in almost the same situation regardless of which choice you make now for public service loan forgiveness we typically look at a one-to-one ratio or higher meaning if you make $80,000 a year and your federal student loans are $80,000 or higher then most of the time public service loan forgiveness is going to save you a pretty decent chunk of money and it would make sense to go for for public service loan forgiveness now these rules can give you a general idea of what to do but there's a better way to make this decision at fitbucks we emphasize that you can't make decisions in isolation so like student loans car loans investments buying homes having children getting married all these things are interconnected and they should be being looked at as a whole and that's why we recommend building out a financial plan that looks at all your finances so you can see how all these little things affect the big picture so to do that we recommend you watch this video next