The Ramsey Show - App - How NOT To Use Your Student Loan Refund! (Hour 3)

Episode Date: October 14, 2022

Kristina Ellis & George Kamel discuss: What to do with savings when your student loans were forgiven, How to get strategic with your budget so you can your house off early, How to use 529's to save for your children's future, Why company shares don't count towards your 15% of retirement savings, How to help disabled family members be financially prepared for the future, Why you shouldn't use the student loan refund to finance your real estate dreams. Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, it's The Ramsey Show, where America hangs out to have a conversation about your life and your money. I'm your host, Christina Ellis, joined by my co-host, George Campbell. Give us a call, 888-825-5225. We're answering your questions about your life and your money,

and we'd love to chat with you. So give us a call. First up, we have David calling from Seattle, Washington. Hey, David, welcome to the show. Hey, Christina. Hey, George. It's a pleasure talking to you guys. Good talking to you too. How can we help? I guess, so I have a, I've saved up quite a bit of money, at least quite a bit for me. And I'm trying to figure out what to do with it. Just to give you a quick background, I have, I guess, $19,000 in student loans. And I guess with the whole student loan forgiveness thing, I'm just kind of confused as to what to do right now. Welcome to the party, my friend. That's a lot of people right now.

It's confusing times out there in student loan forgiveness world. Yep. So what exactly is your question? Yeah, I just, I have $50,000 saved up just kind of just being frugal, I guess, with my wife and I. My wife's in the military. Good for you. Awesome. Yeah, so I have the ability to pay it off, but I don't know if like right now is the time.

And then we're also thinking like once she's out of the military, we want to buy a house. And so we're kind of like pondering on what to do with the excess. Like should it just stay in a savings account where it's at or put it in like some sort of investment account? Do y'all have any other debt? No. Okay. Is that your emergency fund in that 50k as well? Yeah. So about, I guess, 9 to 12 of that would be an emergency fund. Okay, what's your income? So together, I make 90, my wife makes about 36, something like that. So 120 base, I guess. Great. Man, David, it's just, it's a tricky time right now with student loan forgiveness. So there's a lot of opinions out there, a lot of lawsuits out there, and a lot of people really excited about forgiveness. And we're kind of in this month where it's make or break. We're going to see forgiveness were going to be available at the beginning of the month. And then they said it was going to be the 17th. And now they're saying the 24th.

So it seems like it keeps getting pushed back. They did release a preview of the application. And I don't know how I feel about that because it kind of feels a little bit like dangling the carrot to say, hey, it's still here. It feels like a movie studio and the movie is not done. Like, just put a trailer out there. Just buy some time, man. Yeah. So, I mean, it's a strange time.

I mean, I feel like by the end of the month, the end of October, we should have some clarity in some direction. A lot of the lawsuits out there, there are some that have some teeth. I was reading this morning that a federal judge is trying to block it in one state. And there's several,

I think there's six states that are in on the lawsuit. So there's just a lot of movement this month. So if it were me, and I don't know, correct me if I'm wrong, George, but I would probably wait to the end of the month just to see what happens. I mean, we're only weeks away from seeing decisions and a little bit more clarity. I'm not exactly holding my breath that it's going to happen because a lot could change in the next month. I mean, there's a lot of people who don't think forgiveness is going to happen at all. And so it's just, it's a really tricky time, but I would give it maybe a few weeks just to see if these applications actually come out. And if not, then it's great that you have the money to pay it

off. I love that if student loan forgiveness ends up not happening for whatever reason, that you could take that money right now and wipe out those student loans. Right. That was kind of the plan. Are those your student loans? Hers? Who's it fall to? Yeah, they're mine. So best case, you would get 10K forgiven? Well, we're married, so I think it would be the full $20,000, I guess. I had $30,000 originally, but I paid off, I guess. But if they're not her loans, it's not $10,000 per person, it's per borrower. Did you have a Pell Grant when you were in college?

