 what's happening guys. Finally got a haircut. Super happy about it. Quarantine hair was getting out of control. But anyways I stumbled upon this video of Dave Ramsey talking to this guy that's $435,000 in student loan debt. Now if you know anything about Dave Ramsey you know that he pretty much hates any form of debt. Like this guy's allergic to debt. He hates all kinds of debt even the good kinds. Now I don't necessarily agree with Dave on everything but the truth is a lot of people do resonate with his teachings. They aren't perfect but he has helped thousands of people get their finances together and he's helped them to smash their debt like you guys always smash the like button. So let's jump into this video and see what's going on. I'm actually getting ready to relocate from Colorado out to Chattanooga in which real estate is about half the price as it is out here. So I got a $20,000 a year raise plus we're going to be saving almost 900 a month in rent. Good. Okay so this part's great Justin is moving to an area where he's going to be making a lot more money and on top of that the cost of living is also going to be lower. This is a smart move and it's becoming more and more common. For instance a lot of people are leaving California because the cost of living there is just astronomically high and the taxes are really high. Now this will allow him to save up money and also pay off his existing debt but how much debt does he have exactly? So collectively me and my wife are 460,000 in debt in which 435,000 of it is student loan. Wow. Okay so this is what I've been telling you guys about this entire time. I'm really trying to get the word out there so that less people fall into traps just like this. $435,000 of student loan debt and let's not forget you can't just get rid of it in bankruptcy like you can with credit card debt or you know mortgages or a lot of other types of debt. So one way or another unless you fake your own death change your name and move to Thailand you're gonna have to pay it back. So I'm guessing that this guy either went to one of those overpriced private colleges for undergrad or maybe he went to graduate school and pulled out a grad plus loan. Let's find out. Who's the doctor? Who's the lawyer? I am. Okay. I am. I'm a chiropractor. You're a chiro... Okay so believe it or not chiropractors are doctors and so for that reason you do have to go to graduate school in order to get your degree and become one. So this means in addition to the four years of undergraduate he probably had to go to graduate school for several years as well and as bad as student loans are for undergraduate programs the student loans for grad school are 10 times worse. In graduate school when you're getting either a master's or a doctorate you're going to be pulling out what are known as grad plus loans and these are loans that I've talked about in other videos extensively and I'll probably make more videos about grad plus loans in the future as well but basically through a series of laws that were passed grad plus loans are kind of like a blank check for graduate schools to charge students whatever they want. This is why you keep on seeing these ridiculously high student loan numbers as schools are routinely charging over $50,000 a year. Now I'm not going to get into it too much because I've done that in other videos but normal student loans charge around four percent interest rate or so whereas grad plus loans have interest rates over seven percent. For the 2018-2019 year the interest rate was 7.6 percent which is higher than almost any type of investment that you can put your money into out there. So to put that in perspective the S&P 500 on average has risen to about 7.1 percent adjusted for inflation since they started recording it and over 95 percent of investors cannot beat the market average of 7 percent so whoever is servicing these loans aka whoever you're paying for these loans is in the top 5 percent. And speaking of servicing did I mention that there's a 4.2 percent servicing fee on whatever money that you take out. On top of that any money that you take out starts compounding immediately after you take it out while you're still in school. So the money you take out your first semester of graduate school is going to be compounding the entire time. Now there's a lot more to it than that but basically this created a recipe for disaster that so many young people end up getting in trouble with. They just don't know any better because nobody's out there telling them about these things. What did you pay for chiropractic school? Chiropractic school was probably pretty close to with grad plus probably 350. So there you go right out of the horse's mouth. So I'm not sure here if he means that he paid 350,000 for chiropractor school and then it compounded to 435,000 or whether he paid you know a lesser amount for chiropractor school and then it compounded to 350,000 and then the rest of it is just his undergraduate loans. I'm not sure exactly what he means by that but either way you can see that he probably didn't take out 350,000 dollars in loans. He probably took out for chiropractic school more like let's say 50,000 a year so more like 200,000 in loans and it's already almost doubled to 350,000 and this happens because the interest starts adding up right when you take it out in school. And how many chiropractors make enough to justify anywhere near that none? Maybe 1% like the upper 