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Taming The High Cost of College

Late Stage College Planning

bankruptcy

THCC103 – The Ugly Truth About Debt Interview with Travis Jennings, Founder of Debt Reduction Inc.

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“Debt is a bad thing and your personal finances have to be in order,” states our guest today and creator of Debt Reduction Inc. Travis Jennings. In this episode, we learn about the problems that come along with chaining yourself to your lifestyle, which often starts late in high school. Don’t let your student fall down this slippery slope! Set them off on the right foot and make sure your own finances are clear in the process with the great advice here- Win, win!

Questions Answered Today:

What does the typical person with debt look like?

Travis helps everyone that can’t necessarily afford a wealth manager. “What we try to do is focus on the debt aspect because I don’t see a lot of people out running around teaching how to get out of those issues,” says Jennings.
There is technology available now to help you restructure your debt and properly pay it down as quickly as possible.
Most people are doing okay covering their payments, but can’t quite squeeze college in as well.
“I think it is important to look back and analyze how we got into this mess,” Jennings notes when describing how people get into debt. Paying for college requires excess income.
Assets show up on the financial aid forms, but debts do not. You have to get your debt in order to be eligible for more financial aid.
Options for student loans include:

  • Mom and dad can borrow to help pay for college (Jennings does NOT recommend this!)
    • Formal student loan
    • Home equity
    • Credit card
  • Students can get their own loans to “have skin in the game”

The solutions that Jennings recommends the most are educationally based. These include:

  • Get a written plan
  • Understand the effect of the interest you are paying or receiving
  • Transfer from a position of debt to a position of wealth

Where can you learn more?

Jennings recommends the following:

Seek help from professionals, such as this podcast, to better plan your finances or to figure out how to get rid of your debt if nothing else works.
When it comes to bankruptcy or debt consolidation Jennings warns, “I’m not a big fan. It is not fixing the behavioral finance aspect.”
The problem is that most people don’t understand finance and people don’t apply education to their own lives.

LINKS AND RESOURCES:

BRAD RECOMMENDS:

Consolidating debt
It may make sense early on in the college process to use other assets to pay off debt. For a family that has both assets and debt, it might make sense to use those assets to help pay down the debt so you can qualify for more financial aid. You can also redirect the cash flow that will be freed up from paying off these debts towards paying for college.
Rolling debt into your mortgage
Brad also suggests refinancing a mortgage to help pay off any outstanding debts, if it makes sense for your family. This is also advantageous because it helps prevent new debts in the form of student loans where the interest rate is substantially higher than if you had stretched your mortgage to a 15 or 30 year.
You have to be disciplined! Don’t pay off your credit cards and then run them right back up again and put yourself back into debt.

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