I did. Okay, so just on your own, regardless of being married, you would qualify for that if it was Pell Grant. Right. So, Christina, correct me if I'm wrong, if he paid it off today, he could still qualify to get forgiveness if it comes down the road. Well, and they're doing the refund where if you paid it off- That's what I'm saying. You'll get a refund. During the pause, you could apply for the refund and then get it forgiven. Yeah. I mean, if you want to wait the two weeks and see if anything happens,

I'm personally not holding my breath. If I'm in your shoes, I feel good about paying it off. You get 50K in the bank. Let's call 15 your emergency fund. That makes me feel better with your income and expenses. That leaves you 35. You pay off the 19. That still leaves you with 16. Now you're completely debt-free. You have a fully funded emergency fund. You have 16,000 in the bank. Now is the time we can start saving on top of that for the down payment right um yeah and we're so just and quick point to that uh we're not planning on i guess buying for a while uh just because like the just being in the military uh and that kind of thing yeah um but i we definitely have the option to so we just didn't know like if it's best to put it in like a savings account or should we look more't know like if it's best to put it in like a savings

account or should we look more long term? Is this like three years out or is this like seven years out? It's actually, it's like right on three years. Okay. If it's three years or less, I would stick to a high yield savings account online. Right now you can get over 2%, sometimes over 3% with bonuses and that money can grow at least for you. But the point of this is not to grow at 9%, 10%, because as you've seen, the stock market's been a little crazy lately. And so people that two years ago said, I'm going to put my house down payment in the stock market, and two years from now, it's going to grow so much, and I'm going to get a house. Well, now they're crying because their accounts are down 25%. And so it worries me when you have a short time horizon

to throw the money into the market. If it's five plus years, I feel better about that because over that period of time, the money historically will have grown. Yeah. How do you think, what's your advice for people trying to figure out the best high yield savings account? Where should people put their money? So there's a lot of, there's tons of online banks these days, but I look at ones that have a long-term track record. Always make sure it's FDIC, which means it's insured by the government. In case the bank goes bankrupt, your money's secure, up to $250,000 per depositor on the account. So if you're married, it's a joint account, you have up to $500,000. And so most of the banks do that, but you just want to be careful because some of these will promise big interest numbers, but they might be

temporary. So I've had good experiences with Ally and with Marcus by Goldman Sachs as good, solid high-yield savings account options. Now, some of these best high-yield savings account options, they're online banks. And I know some people can feel kind of nervous about that. What would you say to kind of alleviate fear around that? That's where it goes back to the proven track record. How long have these people been around? Ally's been around forever. Marcus is a Goldman Sachs company.

It's been around forever. It's FDIC insured. So I don't see it any different as your local bank security level. And so obviously you want to have good fraud protection and password security and, you know, multi-factor authentication and some things to protect your password. But other than that, it's no different than having your debit card associated with your checking account. So this is a great option. Be careful though, because some of these online banks, you can't wire money out if you're trying to close in your home. So you want to make sure you have a good month window of time to get the money out to your

checking account with your local bank to do any kind of home purchasing. It's a good word, George. We're taking your calls, 888-825-5225. We'll be right back. This is The Ramsey Show. The welcome back to the ramsey show we're taking your calls 888-825-5225 up next we have kinsey calling from mil, Wisconsin. Hey, Kinsey, welcome to the show. Hey, how are you guys? We're doing great. Thanks for calling. How can we help?

Yeah, thanks for taking my call. So my question is regarding paying off our house. My husband and I bought a house about a month and a half ago. We did a 30-year mortgage. This was before I started listening to you guys, so I know you would probably poo-poo that. But we're just trying to figure out a plan of how we can pay it off as quick as we can, just taking a peek at our budget and trying to find some areas we could cut back on. In particular, one area that we're looking at is investing. So we both invest 15% of our income.

