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BIZ Academy Podcast
Hosted By: Wyatt Yates

Money Myth: My Student Loans Will Be Forgiven



In this episode, we discuss the student loan forgiveness program. What percentage of borrowers actually have their loans forgiven? Can you count on loan forgiveness to eliminate your student loan debts? Is there a better way? Listen to find out.

Action Steps:
Go back and listen to Episode 6 and follow the action steps in that episode to tackle paying off your student loans before you would even be eligible to file for loan forgiveness.

Episode Transcript:

Wyatt Yates Host 00:00 Money doesn't have to be complicated. You can achieve financial independence. This podcast gets to the truth behind the money mess you hear from your grandma, your broke uncle, the latest social media influencers and the so-called money experts. Welcome to Money Myths with your host, wyatt Yates. This week's myth is my student loans will be forgiven. Now, this is one that's gotten a lot of press lately, especially when Biden took office and everybody thinking he was just going to, all of a sudden, just wipe out student loans. Now, when we say student loans we'll be forgiven, what we're talking about here is that you won't have to pay back all or a portion Most likely, it'd be a portion of what your student loans are that you owe. We're only talking about government student loans. If you got a private student loan, it doesn't apply to this. We're talking about the government student loan program. 01:10 The government stepped in in 2010 and started doing the direct lending on these student loans, instead of kind of being behind the scenes and just guaranteeing the loans and basically just taking the losses on write-offs and whatnot on the student loans. The government stepped in in 2010. And when the government stepped in in 2010 and started doing direct lending, that gave them the ability to not just basically guarantee the loans and take the loss. They're also able to collect the income and, in theory, try to make a profit through this program since their direct lending where before it was the banks would make all the profit and the government would only step in when a loan was bad and guarantee it and make the banks whole. So the banks didn't lose any money. But in 2010, the government stepped in and said it's part of a kind of a budget reconciliation process, because now they can actually get the income and not just guaranteeing losses. And since 2010, the student loan debt balance has more than doubled to where today we set out roughly $1.7 trillion owed in student loans, with the majority of those being government student loans. There still are some private loans, but the vast majority are government backed direct government student loans, and that's what we're talking about here. So when we say they can be forgiven, the government says we're just going to wipe away that balance. Whatever that balance may be, it's typically not all your student loans. You got to make payments on them and if you meet certain criteria, then they'll forgive. The remaining balance is what we're talking about here. Now this myth exists because even before the whole buying is going to wipe away $50,000 of your student loan balance. 03:06 Even before then this myth existed because there are programs in place for loan forgiveness for federal student loans. I'll just name off a few here. There's like over a dozen different programs that if you meet certain criteria you can get your remaining loan balance forgiven. You have the public service loan forgiveness program. You have the forgiveness with income based repayment. You have forgiveness with pay as you earn. You have forgiveness with revised pay as you earn. You have forgiveness with income contingent repayment. You have the federal Perkins loan cancellation. You have student loan forgiveness for teachers. You have student loan forgiveness for nurses. You have loan repayment assistance for doctors and other healthcare professionals. You have loan repayment assistance for lawyers. You have military loan student loan forgiveness and assistance and you have student loan discharge for special circumstances. 04:05 Like anything with the government, of course, there's a million criteria, a million different programs here, and that all existed even before we started getting a lot of press with the current administration and people thinking he was just going to do executive order and wipe out student loans. So the whole reason this myth exists because there are programs in place for the government to forgive your student loans. But like anything, you always gotta read the fine print. Okay, this myth is false for a few different reasons. The first reason let's just look at the stats behind the federal government's forgiveness program. Let's look at, okay, how many people are actually getting their loans forgiven as of right now 0.3%, 0.3%, not even 1%, not even a half of a percent. If you wanna round up, I guess you can get it to a half a percent, but 0.3% of student loan debt has actually been forgiven. 0.3% of student loan debt has actually been forgiven through these programs. Another stat 0.7%. Still not even 1%. 0.7% of eligible borrowers will eventually benefit from student loan forgiveness. That's the federal government estimates. 0.7%. Not even 1% of eligible borrowers will meet the criteria of the forgiveness programs that they have. Then, if you take the number of student loan borrowers so the people that have student loans, and you take that divide by how much in terms of dollars has been forgiven by the federal government, it amounts to $95.45 per borrower that the federal government has forgiven student loans, so $95. 06:04 And how efficient is the government in this whole forgiveness process? They still have 43% of all the applications they've ever received. They haven't even processed yet 43% of student loan forgiveness applications have yet to be processed. In the last two years, the number of denied claims has more than quadrupled under the forgiveness programs and the Higher Education Act, which kind of started really, the expansion of these forgiveness programs. That was done in 2008,. Still, 13 years later, has never been funded by Congress. Congress does a great job of passing these acts and then not funding stuff. They can't figure out how to pay for it, so you have basically nobody getting their debts forgiven. 