It’s time for episode 3 of MAKERS Money — Sallie’s weekly show about women, money, and power. Guest Tiffany Aliche of The Budgetnista talks with Sallie about tips to stay on top of your student loan debt — including whether you should date someone with debt.
MAKERS Money is co-produced by MAKERS, the network of changemakers that spotlights the trailblazing women of today and tomorrow, and business and financial news platform Yahoo Finance. The season airs Thursdays at 6PM EST on Yahoo Finance, MAKERS, and here at Ellevest. We’ll be archiving the episodes at Ellevest, too. Pour yourself a glass of wine and tune in Thursdays at 6. You don’t want to miss this.
MAKERS Money, Episode 3: Slay Your Student Loan Debt
Sallie Krawcheck: Money is power, and ladies, it's time to level the playing field.
Hi, everyone. Welcome to MAKERS Money. I'm Sallie Krawcheck, CEO of Ellevest, the top-rated investing platform for women*. Today, we're back at happy hour in New York City, and we're talking about student loan debt.
Okay, I know, I know. You are not allowed to turn off this video — because I know it's not a topic that thrills, but it's so important. In case you missed it, graduates in the United States owe an effing fortune in student loan debt: more than $1.3 trillion dollars. We women hold nearly two-thirds of it, averaging more than $20,000 each for a bachelor's degree. And that's $30,000 if you're a woman of color.
Sallie: And here's a double ugh/yuck, the research tells us that paying student loan debt is slower going for us women than it is for the guys due in large part to that frustrating gender pay gap. So you know I'm bringing some tips. And I've got four tips to help you pay down your student loans faster and without pain.
4 ways you can pay down student loan debt faster
Number one. Put your student loan payments on auto-pay. Now this will typically save you 0.25% in interest expenses, and it's going to ensure you are never going to pay a late fee. Not to mention taking one more thing off your to-do list.
Number two: Not all student loan debt is created equal. If you've got multiple loans, they're likely to have different interest rates, so you want to pay off the loans with the highest interest rates first. If you can pay more than the minimum — which is terrific — always make sure you specify which loans you want the additional payment to go toward.
Number three is “pick up the phone.” Have you been paying on time? If so, then make a call to your lender and ask for a lower interest rate. This is where a boring task and a speakerphone are your friends. It doesn't always work, but no one is going to penalize you for calling very quarter and asking. So ask.
And finally, number four: Don't let student loan debt make you put everything else on hold. I've heard from some of you that it can be tempting to pour all of your extra money into chipping away at the debt — and if it's keeping you up at night, I totally get it. But your student loan should not keep you from contributing to your 401(k) or starting an emergency fund or living your life.
For more on this, I'm delighted to be joined by Tiffany Aliche, The Budgetnista. I love that name.
Tiffany: Thank you.
Sallie: Tiffany has been called America's favorite financial educator, and her Budgetnista blog is one of the top personal finance blogs in the nation. Welcome, Tiffany, and cheers.
Tiffany: Thank you.
Sallie: So, Tiffany, a lot of women tell me they want to make progress on their student loan debt but they just don't know how to go to it. What are you advising them?
Tiffany: Well, I say: Don't avoid it. Call your loan provider. There are two specific programs you're going to ask about. There's a forgiveness program, and there's something called the IBR Program. That is the income-based repayment program. And so if you don't make much, you might qualify for the IBR program, and what that means is that based upon what you do make, that's what your payment is going to be.
Sallie: Forgiveness and IBR programs.
Is college right for everyone?
Sallie: Important to remember. But … What do you think about college these days? I mean, it's awfully expensive.
Sallie: Is it right for everyone?
Tiffany: Well, I say this: “Knowledge for all, college for some.” So college should be an investment. So you want to have a return on your investment. You might find that you want to be a plumber or you want to be an actor.
Sallie: My son! My son! An actor. Should he go to college?
Tiffany: You want to invest in training and trade school versus college, because it might not be a fit.
That romantic question: What’s your credit score?