And I don't know if we're investing too much, if we should be investing 15% combined or individual. Great, great questions, Kinsey. So yes, you both want to invest 15% because that's 15% of your total household income by the end of the year. And so out of all the areas to cut, I would not cut investing. You guys are doing so great in that area. And when we talk about Baby Steps 4, 5, 6, we do those at the same time. So you got 15%. Do you guys have kids? We don't, no.

Okay. So we are fast passing through Baby Step 5. Now we're Baby Step 6. You guys have no debt other than the house? No debt, just the house. Yeah. Wonderful. And a fully funded emergency fund. Fully funded. Yes. This is the place to be. Okay. So how much margin do you guys have right now

while investing 15%? What is left at the end of the month to throw extra on top of the principal? Yeah. So we have probably about like three grand. So we think we can probably throw like at least $1,500 extra a month at it. You have an extra three grand on top of being able to pay your mortgage? Correct. So why not throw the whole three grand? Do you have other things you're trying to save up for? Not particularly. I guess our expenses just might change every month.

Like we just got into this house. We have stuff to buy for it. So trying to kind of budget out like things you want to buy for the house. And otherwise we don't really have like many other expenses. We have a travel fund. I try to throw money into a travel fund so we can take trips here and there. But no, I guess just trying to figure out like what's a good amount to save. I mean, we have a savings right now with

probably like 25 grand in it. And I don't know if we should just take from that and maybe throw some of that at the mortgage too. Well, if that's beyond your goal for your emergency fund, let's say your emergency fund goal is four or five months and that adds up to 20 grand. That means that extra five we can now use for these kinds of house projects, renovations. Okay. And you can also... That would be separate from our emergency fund. Exactly. I mean, there's 25 grand.

I like separating the emergency fund because all of a sudden the sale at the mall turns into an emergency. And so keeping it separate and going, is this unexpected? Is this urgent? Is this necessary? That qualifies as a true emergency. Me wanting to wallpaper the bathroom this weekend, this is a personal attack on my wife. That is not a true emergency, you know?

And so we're going to save up for that separately. And you can do that with a sinking fund line item in your budget. So you could say, hey, house repairs and projects, I'm going to put $200 every month into that fund so that by the end of the year, we have $2,400 we can spend. What's the total mortgage you all have right now? So the total mortgage is $2,500 a month. That's including taxes too in there. What's the loan amount? It's $389. Okay. And what's your household income? You probably make about like $140, I would say, around there. Okay. So your take-home pay is probably, I'm guessing, eight or nine grand. What does that come out to? Probably closer to eight?

I think it ends up being closer to like seven. Okay. Because you're investing before that hits your bank account? Correct. Yeah. Okay. So one, I mean, you guys are doing great to still have three grand of margin, but that mortgage is 35% of your income every month, and that's on a 30-year. Right. And so you guys bought a whole lot of house comparatively to your income and down payment levels, which you will survive. You're in a good spot financially, but I'm with you. I don't want to have this debt any longer than I have to. And so if we can pay it off faster than 15 years, that's the goal. So we have a great mortgage payoff calculator at

ramseysolutions.com. Go jump onto that. You can click on free tools and you can enter in your loan amount, enter in your date of your first payment, enter in the loan length, which for you guys is 30 years and the interest rate and that add on how much extra you're going to put. And that will start to give you a picture of, oh my gosh, if we can find another $400, we can pay this off three years faster. How cool would that be? Well, George, you have experience with this. Personally, you paid off your house early.