1%. Yeah that's probably true. So according to BLS chiropractors are making about 70,000 a year on average and that's not very good for a doctoral level degree that you go 350,000 in debt for and I think if Justin would have just taken the time to crunch the numbers and look up the stats here it would have been very easy for him to see that it's simply not a good investment and he could have either chosen a different degree or at the very least go to a cheaper school. And how many chiropractors make enough to justify anywhere near that none? Maybe 1% like the upper 1%. This is a great example of 2020 hindsight. Most people that I've talked to in my life have this same opinion when they talked to me about their student loans. They had no idea what they were getting into and they have a lot of regrets about them. So if he would have done his research and planned things out beforehand it would have been incredibly obvious that this is a bad idea. So with your $20,000 raise what are you going to be making? We'll be with the raise and once bonus because we get her adjustment bonuses and stuff like that I'll be roughly between it's going to fluctuate between 100 and about 115 for now. Okay so here we see that Justin's actually doing pretty well for a chiropractor he's getting paid a really good salary but still the numbers just don't add up to justify that kind of debt almost half a million dollars in debt you've got to be making pretty close to like a doctor's salary. Okay so at this point Dave asks him if his wife is working and he says she isn't and then this. So we have three kids and she's actually cooking number four. Oh man so kids are ridiculously expensive especially when you're trying to pay down your loans and he wants to have more of them. Okay I mean I'm not going to say too much here I don't think that's a good idea that's all I'm going to say I'm going to leave it at that. If you did $50,000 a year and lived on 50 that's 10 years still. So basically if he used half of his income just to pay off the student loan debt it would still probably take him 10 years to get it all paid down. So this guy is is honestly just in a really awful situation it looks like his wife won't be able to go back to work anytime soon as well and after taxes rent day to day costs car costs food paying for the kids for instance all these things it's going to be very tough to be able to pay $50,000 a year that family is going to have to live well below their means like you know rice and beans as Dave Ramsey says cheap rent sleeping in the same room yeah they're going to have to live well below their means in order to get that paid down plus that 435,000 is just going to keep compounding those entire 10 years so it's probably going to be another hundred thousand dollars of debt or even more by the time they get it paid off. Now as you can imagine Dave thinks this is the best plan and depending on the details of the situation it might be. I would suggest that there's several other things that this guy could look into that might be better plans for him. Now the first one that you see on the internet quite a bit is the public service loan forgiveness plan which is basically you work like a government job or a public service job for 10 years you make your payments for those 10 years you never miss a payment and then at the end of the 10 years they will forgive your loan. Now this program is honestly extremely difficult to get into I think only one or two percent of the people who apply for it actually get accepted and on top of that I don't think there's that many government jobs for chiropractors so that's probably not a good option for him. Another option would be the repay or the pay as you earn PAYE. This is an income driven repayment plan and basically you do the minimum payment for 20 years and then theoretically after that 20 years the rest of the loan is going to be forgiven. This minimum payment would be 10% of your discretionary income but there's a catch you still have to pay taxes on whatever amount is forgiven so at the end of 20 years if that's a million dollars you still have to pay taxes on it. Now another way he could go is he could consolidate and then refinance his loans with another company. Basically refinancing means you trade your old loan for a new loan and a lot of the times this new loan is going to be lower and it's also going to have a lower interest rate. There's a lot of different companies out there that do this and I'll probably make another video about how you go about doing this in the future but this can be a great option for you if you're not worried about ever having to miss a payment. If you do miss a payment though this can be really bad because you'll lose some of the protections that the original loan had. So the one good thing about student loans is they do have certain protections that help students if they get in a bad spot. Sometimes when you refinance you're going to lose these protections and so you might get a better rate and all that sort of thing but you're also not going to be able to have a lot of the leeway that you would have if it was still with the government. I might do a video on that in the future that's just a really quick overview on how it works. Let me know if you're interested in that. Go ahead and check out my videos right here. I made them just for you. Smash the like button, hit the subscribe button, ring the notification bell and comment down below.