The Ramsey Show - App - Should We Keep Our Costco Credit Card? (Hour 3)

Episode Date: August 29, 2022

George Kamel & Kristina Ellis discuss: Buying a new home and keeping the old one as a rental property, Why you shouldn't keep a Costco credit card for the cashback, How to get an ex's name off a deed, Horror stories from people with student loans. 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

Девочка-пай From Ramsey Network, this is The Ramsey Show, where we help you get control of your money, get ahead in your career, and get on the path to living well. I'm George Campbell, Ramsey personality and host of the Fine Print Entree Leadership Podcast, joined today by bestselling author and fellow Ramsey personality, Christina Ellis. And we are excited to take your call about life and money. The number to dial is 888-825-5225. Don't be shy. Do it. 888-825-5225.

Andrea joins us in Denver, Colorado to kick off this hour. Andrea, welcome to the show. Hi, thanks for taking my call. Absolutely. How can we help? I have a question about my husband and I's future real estate plan. So right now we are in a condo that we own 100%. Awesome.

We have $50,000 in our savings account, and our plan was to live here for another two years and just keep stacking away money and then keep the condo that we have. And if we have like 100, 150, if not hopefully more, buy like a single family house because we do have a couple of kids and rent this house out. Now we would have, you know, a small mortgage on whatever house we purchase after that, but we would get gazelle intense again and pay that off very quickly. So what do you think of that plan? I mean, you guys are crushing it. That's incredible. I like where this is going. So the condo's paid off. What's it worth? It's worth about $260,000 to $270,000. And what do you think you could rent it for? Oh gosh, we haven't even thought about that. Probably between $1,600 to $2,000 a month. Love it. And how much is the new house going to cost? We're hoping to stay below the $550 range.

And what's your household income? We net $110. Okay. So the only worrisome part is you said you're going to have $150 to put down on the new house. I'm hoping more, but that's being conservative, yes. Okay, because that leaves you guys with a $400,000 deficit that you'd have to take a mortgage out on, and my concern is that's a lot of payment from your take-home pay.

Okay. So I might be looking at either delaying that purchase to be further out to where you could put, you know, $350,000, $400,000 down and have a $150,000 mortgage. I'd feel a lot better about that plan. Or we look at finding a more affordable single-family home, which may be very difficult in the Denver, Colorado area, right? Right. We're in Grand Junction, but that was the closest city. So it's a lot less, but it's still, you know, it's... But there's not a lot of great single family homes for $250,000 in that area? No, no. Okay. So that's, yeah, I mean, I would go, you can jump onto our mortgage

calculator at ramsaysolutions.com and crunch those numbers. But this is a good plan if that payment of the new house is going to be a quarter of your take-home pay on a 15-year fixed. And that will dictate how much money down you would need. And if that's $150 and you still have the emergency fund and you're still investing 15%, fantastic. But if not, it just means delaying. Well, and I mean, the condo, it's nice to have a real estate investment. It's nice to have something that's earning money, but there is also the option of selling it and getting a lot closer to having a much larger down payment and then just having your primary residence completely

paid off, which I know that would feel pretty fantastic. What do you think about that plan of selling it and using that and maybe paying cash for your primary residence? I think that because the condo is in such a good area, I would rather stay here longer and just save more than rather than selling it. So even just the lane. Yeah. If that makes sense. Absolutely. I mean, the rent that you would make, you're looking at, you know, maybe 20 grand a year. So it's not like life changing money. It's great. I'm a big fan of real estate investing, but I want you to do it in a way that isn't going to add stress to your life to where you're now a landlord, you've got a mortgage again. It's a big mortgage because a $400,000

mortgage on a 15-year fixed is going to be a big portion of your income. And so I just want you to do this with wisdom. It sounds like you're wanting to do that. You're wanting to do it the right way. And if that means delaying, you're okay with that. Well, you guys have obviously shown that you're willing to make the sacrifices. The fact that you already have a 100% paid off condo, you have $50,000 in savings. You guys are tight with your money and you're doing a great job. How old are you two? My husband's 34 and I will be 33 on Wednesday.

