Student Loan Debt - Enough to Buy a House!
Rental Property Investor · Andover, MA · Member since 2017 · 126 posts · 67 votes
Hey Everyone,
It's no secret that Americans owe over $1 trillion in student loan debt, spreading out over millions of borrows. I'm curious to hear how other successful real estate investors who were once faced with the same challenge were able to overcome the massive debt barrier?
Looking forward to the responses!
Dan
Hi @Daniel Ortiz. I didn't... I pay the minimum on my student loans and invest the extra. Why spend a ton of money paying off something at 5.something% when I can invest and make 10%-25% on that same money?
Now that I have added a number of units under me I feel more comfortable looking at paying those down. Mostly because I disagree with the entire higher education cost, loan-till-you-die, can never bankrupt, no underwriting necessary philosophy that our government uses to give itself its #1 asset on its balance sheet. I'd rather cut their interest income and vote with my money.
@Josh Day - I was able to at least consolidate the loans, which has put me in a much better situation but definitely still not a favorable one (which explains why I'm raising the question). I appreciate the feedback though, those are all great ideas and ones which I previously considered.
@Christopher Giannino - I am interested in house hacking, but wanted to get an unbiased response first before just asking what you think about it. This is great though, because I am not firmiliar with the BRRRR strategy so I will definitely check it out.
Hey Everyone,
It's no secret that Americans owe over $1 trillion in student loan debt, spreading out over millions of borrows. I'm curious to hear how other successful real estate investors who were once faced with the same challenge were able to overcome the massive debt barrier?
Looking forward to the responses!
Dan
Student loans can get you on the ropes. Depending on where you live and student loan debt principal balance, it may even be the equivalent of a few mortgages and can be significant. If you plan on maintaining traditional employment for a while, it definitely affects what jobs you go after (pay rate), if you plan on having any quarters left after paying student loan bill. Definitely want to look into ways of earning additional alternate income if you plan on aggressively attacking it.
@Account Closed - With only a few quarters left after paying the student loan bills, I'm headed down a path to see how I can earn additional alternate income to try and attack the loans more aggressively. My aggressive approach though, is where real estate investing comes in. Goal is to leverage that as a way to attack the loans.
@Marcus Johnson - I admire your drive and focus to buckle down and grind through the $28k in loans.
I had $28,000 in student loans and I got three jobs and I work really hard to pay those off along with my wife. Once we pay those off which only took five years we started saving money because we have no debt except our primary mortgage. When you minimize your debt you have more income to save with and invest. Plus borrowers would rather land to someone with a loan debt to income ratio.
$28,000? The monthly payments on that would certainly be manageable. It is not unusual for grad students for instance to have student loans in the $100,000+ range. At a 10 year term and 6.8% interest, that can sting a bit.
Until I reread your post, I thought you said you had to get three kids along with the wife to help work on paying down the loan. I'm thinking, good gracious! What is the pay rate in Minnesota?
@Account Closed - With only a few quarters left after paying the student loan bills, I'm headed down a path to see how I can earn additional alternate income to try and attack the loans more aggressively. My aggressive approach though, is where real estate investing comes in. Goal is to leverage that as a way to attack the loans.
@Marcus Johnson - I admire your drive and focus to buckle down and grind through the $28k in loans.
If you have not already, you benefit from developing a personal budget to have an intrinsic understanding of what all your personal liabilities are, what you should be making and what your savings and investment requirement should be, in an environment where the future of social security and it solvency is suspect.
I have heard some real horror stories where they do not wait on you to send student loan payments but have the ability to get at your paycheck as if they were making some sort of a FICA or medicare tax deduction -- before you even see your check.
If you have considerable personal debt, credit cards etc., and owe anything in the $100,000 range on student loans, at the recent 6.8% rate and 10 year term, the student loan payment alone would be somewhere in the $1152.86 range per month. When you factor in other obligations, your debt to income ratio at a personal level may affect your ability to make substantial or meaningful investments that rely on your personal credit.
About real estate investment strategy, the margins on a rental business model can be thin at times (there may be a few exception to this), unless you invest in a market where that is being offset by rapid growth in the value of the property.