Yes, we did this December 2021, and we did our debt-free scream this past January. And that was part of the game to us, which I guess we're just sick people, but we were always doing the calculations. Like, we can put another 400 bucks towards this. That speeds it up by this much and this much. So I love having a goal saying, hey, what if we could pay it off in the next eight years

and then try to beat that goal over time? And you meet the people on the stage. Everyone's debt-free journey tends to go faster once they get into it because it's addictive and they're willing to sacrifice more and more as they get closer. Well, I think that's a huge key is having that clear goal and having something to push towards. Because if not, it is easy to go, you know what? I think I want that extra throw pillow. I want that extra piece of furniture. But if you've got that clear goal, you've got a timeline, you've got something that you're really charging towards, it just makes you that much more

motivated. Oh, absolutely. And I speak on behalf of all guys and say, we don't need any more throw pillows. We don't need any more shams, which is a great name because that thing is a sham. You can't even sleep on it. You get yelled at. All right. Our question of the day comes from blinds.com. Find out yourself why blinds.com is the number one online retailer of custom window coverings. You get free samples, free shipping, and with the new promo codes they run every month, you'll save even more. Use the promo code Ramsey to get the best deal. Today's question comes from Andy in Tennessee. He asks, if we save for 18 years in a 529 plan and our daughter doesn't use it for education, what can we do with that money? That is a great

question. So many people are worried about investing because they're going, well, what if my kid doesn't go to college, Christina? I don't know what's going to happen. I don't know how expensive. I'm just not going to invest. That's not the best option. I'm just making the impression here. Well, there are a lot of different options that you have with a 529 if your student doesn't end up using that money. So for starters, you could transfer it to another beneficiary.

So if there's a sibling coming up that's going to need to go to college, you can transfer that money to them. You can also transfer it to other family members. So a niece or a nephew. It's very generous. It's very generous. The permissible family members. You can do spouse, child, grandchild, siblings, parents, step parents, nephews, nieces, aunts, uncles, and even first cousins. Yeah. I don't think people realize how far out that goes. So there's a lot of options. You can also save that money for future educational needs. So maybe your student isn't

going to college right now. Maybe they don't want a four-year education right now, but maybe in five years they go, hey, I changed my mind. I want to go back and get a certificate. I want to go to trade school. Or even if they are in college and they didn't use all that money, they could go to grad school. So that money could get used later on. And then you can also save it for a grandchild. So let's say your kid doesn't go to school. Maybe that's an educational legacy that you leave for your family later on. And I would just make sure to highlight with that to talk to a tax broker, because there are some implications with skipping generations. But you can still set it up in a way where that fund is available for future children.

And then also a really cool thing is they have penalty free scholarship withdrawals. I love this. A lot of people don't know about this. A lot of people don't know about this. So check out that because you can use that money without some of the penalties and challenges. If I get a $10,000 scholarship, then the 529 plan was a waste. No, you can withdraw $10,000 from the account to your bank account against that scholarship with no penalties. Exactly.

Exactly. So it also encourages you to still pursue scholarships aggressively. I think some people who have 529 plans are like, hey, we've already saved up this money. My kid doesn't really need scholarships. We'll still go for the scholarships because if they get those scholarships, that money can go to something else. They can go to their wedding, a down payment on a house or something in the future. So still keep the motivation for both. And remember, if you start investing, in this example, from age zero to 18, and you just put two grand a year in that thing, that's 36,000 over 18

years. Well, the growth on that account, it could grow up to $100,000, which means the majority of the money in that account was all growth. That's amazing. Yeah. And even if you only have $25 to invest, I think we took a call a few weeks ago where somebody was like, oh, I only have this tiny bit. Is it even worth it? Yes. $25 a month is way better than nothing. So, you know, be with the power of compound interest. Exactly. Well, we're taking your calls. 888-825-5225. This is The Ramsey Show. សូវាប់ពីបានប់ពីបានប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពី right now is the time of year when it's make or break when it comes to our goals we're heading into holiday season and let's be real it's hard to stay motivated we all have goals whether it's to find a better job, make more money, pay off debt,