Oh my goodness. Happy early birthday. You guys are killing it. I love seeing people in their early 30s making wise money moves like this. It's goodness. Happy early birthday. You guys are killing it. I love seeing people in their early 30s making wise money moves like this. It's awesome. Inspiring stuff. And I also just love that she's just very relaxed about it. I feel like right now in the real estate world, people are so stressed. There was no frenzy in her voice. Right. That's just refreshing to hear because I feel like a lot of people in these scenarios are very much like, I'm in a condo. I

need to get out now. What should I do? And there's a lot of panic around real estate just in general right now. So I think it's just, she's in such a great place. It's very refreshing to hear that. It was calming to me. Yeah. So thank you, Andrea. All right, James joins us up next in Hartford, Connecticut.

James, welcome to the show. Thank you very much for taking my call. I really appreciate it. How are you both doing today? We are so, thank you for asking. I appreciate that, James. What's going on with you? So, first of all, we'd like to start out by saying that Dave has completely changed both the life for myself and my wife.

We've gone from being in $30,000 in debt to being debt-free to having a fully funded emergency fund. But we've been kind of Dave-free, to having a fully funded emergency fund. Awesome. But we've been kind of Dave-ish, and we've had a discussion because it comes down to Costco. And I know you guys are big supporters of Costco. Big Kirkland Signature fan over here. I got the sweatshirt and everything. My man. Thank you very much.

That's great to hear. It's one of our favorite experiences of the week. But what it comes down to is we have not, I regret to say, gotten rid of the Costco credit card because there's a year, an annual fee. And my wife's argument is that, well, we spend money at Costco, we get the cash back on the credit card, so it covers our annual fee. I love that she's right there next to you being like, give them the full story, James. We're trying to not be on speakerphone, but she is right here with me.

Love it. Yeah, I love it. I love her too. And I, and I appreciate her opinion and it's, I don't want to be Davis. I want to completely commit to this lifestyle because it, it really has from the point of giving to every aspect of our life. Um, it's changed everything. We've, we've never been so comfortable even in these most turbulent times, but we have not gotten rid of the Costco credit card with the cash back because of the annual fee. And she's like, it covers the annual fee. And we get like $700 a year cash back. We pay no interest. So for us, we pay it off every Sure. So we need you to weigh in on

this because I have no argument. I have nowhere to go with it. I cannot wait to give you my opinion. And this is rare, but I'm going to hold you over the break. So hang on the line. We're going to come back to you. And I want to hear from your wife's side of the story because you're convinced. But if she's right there, we got to talk to her about Costco. This is my favorite call of the day. So hang on the line, James. We're going to have a conversation about Costco, about credit cards, about rewards, cashback, all of it right here on The Ramsey Show.

Stick around. ស្រូវានប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប� welcome back to the ramsey show if you missed it just before the break we were talking to our friend james in hartford connecticut and they are debt-free, fully funded emergency fund, doing the Ramsey plan, but ish, because they can't get rid of the Costco credit card. It's too emotional. So we're going to go back to James here and see what his wife has to say, who is also on speakerphone. James, are you with us? Yes, yeah, and I have my wife Shannon here. Shannon, okay.

I can't wait to hear her perspective on this whole thing. Yeah, Shannon, all right, lay it out for us. What do you love about this card that it's like under your pillow at night and you're snuggling it? Okay, so my thing is we don't ever pay interest. We always make sure that we only spend what we can afford. But then, yeah, at the end of the year year like i get my gas cheaper every time i get gas i save money you know occasionally on everything that we buy including milk bread

eggs which we have now gone to costco for because of the cost of the grocery store in opposition to what costco charges and so at the end of the year, we usually get, Costco does two different checks. And at the end of the year, when we total it all up, it becomes anywhere back anywhere between $700 and $900 interest-free. We have never paid interest. We have never paid a late fee. And we still save on the goods that we would buy every week for our home, for our family. So for me, I kind of look at it as, well, every week we buy gas, we save money on gas. Every week we buy milk, bread, eggs, laundry detergent, things like that.