06:55 And then you have the government not even processing all the clay, the applications yet they have 43% of all the applications they've ever received haven't even been processed yet, and the program is that how it's supposed to be funded has never been funded by Congress. This is why you have the disaster that we have in the forgiveness programs that our government is running, which is the first reason why you can't believe this myth. It's not the main reason. So say, even if the government did a great job with this program and it was a wonderful program, let's just look at some of the stuff that you have to meet, some of the criteria you have to meet in order to qualify, and this is really the main point on why you can't forgive this myth. It really is because you are having someone else tell you what you can and can't do with your personal finances, and that is not good. Never, in any circumstance, do you want to put the responsibility of your personal finances on a creditor, and the federal government in this situation is a creditor. You have to take control of your personal finances. You don't let other people take control of it for you. You can't rely on other people to succeed with your personal finances, and that is the biggest reason why you can't believe this myth. There's been a saying around for thousands of years now where the debtor is a slave to the lender, and it is very true in this case. 08:36 With these forgiveness programs these forgiveness programs you have to be paying on your student loans. From anywhere from 10 to 25 years you got to be making payments. It depends on which program you're going with, but for 10 to 25 years, you got to be making payments on your debts, and then the remaining balance will be forgiven. First of all, just about every single person can pay off their student loans in less than 10 years. I've put it on you that most people can probably pay it off in anywhere from 2, 3 or 5 years. So when you're signing up for these forgiveness things and thinking that your loans are just going to be forgiven if I stay this course with this forgiveness thing, even if you're the exception I mean we went.3% of student loan debt has eventually been forgiven. Even if you're the exception and meet all the criteria of these programs, you are signing up to be a slave to the federal government for twice as long or even more, four or five times longer than what it would actually take you just to attack it and pay it off. So that's the first problem You're going to be signing up to take longer to get rid of this nightmare that you have. 09:52 The second problem is these programs will tell you where you can work. You'll have to work in a certain area to be able to qualify to meet these, whether it be a certain field, whether it be a certain geographic region, where most of these are tied to geographic areas or disadvantaged communities and stuff, basically limiting you to areas that are going to limit your income in the first place, which is why they say your income is going to be less if you work in this area. So that way you're not going to have as much of a means to pay them back, so we'll forgive them. If you work in that area for the next 10, 20 years and continue to make payments on your loans, we'll forgive the remaining balance after that. The problem is your income is your greatest tool to financial independence. So when you're purposely restricting how much money you can make just to get your loans forgiven, you're taking away your greatest tool to reach wealth and financial independence. You're letting the government dictate what you can and can't do and it's going to limit you being able to achieve financial independence and your financial goals. So those are the two main reasons why you cannot believe this myth. 11:19 Yes, there are programs in place to forgive student loans, but when you look at the stats, very few borrowers are getting their loans forgiven. 0.3% of student loan debt has actually been forgiven. Not even 1% of student loan debt has been forgiven to date. And we note in the government is not even doing a good job processing applications for this program. They still have 43% of all the applications they've ever got. They haven't even processed. And this program has never been funded by Congress. So it's a disaster of a program. 11:54 Yes, you may hear from somebody that was able to meet all the criteria and go through the process and got it forgiven. They're the exception, not the rule. So that's the first reason why you can't believe this, and the second reason is you have to take responsibility for your personal finances. You can't let your creditors dictate where you can work, how much money you can make and other aspects that relate to you being able to achieve financial independence. You have to take personal responsibility. You can't be a sign up to be a slave to a lender for 10, 20, 25 years. You can get this paid off faster than any of these forgiveness programs that are currently in place will allow you to. So why sign up to be a slave for an extra five, 10, 20 years when you can be done with it and move on and start reaching your financial goals Makes no sense. 12:56 When you look for the easy way or try to find the easy way to get around the hard truth that you signed up for this and you owe it, you will only cause yourself trouble and you're not going to reach your financial goals. So put in the work and get rid of this If you're one of those people with tens of thousands of dollars of student loan debt, even over $100,000 of student loan debt, you can get it paid off. People do it every day. So for the action step this week, I want you to go back to episode 6 on, and episode 6 covers the best way to attack any debt you may have. So go back, listen to episode 6 and then follow the action steps at the end of that episode and apply it towards tackling and paying off your student loan debt. If you follow episode 6 and those action steps and really get to work, you can probably get your student loans paid off I would guess in under five years. Just from the people I've worked with and seeing their results, you really can get this done way faster than any forgiveness program is going to. Let you be done with this. 14:15 So go back, listen to episode 6, take responsibility for your personal finances. Don't rely on a creditor that promises to just eliminate your debt if you meet all the stipulations they want you to meet, that in turn, are actually going to reduce your income and make it even harder for you to pay them off and harder for you to save for retirement and reach financial independence. Your financial future is in your hands and you can do it If you take responsibility and get rid of these creditors that are trying to tell you what to do. Thanks for listening. Want to achieve financial independence? 14:59 Go to ruggedfinancialcom where you can download my free PDF of the 12 Things to Do to Win With Money, and you can also sign up for my weekly Money Tips emails, where I cover the same tips and tricks and advice I walk all my clients through so you can begin your journey to financial independence. Thank you for watching and listening to this episode of the Money Myths podcast. Please do me a favor and, if you found this episode interesting, subscribe to the podcast so you can make sure you get all the future episodes. Also, leave a rating and review so you can help us grow this podcast so we can leave more people to financial independence. And, lastly, please take a screenshot of the episode, share it on your social media channels and tag us using at ruggedfinancial. We will see you later.

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