We received big news last week when the Supreme Court struck down on President Biden’s student debt forgiveness program. But outside of nulling the proposal to cancel debt for current borrowers, what impact will this decision have on future borrowers?
My biggest takeaway: Future student borrowers will be held responsible for their debts.
Why this is important: With students on the hook for the repayment of their debts, there should be a newfound emphasis on upfront planning for the cost of college before attending.
Two major topics of conversation with your high school senior:
- Not all majors are created equal
We’re big on thinking of college as a return on investment. Just as the $10,000 of potential forgiveness would have made a larger impact on lower income individuals, a larger loan balance is an even greater obstacle for students pursuing careers in lower income occupations.
It’s not about choosing a major based solely on starting salary, especially if it’s not a good fit, but it’s about thinking about a major choice economically in terms of the impact on your child’s debt repayment after graduation.
2. Know before you go!
Our general rule of thumb with student loans: For every $10,000 borrowed, you can think of it as an estimated monthly loan payment of $100 after graduation.
Take a look at the example above. This is an individual whose first job is at a $50,000 / year starting salary with $100,000 in student loans. For this case, more than 30% of their take home pay would go towards student loan payments. What this means postgrad: Recent grads are forced to live at home, or restricted from savings for a home / retirement while saddled with these large scale loan repayments.
For those families with a high school senior this fall, it’s all about making a plan for your child to achieve a high-quality education at a cost that fits your family’s finances.
Looking to schedule a time to discuss your situation? Click this link to my calendar to connect.
Check out my recent whitepaper: 5 College Planning Mistakes to Avoid
All the best,
Andrew Holmes, Certified College Planning Specialist™
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