I always, I'm a coupon shopper, so I always save money. And at the end of the year, we get that bonus. And my husband wants to cancel the card. And me, I'm like, but it takes me, you know, I have to work two full shifts at the hospital to gain that $700 to $900. And it's two days a week. I don't have to work and to get that extra money. And it's like, you know, it's just, in my sense, it's free money. And he disagrees. All right, James, your turn to weigh in. Well, here's why. So she actually just made a very good point earlier. I didn't even have to say it. She said, I went to the grocery store the other day and I brought the cash because we have our grocery

store envelope. Yes. Thank you, Dave Ramsey for that. We have our grocery cash envelope. And she said, I had $120 in there, but I also had another $28 in cash already in there. So she thought that would be plenty of money. Next thing you know, it was like $130. And it killed her to throw that $130 out there. She couldn't believe that we were spending that much on the groceries. And there was that moment of pause where she felt like, maybe should we spend this or should we not? So I thought, maybe there's been these moments where we're at Costco

and we potentially would have had that same moment, but because we're putting it on the Costco credit card, we just, you know, said, you know what, we'll pay it at the end of the month, which we do. Cause we, you know, at the end of the month, we do the tally and we decide, you know, what goes into our savings, what goes into, you know, if we have any extra to, you know, top off our Roth, you know, we'll do that. But maybe we would not have made that purchase had we gone in there with cash with the regular Costco membership. So that's where I'm at. James makes a good point, Shannon. You got to give it to them. It hurts when you spend cash. You know why those employees are at the doors to check your receipt?

Why? Because they have to make sure you spent $200 at Costco legally. That's what they're there for. They know Shannon wouldn't steal. You only spent $50. You bought one thing at Costco. You bought what? Laundry detergent?

How often are you at Costco? You should just work there at this point. This is impressive. She's always there. Yeah, she is. should just work there at this point. This is impressive. She's always there. Yeah, she is. She's always there at the door calculating our expenses. How about we have a compromise here, Shannon? What if we cut up the card, okay?

And then we get the executive Costco membership. That's what I have. You have that, which gives you 2% back already without the credit card. And 4% on gas. Okay. The 4% on gas, now that gas is calming down, I mean, that doesn't add up to that much a year. How much are you guys spending on gas every week? It's not that much. However, I do fill up my gas tank. I have an SUV. I do fill up my gas tank once a week at Costco, and I do save an average of about $0.12 to $0.14 per gallon. But I'm saying, let's say, I mean, you got the SUV, what, $100 to fill up, $120?

No, it's like $78. Okay, so let me just do some math because we're here. We're already deep in this Costco thing. You spend $4,000 a year. $78 a week times 52 is $4,000. You said you get 4%. All right. We're making $160 off of this. Yeah. How much do you guys make a year? I like to something total, probably. You make over $200,000 and we're hanging on to a card to get $100. Yeah. I mean, I'm just saying, you guys are good.

Now, the truth is, like, is this going to tank your life to keep this card around? No. You can still retire with dignity. You're going to be millionaires. You make a great income. You're doing the Ramsey plan, almost. Well, the thing is it's new. I mean, we're newly found. I'm 47.

My husband is 40, and we are newly found Ramsey fans. It's only been about two years. And you've already made this much progress, all while hanging on to a credit card. So now imagine we let go, just do this challenge for me, Shannon, what if you don't even have to cut it up tomorrow, give it two weeks and spend hard, cold cash at Costco without touching the card, you're going to miss out on the precious cash back, right? But I want you to see how much you save in spending, the original amount you spent by doing that. And you can call the show back.

Austin will remember you. He'll never forget James and Shannon from Hartford. Because I'm a Costco member. I've got the executive membership. Ramsey covers the cost for our team members. My wife works here, so they're, I've got the executive membership. Ramsey covers the cost for our team members. My wife works here, so they're nice enough to cover the executive membership. And we just got our big check for the year of like $111 in cash back. And it doesn't change my life.

I don't go like, well, I'm going to spend $1,000 more at Costco to get the cash back. But James is right. There's a subconscious piece to this. When you spend hard, cold cash, it physically hurts, especially at these wholesale clubs where everything's expensive. Can I just pause and say, I love this. I feel like this should be a new thing on the Ramsey show. Settle the debate. We have so many like one spouse calls in and it's like, I wonder what the other spouse is thinking, but y'all just brought something new. And I love that you guys are in on this. Usually one spouse calls in and the other spouse isn't there to defend themselves, but Shannon is here to defend her good name. Oh no, I'm here.

Yeah. I love it. We're definitely, we're in this together. We did this, we started this together. We are in this together. And we've also got our, you know, 20 and 24 year old sons involved where we are trying to get them a hundred percent, you know, Ramsey all the way. Do you have them opening credit cards? Do what? Do you have them opening credit cards? No, no, not at all. But why not? I want to go from Ish, which is a wish, to Dave all the way.