build stronger relationships, and it can be hard to keep momentum going. But here's the good news. Coming up in a couple weeks, we have one of our biggest events, Smart Conference. We're headed to Dallas for a day-long jam-packed event where you'll get advice from leading experts on money, personal growth, career, mental health, and your marriage. You'll leave with all the knowledge and motivation you need to reach your goals and live the life you want. Join me and the rest of our Ramsey personalities, Dave Ramsey, Dr. John Deloney, Ken Coleman, and George Campbell, and Rachel Cruz to get a plan for your money, your relationships, personal growth, and career. Join us live in person on October 22nd to get your passes before they sell out. Visit ramsaysolutions.com slash events to get your

tickets today. Just almost a week away. How crazy is that? So excited. It's going to be a good time. Live band, highly entertaining. I did my rehearsal yesterday. Oh, I'm excited for that part. So I'm feeling good about it. It should be a good time. And if you're not in Dallas, I want you to know that people travel from all over the country to join us for this event. And it is so worth the drive, the flight, whatever you got to do. Bring the whole family. It's going to be a good time. It's going to be so fun.

All right. Up next, we have Tyson calling from Idaho Falls, Idaho. Hey, Tyson. Welcome to the show. Hey, guys. Thanks for taking my call. I appreciate it. Hey, thanks for calling. How can we help?

Hey, so first thing, I just want to wish my wife a happy birthday. It's her birthday today. Husband of the year for that shout out. Happy birthday. Happy birthday. My question has to deal with ESOP shares that I receive from my company. My company is an ESOP company. And whether or not to count that as part of my 15% going into retirement.

Great question. So how much do you have? As far as shares? Yeah. Right now, it's valued at about $30,000. Okay. I would not count that as part of your 15%, but I love that you have them. Are you fully vested?

Could you cash out today? As far as cashing out, I don't believe so. I think the only way you can redeem those shares is leaving the company. There is an option to roll them into what's called an ESOP 401k, to my understanding. Okay. But I'm not sure if there's a way I can actually cash that and roll them into a traditional IRA. Okay. Yeah, do your homework on that. I personally, some of these programs can be great because you're getting stocks at a discount, but if you're not cashing them out immediately

to kind of get your most return on that, it worries me because of the volatility. Obviously you work at this company, so you believe in it. But single stocks in general are way too volatile for me to be putting my money in. And so from a just 30,000 foot view, I go, oh boy, this worries me. So I wouldn't count it apart as your 15%. Do you have any other retirement options there, like a traditional 401k, Roth 401k? Nope, sorry, you left the line there. Let's see if we can get it back. Are you still with us there? Oh, it's on here. Oh, okay. So do you have a 401k as well? Yes. I currently contribute 15% to a Roth 401k as well. Oh, perfect. I would continue doing that. And then are these shares, is it mandatory? How does the ESOP work for you?

Are you putting extra additional money into that to buy the stocks at a discount? No. So basically as the company is profitable, certain amount of shares are given to each employee based off how well the company does. Oh, great. So it's like a bonus, kind of a profit sharing situation. Yeah. So it's kind of like a company match type of thing, but I didn't know if that was different from a 401k match to an ESOP share. Yeah, keep doing what you're doing. 15% to that Roth 401k, and I see this as icing on the cake. This is gravy.

When you leave, you've got a big pile of cash from these stocks, and I would cash out as soon as you're able to, and that way you have more control over it. You can put that in good growth stock mutual funds, index funds, and it's way more diversified, way less risk. Thanks for the call. Yeah. Up next, we have Noelle calling from Knoxville, Tennessee. Hey, Noelle, welcome to the show. Thanks for having me, guys. I'll try to be as clear as I can and please questions at any time.

My mother passed away earlier this year, leaving my disabled 52-year-old brother, who is on disability without a home and with no inheritance to care for him. How can I and my other brother best try to care for him financially moving forward and possibly set him up for better care? I'm so sorry to hear about your mom and the situation with your brother you're now left dealing with yeah so how old are you? so I'm 46 and I have another brother that is 47

and this brother is 52 so he was currently living with my mother and was a dependent on her and she actually put the house into a trust, which is supposed to be sold and distributed amongst other beneficiaries. So he does not have a home at this time, but anything that she had left over, she distributed it completely to others in inheritance. What do you mean to others? Other family members, things like that. So basically, those that will benefit from the sale of the house and the trust would be like the eight grandchildren. Other money that she might have had in retirement will go to possibly a sister, a niece, things like that.

