Student Loans with Terri and Mellie
Student Loans with Terri Bennett and Mellie Davis
On this episode of Financially Naked: Stories from The Financial Gym, our host is Terri Bennett, Financial Trainer in the New York office, and Financial Gym client, Mellie Davis, and they are going to discuss student loans.
Podcast Notes
Consumers under the age of 34 owe a combined total of $620 billion, as of 2019. Many clients of The Gym are faced with student loan debt, and this affects people from early 20s through retirement.
Student loans was one of the reasons Mellie decided to join The Gym. She is from New York and she recently moved to Washington DC to teach at an elementary school. This move had a big impact on her finances and she wanted to move forward with some financial milestones.
Mellie is currently 37 years old and she wants to own property at some point, she had credit card debt, and she has student loan debt from undergraduate and graduate school. She has more than $90,000 of student loan debt.
Terri also went to undergraduate and graduate school. The rules changed when Terri was in graduate school, where they stopped deferring interest on student loans while you are in school. Terri added approximately $2,000 to her student loan debt just by being in graduate school.
Mellie and Terri were the first in their families to pursue higher education. Mellie was a student accruing interest and working full time in NYC. There is much more emphasis on first generation students now, as schools recognize the gap in knowledge.
Mellie has had a few different careers since she graduated undergrad in 2005, from working at a non-profit, managing social media accounts, blogging, and working in a museum as an educator.
Many teachers do not go into the profession for the financial wealth, but for the emotional wealth. It comes with taking on student loans to become qualified for the job.
Mellie worked in the public school system and now she is working in a private school. Public schools usually have unions behind them, but at a private school, you are mostly an at-will employee and you have less individual protection and bargaining power.
About five or six years ago, Mellie started using Mint app, and it helped put everything into perspective. She realized that she owed a lot of money, and it became clear that she needed to change some things.
If Terri had only paid the minimum payment for the length of her student loan, she would have paid $120,000 for the $42,000 she took out. Terri uses the Personal Capital app.
Mellie is currently balancing paying down her student loan, putting money in her emergency fund, and living life. Emergency funds have never proven to be so important until 2020, because so many people were furloughed or they lost their jobs. Having an emergency fund gives you freedom to pay down debt.
The current student loan pause has meant that Mellie has an extra $300 per month. The student loan pause may extend through March 2021. Biden has talked about potentially forgiving $10,000 for all federal student loan borrowers as part of a broader COVID-19 relief bill.
Biden has recommended the cancelation of undergraduate student loan debt if the loan was for tuition for people who earn less than $125,000 a year and for those who attended a public college or university, a private historically black college or university, or a minority-serving institution. This conversation has a long way to go.
Everybody at all levels has had teachers, and it is important to think about the education they are required to get, the cost, and the pay they end up receiving.