So that's where we're at right now. So, Shannon, why not have all the kids open up as many credit cards as possible and get all the cash back as possible? No. See, I disagree with that. Why? I do disagree with that. But Costco is the only place that we actually spend a certain amount of money.

Like, I won't go to a store just because they offer, you know, a discount or a cash. I won't just use my credit card for that. Like, I don't do that. But Costco, because we get so much cash back at the end of the year, we do a lot with giving. We do a lot with, um, we did make a wish this year. We do, you know, um, food banks, we do Christmas clubs. We do all sorts of things where we give back because, you know, my husband, when he started this with us, cause it was all him, I will say it was all James, a hundred percent Dave Ramsey, full in, we do give back and we believe in that. So it's kind of like, you know,

well, if we have this extra money, it's more that we can, we can give. And it's, it is kind of nice to get that check back or to even, even if, even if I, you know, was one day at the store and you have that check, you say, okay, well, today's groceries, we don't have to pay for because we've paid for it essentially all year round by not paying any interest, not paying any fees, our $100 and whatever dollar amount Costco charges was covered. And now they've given us back money for being a good member.

You're sweet, sweet people. Well, I just want to hang out with James and Shannon. They're awesome. Here, do me another solid. Go listen to the fine print episode two, The True Cost of Credit Card Rewards. You might find out some fascinating things in that episode that I did on that. Hope it changes your mind.

But if not, you guys are going to live. But I want you to go all in on this plan because that's where the true life change happens. That's where you make decisions differently because you're spending your own money instead of the bank's. Thanks so much for the call, guys. That was a good time.

This is The Ramsey know that you've had enough stress lately when it comes to the rising cost of gas and groceries. You might feel trapped in a dead-end career. Your relationships might need improvement. Enough is enough. You deserve a break. And that is why we brought back the Ramsey $10 sale on our number one bestselling books and tools. But the sale is available for just three more days. So if you're ready to say, you know what? I'm done living this way. Do you want to hit the reset button on your life? You can take advantage of some of our best-selling products and tools to do that, including the Baby Steps, which is what I use to climb out of debt and build wealth. We also have the Total Money Makeover, Know Yourself, Know Your Money's on there. You can also pick up

Questions for Humans Couples Edition if you need to reconnect with the spouse. Christina, this is very hard for me to do because we get home, you're tired, you just want to sit on your phone on social media and scroll, right? Oh, man man we love the questions for humans couples edition we actually did that on our date night recently we've got kids and it's so easy teacher's pet where's john deloney when you need him he's gonna give you a gold star but it's so easy as a parent to like when you go out on your date night you're just talking about your kids and you're talking about everyday life and this like actually challenges you to have deep, real conversations. Well, most conversations are, how was your day? Good. How was your day? Fine. What are we doing for dinner? I don't know. What do you want to do?

That's like 80% of marriage, right? Or nagging, like we got to do laundry. You're going to do, you get the, I did the dishes last time. And so this is a great way to actually connect as a couple. That's on there as well. Dave's a brand new book on personal growth. The momentum theorem is also on there. If you want to start to start making changes for everything you need in life. And this is the cost of a burrito these days. 10 bucks. That's amazing. So there's only three days left to take advantage of this. And we're offering a free financial coaching call with any purchase. That is worth the $10 alone. That's amazing. You can talk with a Ramsey preferred coach about your specific money,

questions, and plans with that free financial coaching call. So get it before the sale ends. Go to ramseysolutions.com and check out all of the products included in the $10 sale. All right, Jean joins us up next in Atlanta. Jean, welcome to the show. Hi. Hi, how are you? I'm good, I guess. How are you? We are doing well. How can we help today? Yes, I just recently got out of a relationship, and I own the house. My name is on the mortgage, and a few years ago, my boyfriend had pressured me to put his name on the deed. And now that I'm in the house by myself,

I don't know how to get his name off the deed. So I'm kind of upside down in it. I heard Rachel, I just started watching y'all last week, and I heard Rachel say that if your mortgage is more than 50% of your income, then your house is poor. And so I've been scrambling, trying to figure out what I need to do. I'm afraid that the house might go into foreclosure because I can't sell it because his name is on the deed if I needed to. I'm so sorry, Jean. So is he out of the picture now?