Was anything left to your brother? Nothing. Nothing was left to my brother, myself, or my other brother at this time. Did your mother talk to you about that and why she set it up that way? She did not. No. So was this a surprise to you when she passed and they went, oh, that's weird. They skipped us. It was to everybody. And we've tried working with someone to kind of figure out if there was something that was done improperly, if I could say that in a nice way. And there's nothing we can do at this point. So now moving forward, we just have to start

taking care of things and making sure that he has the care that he has in the future. And he is on a fixed income. Okay. What is his income? I believe he brings in approximately $1,100 a month. All right. From disability and possibly Social Security. Where is he now? Where is he living? So right now he is currently living in the home before it is to be sold. And then we're kind of going, all right, what's next?

We've got to get him some housing. Correct. We currently have opened both of our houses, my brother and myself. He lives in Michigan and I live in Tennessee. So that is an option. We're looking more medically how we can take care of his medical needs moving forward. I know probably a strict budget of his disability income definitely is a must. I was thinking possibly looking into the long-term care insurance, but I do not know that he's going to qualify because he does have some current disability. Yeah, I would reach out to our friends at Zander to at least see what the options are

because of his disability and see what he would qualify for to help out the situation. So in terms of housing, he can live with one of y'all long-term, right? He can. That is correct. We'll probably have to modify our homes slightly, things like that. So he can, but I guess, and he does have Medicare, but we do know that that's probably not the best. In the long run, nursing homes, care, things like that. So that's why we wanted to kind of look into what can we do now in the future to

possibly get, you know, a little bit more maybe in-home care if needed. How could we possibly go about doing that now, saving up beside the possible long-term and care insurance? What are the options if anybody options? Does he need full-time care? What's that situation like? Not at this moment. He does not, but it's something where his body is deteriorating as the days go on. So it's something that's definitely going to be in the future. How soon, that we don't know. That we do not know. Well, for now, let's get this house situation figured out. Correct, yeah. And get that thing sold, then have him move in with one of you, whatever makes more sense, temporarily,

while we do our research, do our homework, look into the different insurance plans, talk to our friends at Zander, and figure out what's the most affordable option to get him the care he needs right now. If he needs more, then later on down the road, we do more homework and figure out how we do that later on. But you guys getting in a financial position between you and the brother talking about this, how are we going to handle this financially, logistically, making a plan for all of that, that's the best thing you can do right now for him. But I'm so sorry you're put in this situation. That's a tough place to be. But you sound like a great sister, for sure. Yeah. We'll be right back. This is The Ramsey Show. Our scripture of the day is, Do not judge others, and you will not be judged.

For you will be treated as you treat others. The standard you use in judging is the standard by which you will be judged. Matthew 7, 1 through 2. Their quote of the day is, those who judge will never understand, and those who understand will never judge. Wilson Candini. Welcome back to The Ramsey Show. This is Christina Ellis, joined by George Camel. Up next, we have Mateus calling from Fort Lauderdale, Florida. Hey, welcome to the show. Hi, thank you for taking my call, Christina and George. How are you? Thanks for calling. We're great. How can we help? So I'm a longtime listener and a first-time caller. I decided today to answer George's

call to action and called in. It worked, Christina. I was like, if you've been on the sidelines, you've been thinking about calling. Today's your day. Thanks for calling, man. How can we help? What's going on? All right. So I've been doing Davis for a while and I was debt free until I decided to request a refund on my payment towards my student loan debt that I made since 2020. And the amount I am expected to receive is $33,504. Hold up, you took the whole thing? Yeah. Oh boy. What made you decide to take the whole thing?