Sallie: Great. Too late. Now, this situation comes up again and again. You are so in love, and you are ready to be married … and he or she is swimming in student loan debt. What do you do?
Tiffany: Well, here's the thing ... I'd be more concerned if they had a really bad money mindset, because that [student loan debt] is something that you can work toward. You can call that loan provider. You can even really adjust where you work and say, “You know what, I'm actually going to work for the state or for the federal government so I can get that loan forgiven.” But if this is someone who is consistently making bad, poor financial choices — that's what you want to be worried about.
Sallie: So what do you, sit down with them and have the money talk?
Tiffany: Yes, certainly. I mean, I asked my husband on date three, “What's your credit score?”
Sallie: And you got to date four?
Sallie: Yeah, but it's all about being mindful, right?
Smartest (and stupidest) money moves
Sallie: All right. We love to ask this question of everybody who joins us. What's the stupidest thing you've ever done with your money?
Tiffany: Oh, I could trump anybody's stupidest thing. I invested with a "friend of mine." And I said that I wanted to learn how to invest. So he said to open up two credit cards … and I did.
Sallie: What? I'm sorry. You took money out on your credit cards?
Sallie: To invest?
Sallie: Okay, we are headed towards the stupidest move ever right now.
Sallie: And it turned out super well, right?
Tiffany: It ended up … I took out $20,000, and based upon what he said I'd be making, I spent another $15,000 — ended up with $35,000 in credit card debt, and he was gone.
Sallie: Okay. I also love to ask: What's the smartest thing you've done with your money?
Tiffany: The smartest thing, for sure I learned the lesson, and I said I'm going to invest in education, so just taking courses and lessons and reading books, and just investing in knowing better so I could do better.
Sallie: Well, you rock. Thank you so much for being here with us today.
Tiffany: Thank you for having me.
My retirement vs. my kids’ college
Sallie: And now it's time for my favorite part of the show, which is questions from all of you and we received a lot of great questions from you on student loans. So clearly, this is a challenge that hits home for many of you. So let's go ahead and tackle them.
Question number one: “I have to choose between paying down my student loan debt and starting to save for my own kids to go to college. What should I prioritize?”
This one hurts me a little bit, because as a parent, we all want to give our kids everything and we want to do as much for them as we can. But in most cases, you should pay off your own debt first — because if you prioritize your child's finances at the expense of your own, what you're really doing is creating a position in which they may need to take care of YOU financially down the road.
As a rule of thumb: As they say on airplanes, put on your own oxygen mask before assisting others. It'll be better for both of you in the long run.
How do I refinance my student loan debt? (And should I?)
Question number two: “I'm making big monthly payments on my student loans but it doesn't feel like I'm making a dent in my balances. Should I refinance?”
If it's going to take down your interest rate, you certainly should. And to do so, you're generally going to need a credit score of 700 or higher. From there, it's best to take that and take the application and shop a few different lenders — whether it's your traditional bank, or one of the online student loan lenders like Common Bond or Earnest. Scope out several and compare the options.
I have undergrad debt … and I want to go to grad school
Question number three. “I'm a senior in college and plan to attend graduate school this fall. I'm worried because I already have student loans from college and likely will take on more during grad school. Any advice?”
Depending on your intended grad program, you might consider working for a year or two before going back to school. Here's why: It's going to give you some time to get some financial stability, and you'll also get valuable work experience that may make what you learn during your studies even more valuable. I know it did for me when I went back to grad school.
Another thought: If you find a job you love, some employers will provide assistance by paying for part-time graduate school programs, as long as they are related to your work.
Okay, look. I know it may sometimes feel like your student loan debt is going to leave future you eating the same ramen noodles you did in college, but I'm telling you now: If you take it one step at a time and you are dogged in your pursuit, you can be on your way to slaying that debt once and for all.
Ladies, we want to hear from you, so tweet at @MAKERSwomen and use the hashtag #makersmoney, or send in your questions to me at email@example.com. Thanks to Tiffany Aliche for joining us, and until next time, remember: More money, more power.
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