Yeah, he was removed from the home. I was in an abusive relationship with him. I'm so sorry. So is he out of the picture now? Yeah, he was removed from the home. I was in an abusive relationship with him. I'm so sorry. Thank you. Are you okay now? Are you safe? Yes, I just got back a couple months, I mean last week actually.

Okay. I had stayed out of the house for two months, but he still hasn't moved his things out. Are you getting any help professionally from a counselor? Any support, mental health? No. Okay. I can't afford it right now. I'm just trying to figure out what to do with the house. I'm, you know, I'm paying a mortgage. I'm in credit card debt that has built up over the few years that we were together. And so I'm trying to figure out, you know, I'm kind of robbing Peter to pay Paul right now. Do you have a pen and paper nearby? I do. Okay.

Write this word down. Quit claim deed. That's what you're going to need him to sign in order to be able to sell the house. I've looked that up, and I don't think he's going to do it. Well, at that point, you need to take him to court. He wants me. I can't afford to even go to court. It's that bad of a situation. Well, we need him to sign this quit claim deed in order to go through with this process,

and you do that with your escrow company, your local title company there in the Atlanta area, and what are they saying? Nobody, my mortgage company says I have to, that's a deed problem, and the lawyers that I've called are basically saying that they, you know, it's a civil matter. Are you able to get a public defender? I've been calling public defenders and, well, at least the ones that I've called were through the domestic violence people. And, you know, they don't know and they can't reference me. They just, they called, you know, I just called somebody today and they just told me that that was a legal matter for civil litigation. I'm so sorry, Jane. This is a messy situation.

Yeah, my heart goes out to you, Jane. I do wonder, you said you worked with a domestic violence shelter. What kind of resources have they offered? Well, they were able to get my life changed so far, but I've talked to them about it. And even the lawyer there, they just, you know, they're just domestic violence lawyers. But it's like I either need a real estate lawyer or, like I said, the civil litigation. Well, I do wonder if some of the attorneys that are within that shelter could recommend any other attorneys that would perhaps work with you on a pro bono situation. I've asked and they don't really know. They just kind of put it back into my hands to find out.

And he wants, my ex wants me to drop the restraining orders. But I... What is that going to do for you? Yeah. Other than put you in danger? Yeah. So, and I'm not speaking with him. I mean, during the threats, he would say he would give me back the house,

but he hasn't said anything about it now. How many, so you connected with one domestic violence shelter. Are there any other? Yeah, I did call another one who gave me the name of a lawyer, but the lawyer that I spoke to told me that she was for marriages. She's a marriage lawyer, and she said my... Because it was a boyfriend and not a spouse? Yes. Well, we're going to have to beat down the doors of some of these public defenders and get someone to fight for you in a court of law to get him to sign this quit claim deed and have a judge

go, you're signing this thing, or they're going to go after him. That seems to be your only option at this point, because we can't sell the house without getting the quitclaim deed, and here you are trying to afford this mortgage. And so you need to at least contact your lender and say, listen, here's the situation. I can't afford this mortgage. You can foreclose if you want to, and I want to sell this thing, but I can't until he signs a quick claim deed. So I'm in kind of a conundrum here. Have you explained that to them? Yeah, I did call them a few months ago, and I told them the situation, and they were saying that I would probably need to call a deed lawyer.

Yeah, have you done that? Yeah, but they gave me the number to another lawyer and they said that we would probably have to be forced to sell the house and get the proceeds. Yeah. Well, Jean, I'm so sorry you're going through this. I wish we could help further. What I am going to do is give you a free financial coaching session with someone in your area who can dig deeper than we can on a quick radio call here. So hang on the line. Austin's going to pick up and we're going to give that to you. And it'll be about an hour and they'll walk you through all the resources available in

their area. They'll be more knowledgeable than we are about what's going on in the Atlanta area. But it sounds like there's only one route here. And it's to get a lawyer who's willing to do this pro bono, get a public defender, someone who was willing to do this, since you don't have the money to cover it, to get him to sign. But that's the only way out of this thing with a quick claim deed. And that is a legal document saying that he is part owner in this house. And without that, we can't sell the house. And so that is the A1. And

I hate that you have to go fight all this after going through what you went through. I cannot imagine. But that's the situation we find ourselves in. I would also encourage you to reach out to some mental health professionals who work on a sliding scale because there are some out there. I've had friends who've gone to counseling for $10 because that's all they could afford. But you do have to find them that work on a sliding scale. I think that could really help you process some of this trauma and pain that you've been through. Well, hang on the line, Jean. Austin will pick up. We will get you connected with that financial coach. And if there's anything else we can do for you along the way to get you out of this awful situation, please call us back. We are here for you. This is The Ramsey Show. Our scripture of the day, Galatians 6-9.

Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up. Mark Twain said, do the right thing. It will gratify some people and astonish the rest. Ain't that the truth? I'm George Campbell, joined by Christina Ellis. And we've been talking a lot about student loan forgiveness, and it's, you know, spun up a whole bunch in the news cycle, and we found this article from MSN and BuzzFeed. People who regret their student loans are sharing what they make now, and it's heartbreaking, and this speaks to the fact that so many kids that I talk to, that you've talked to, go, well, Christina,

I'll take out student loans because I'm going to make like a ton of money when I graduate. I'll be able to pay it back so easily. And we have some real people showing us that that is not quite the truth. Right. Well, what's sad is that a lot of loan officers, a lot of people, when kids encounter them at the college, they say, hey, it's going to be easy to pay this back. You're going to get this awesome job after graduation. And these stories highlight that that's not always true. Yeah. Let's read a few just to really brighten up your day here. All right. One person said, I was a single mom of two small children, was told over and over that college was the only way out of poverty. Well, got my degree and still make less than $50,000 a year. I currently owe $130,000. I'll never be able to pay it off or purchase a home. I'm 52. I have no idea how I'll retire or even live once I can't work anymore.

This next one says, I'm about to turn 65. I have over $100,000 owed in student loans and regret having gone to college as my earnings are $60,000 yearly. I have had to file bankruptcy and can't afford to retire because I have a chronic health condition and will be paying student loans until I die. This debt should be removed for senior citizens. Oh, man. Here's another one. My teacher's salary in southeast Missouri was $30,000 a year. Student loan total with interest, $66,000. In June, I became a social worker, making $36,000 a year. This is brutal. Yeah. This one says, I regret going to veterinary school. Between undergrad and vet school, I have $360,000 in student loans. I make $125,000.

And I'll end on this one. I have a BA in telecommunications making $45,000. I'm in debt for $139,000. When I graduated 13 years ago, my debt was $115K. I've been making payments all of those 13 years SMH, which for those of you over 35 means shaking my head. There we go. Wow. This is dark stuff, Christina. And it's led to a lot of people just going, I'm just not going to worry about this because it's too much to worry about. I can't handle the stress of it. Right. And one, especially with the pandemic pause, a lot of this has not, it's kind of been out of sight, out of mind. So people haven't had to worry about it.

And yes, there's forgiveness now, but these stories highlight that there are still people in a lot of pain with a lot of anxiety and a lot of debt still. So we've seen this TikTok trend recently called the ostrich method, where people basically are thinking that the best idea is to just stick their head in the sand and kind of not think about their student loan. You know what this is like? It's like when you played hide and seek and you just put your hand in front of your eyes and you were like, well, if I can't see them, they can't see me. Doesn't work like that, does it? So here's what the article from US Today says about the ostrich method.

Yeah, it says, Relatable jokes about ignoring student debt and dodging student loan payments are popular across social media. After all, the pause on federal student loan payments has been extended multiple times over the two presidential administrations during the ongoing coronavirus pandemic, and many borrowers haven't had to make payments for nearly two and a half years. The two plus year hiatus hasn't stopped for social media users from joking about how they'd like to avoid any and all payments. But what would happen if the freeze on student loans is lifted and you didn't pay? People are asking. So what's happened is for two and a half years, we haven't made payments. And so everyone's gone, well, it's been two and a half years. I'm used to not making payments. What if I just kept not making payments even when they become due? That's a scary thought.