So I recently purchased a condo and I just figured that having as much money as I could have would help with the remodeling of the home and also just keeping up with the payments of the house. But you worked really hard to pay it off. You were super motivated to pay off the student loan initially, correct? Correct. And then what kind of changed since then? I just like, I had this like itch to get into real estate, become a real estate investor,

and grow my wealth through real estate investing. How old are you? I'm 26 years old. Okay. Did you watch a few too many TikToks? Is this what happened? No, I'm actually really big on podcasts, and I've been listening to other... It's a real estate podcast?

Yeah. Okay. Well, the good news is this is a reversible decision, right? Hopefully you haven't spent this money yet. No, so they're still processing it. I haven't received it yet. Okay. Well, the good news is as soon as you receive this money,

you're going to go back and you're going to pay off that $33,000. Yeah, hit the brakes. Hit the brakes immediately. Send that money back. You are robbing Peter to pay Paul. This is like I cashed out my 401k to buy real estate or I did a cash out refi to get another property and now I'm further into debt.

You're moving backwards instead of forwards. And it looks on paper like you're doing better, but now we sit here owing 33 that we're going to have payments on while we're trying to make payments on this real estate property that we're hoping we get a tenant in and make money off of. And so there's an order to this. And I want you to get into real estate. We love real estate around here, but there's a time and place to do it. And that's once you're completely debt-free with a fully funded emergency fund. And I want you to have your own place first. Yeah. Do you have any other debt outside of the 33? No, I'm completely debt-free. I own my car and I just have my mortgage payments every month now.

Okay. What's left on the mortgage loan? So I just purchased this property. I'm in there a month now. Okay. What's left on the mortgage loan? So I just purchased this property. I'm in there a month now. Okay. What's left on the loan? $207,000. Okay. And what's that monthly payment? Monthly payment is $1,500.

Okay. And what's your take-home pay? Take-home pay every month is about $5,000. Okay. I'm not counting the extra side jobs I do. Oh, nice. Okay. And I'm assuming that's on a 30-year? Yes. Okay. So right now your payments are about 30% of your income on a 30-year. Not ideal. I would

have steered you to the 15-year. It's the only mortgage I would ever recommend where the payment's no more than a quarter of your take-home pay. So a good chunk of your world right now is in this property. And I would encourage you to attack that one first and then save up and pay cash for any real estate property you buy in the future for investing. Okay. Yeah. And you've done this right. You were on the right path. You have felt this motivation. And the thing is, that student loan debt, you've paid it off. It's already felt this motivation. And the thing is, is that student loan debt, you've paid it off. It's already been paid off. And now you can save up money and do this the right way. You can go through baby steps four through six. You can pay off a house. You can

then go on to baby step seven and build wealth and give. We're not talking about someone who's never been motivated to pay off debt. We're talking about someone who's done it before. Don't lose your way now. Yeah, you're a sharp 26-year-old guy. I mean, if you had a car payment and you had $25,000 on the loan, you paid off $25,000, would you then, as soon as you became debt-free, go out and take another $25,000 loan for fun? No, but there is also that new thing that the government is forgiving 20 to 10,000 dollars of college debt so I was maybe if I could take it that's a big maybe and right now you for sure are back 33,000

dollars in debt that's a guarantee also did you have a Pell Grant um my last semester I did so I don't know if that qualifies me okay I would figure that out because um if you had a Pell Grant you should qualify for 20 but if you didn't it would only be out because if you had a Pell Grant, you should qualify for 20. But if you didn't, it would only be 10. But regardless, you still have more debt over and above that. You're still further into debt with the extra 13, even if forgiveness happens.

Well, and I think the good news is you done stupid, but you can still get smart. Yes. You can turn around. I love that this is reversible if you so choose. Please, please, please do not go out and get investment property while you have this mortgage, while you now have this student loan.