Well, here's what happens if. If you miss a federal student loan payment, it's considered delinquent. So that's the starting point. Not good. And remember, you signed a contract that says you're going to pay this money back with interest. And if you don't uphold your end of the bargain, there are penalties associated on top of the interest. And then your loan can go into what's known as default, which many, many people do, which then damages your credit, which you know our feelings about the credit score. We say you don't need the credit score system, but a bad credit score will hurt you. We want you to have no credit score because you don't touch debt. And this goes on, Christina. This is not fun because once it goes into default, you're hit to your credit. It's not the only consequence. You also lose repayment plan options. You face other penalties. And then the government can garnish your wages and they can withhold your

tax refunds, the child tax credit. They can withhold Social Security payments. So this is going to follow you forever. It's not going to go away. There's not going to be a magic wand where they go, well, it's been 10 years and Christina hasn't paid. This is something you can't even bankrupt on. No, you can't run away from this situation. And I think what is so concerning about this pause and the fact that students are even having these questions, there's a lot of students who graduated during the pandemic. They haven't paid their loans. This is their first experience with money and the commitment of having to pay something back. And it's just been paused

and extended. So it's easy to kind of fall into that mindset of like, maybe this is the way things are. Maybe I don't have to be responsible for, you know, the things that I said I would do. And that's just a scary way to set out on your financial journey. Yeah. And many people have not been budgeting for this, of course, because they haven't been making payments. And so it is going to be a dark day when all of a sudden they go, time to pay the piper. And you go, oh my gosh, $600, $800 a month for these payments. I just found all of my old student loan documentation when I was back home in Boston and my parents said, here's all your childhood memorabilia. And over half of it was just student loan bills that were coming in the mail and more marketing from Sally Mae about how great, you know, they were called smart option loans. That

feels like it should be a legal smart option. They're marketing this like, well, there's a bad loans. We're the good loan out there. And so this is scary stuff. You can also lose eligibility for additional federal student aid. You may not be able to buy or sell assets like real estate. There can be legal action against you. You can get sued. And if you still are like, okay, that doesn't seem so bad. Please go watch the Borrowed Future documentary or listen to the Borrowed Future podcast where we interview a student loan attorney. And it is frightening. It is a moment I'll never forget in the documentary, where she says that the lenders are basically saying, give me your pound of flesh. And the way she says it has stuck with me,

it is seared in my memory from Beverly. And this is scary. I kind of got chills, like the tingles down my arm. You can't ignore this boogie monster. And it is under your bed. And the only way to do it is to flash the light and go, how much do we owe and how are we going to pay this off? Right. That's it. Yeah. You got to face it. I mean, even if, so now it's been extended until December and I would encourage you don't use that time to just do the ostrich method and stick your head in the sand. Look at it now, start budgeting for it, get that payment back in your life and start actually tackling it. This is the best time to be paying down your student loans because the money is actually going to principal versus interest. So this is when you can make the most progress. Yeah. I remember the stories are just coming back from when I did the

Borrowed Future podcast and talking to a woman that was older who was going, I'm worth more dead than alive at this point. And the student loan is just gonna go to the grave with me and my balance was 90 and now it's 120. And so especially these income-based repayment plans are actually hurting a lot of Americans because they're not even touching the balance. The balance keeps growing because they're only making you pay this much

and they're acting like they're your friend for doing it. And yet the balance grows and grows and grows like a cancer. It's terrible. Well, and it's like we've normalized keeping student loans around for years. We've normalized this being a 20 to 25 year journey. And we say that that does not have to be the case. We've had people walk through these doors at Ramsey Solutions with tons of debt. And typically the average person pays off their student loans in 18 to 24 months. So I don't want you to just buy into this lie that you have to keep these loans in your life forever. You can get rid of them. I actually recently created a course called The Ultimate Guide to

Getting Rid of Your Student Loan Debt. And it's to help people find that motivation, find that drive in the actual tools and resources and practical guidance to get that out of your life for good. So it's actually free for Ramsey Plus members. And if you're not a Ramsey Plus member, you can find it at ChristinaEllis.com slash start. I love that. Well, the key is here, number one, get riled up. Because if we keep ignoring it, then nothing's going to happen. Our life will continue to stay the same and we'll live a life of mediocrity and debt. So do something about this. Do the debt snowball, follow a plan, get riled up. Don't wait on Washington to fix this, okay?

Folks, this is on us. This is on the parents to have conversations early and often with our kids about how we're gonna make a plan to go to school debt-free. It can be done. Yes. Well, that puts this hour of the Ramsey Show in the books. My thanks to my co-host, Christina Ellis,

all the folks in the booth, Austin, Ben, James, Zach, Andrew, and you, America. We appreciate you listening in. Until next time, spend wisely, save intentionally, and give generously. 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.