This is a nightmare waiting to happen. And you called in because you felt like this was not a good idea. And I hope we convinced you that this was not a good idea and that we slow down. And yes, it may be years before you start becoming a real estate guru investor, but it's time to put down the podcast telling you to go up to your eyeballs in debt so that you can have this amazing life and have all this cashflow and passive income. It's a lie from the pit of hell, Matthias. Don't fall for this. If you need to stop listening to those podcasts for a while, that's probably the best thing to do. Well, and George, that's kind of my fear with all of this student loan forgiveness

is that it's somehow going to change people's perception of debt so that they think it's okay. Because they go, well, they forgave it that time, so I'll just go in a bunch of credit card debt because I'll probably get forgiven. Right, but it's not how this works. It's not how it works.

And even just that mindset shift of, okay, I might have $10,000 or $20,000 forgiven, so now I should ask for a $33,000 refund. This drives me crazy. And the thing I'm angry about with student loan forgiveness is not people getting help. That's not it at all. It's the precedent that it sets

that I can just go into debt because someone will forgive it down the line and it's not my problem anymore. And we've lost all accountability and responsibility as a society because we've decided to go, you know what, I'm gonna outsource all my problems. It's not my problem anymore. And we've lost all accountability and responsibility as a society because we've decided to go, you know what? I'm going to outsource all my problems. It's not my problem. You guys made me in debt.

No, you signed on the dotted line. Right. With any type of debt. This isn't just student loans. With credit cards, with car payments. And we have to start making better decisions for our future that our future selves would high-five us for. And rarely in history has debt been the thing you look back and go,

man, that's what really saved me is going into $100,000 in student loan debt and having a car payment. That's what blessed me financially. No. When you don't have any debt, you make different decisions. When you have to use your own money, you make different decisions. When you have to go to college and pay for it, you make different decisions of where you go to school.

Right. Well, now they're saying with the income-based repayment program, the modifications to it where it's capped at 5% of your income, the danger and risk in that is that students in the future will go, oh, well, I can just take out as much student loan debt as I want because it's going to be only 5% of my income. So why not live in a fancy house off campus? Why not max out my meal plan? Because it's going to be capped. I don't have to worry about it. And guess what happens then? The colleges go, oh my gosh, guys, we can raise prices a thousand percent because the kids are going to take out as many student

loans as it takes to go here and have this life. And they're only going to pay 5% of the loan with their income. And so it doesn't matter. That's the scary part. So we're going to continue to see these numbers skyrocket. Yeah. The trickle down effect, the long-term repercussions. I think that I'm not saying that there were bad intentions in it. I think there were good intentions. But what are the long-term impacts? What's going to be the ripple effect?

We've been fighting for so long with Borrowed Future, with the things we've been doing to get students to go to school debt-free. We want to change perspective and help people realize they don't need debt to get their education. But it's kind of scary thinking, how is this going to change people's perspectives? Is it going to make people feel a little bit more free and easy around debt and just think, oh, it's not a big deal. Like, I'll just get my $33,000 back. As long as debt is easy to access and convenient and a shortcut, people will continue to take it. And so it's time for the government to stop guaranteeing this risk-free on behalf of the student loan companies. Terrible idea. Right. And if you are a parent or you are a mentor or someone who loves a student,

encourage them to go to school debt-free. And also, if you have someone in your life who has student loans and is waiting for a refund, remind them if they still have money beyond that refund, they have to start paying in January. There is still responsibility around these loans. All right. That puts this hour of The Ramsey Show in the books. Big thanks to everyone in the booth, to my co-host, George Camel, and to you, America. Thanks for listening. We'll be back soon. Do you love a good day, Brandt? Want to see the latest Ramsey Show videos going viral? Check out your favorite moments from the Ramsey Show on YouTube. Go watch and subscribe to the Ramsey Show channel on YouTube.