An aggressive strategy would be something along the lines of rehabbing and flipping.
May be too late for those already buried in student loan debt, but help spread the word. It is life-hampering!
College choice is a huge factor. Costs vary widely. That out of state or private school is not in the cards if you must borrow.
Never hurt anyone to work while you're in school either. I did and it made me more organized than those with all that time on their hands.
Spread the word. Parents - learn the word no. It is a full sentence. Students learn the words 'no thanks'. Tell your family and friends how much it ain't stinkin' worth it!
@Account Closed - I was thinking the same thing with respect to @Marcus Johnson post. I'm not one to judge, so maybe the $28,000 was indeed hard to get through...but given what I know about my own financial situation - taking 5 years and 3 jobs to grind through $28k sounds odd. But hey, everyone's lifestyle is different.
@Account Closed - I have created my own financial budget and I must say it really does help clear your vision and put you in a better position to achieve your goals. I am not a spender...so luckily I only have student debt to worry about (no credit card baggage). You hit the numbers right on the head with the $1150 estimate. I owe upwards of $150k and had to spread it out way longer than 10 years to get it down to where it is today. And before you ask, yes I consolidated, and yes I refinanced. I've learned how to live with it, but plan to use real estate as my vehicle out of the rat race.
My goal is to get that first property. I am more interested in building wealth long term through multi-family, buy and hold, cash flow strategies than trying to make a killing quick (as nice as that would be). But who knows, maybe my mind will change the more educated I become.
@Steve Vaughan - In my opinion - it's never too late. If I sit back and become complacent, then I'll end up like everyone else who has accepted paying off student loan debt until they're 40-60 to be "normal". I worked while in school too and must say it definitely helped. Not sure if encouraging parents to say "no" is the right way to go, but perhaps showing younger adults the big picture before allowing them to in bed with a mountain of debt is a better approach.
@Account Closed - I was thinking the same thing with respect to @Marcus Johnson post. I'm not one to judge, so maybe the $28,000 was indeed hard to get through...but given what I know about my own financial situation - taking 5 years and 3 jobs to grind through $28k sounds odd. But hey, everyone's lifestyle is different.
@Account Closed - I have created my own financial budget and I must say it really does help clear your vision and put you in a better position to achieve your goals. I am not a spender...so luckily I only have student debt to worry about (no credit card baggage). You hit the numbers right on the head with the $1150 estimate. I owe upwards of $150k and had to spread it out way longer than 10 years to get it down to where it is today. And before you ask, yes I consolidated, and yes I refinanced. I've learned how to live with it, but plan to use real estate as my vehicle out of the rat race.
My goal is to get that first property. I am more interested in building wealth long term through multi-family, buy and hold, cash flow strategies than trying to make a killing quick (as nice as that would be). But who knows, maybe my mind will change the more educated I become.
@Steve Vaughan - In my opinion - it's never too late. If I sit back and become complacent, then I'll end up like everyone else who has accepted paying off student loan debt until they're 40-60 to be "normal". I worked while in school too and must say it definitely helped. Not sure if encouraging parents to say "no" is the right way to go, but perhaps showing younger adults the big picture before allowing them to in bed with a mountain of debt is a better approach.
Daniel, I just meant too late to not get into the debt in the first place. It's done, but I agree it's never too late to better ourselves and our opportunities.
I encourage parents to say no to their students that want to attend schools that cost way more than what's needed. If community college then transferring to a state school gets the job done, my kids will not receive my help with anything more expensive. NO, you won't receive my assistance going to the cute school that costs twice as much. I will not help you go $150,000 into debt. No!
You feeling differently about this does not surprise me. Best wishes though as you work throughout this.
@Steve Vaughan - Please, feel free to call me Dan. Whoops, my mistake I must have read your original post too quickly.
It's not that I feel differently about this than you...I think you make excellent points that I agree with. I just don't think its a cut and dry decision to make.
For what its worth - I will not allow my parents to touch a dollar of what's to be paid back. I plan to leverage this inner drive well into the future. Best wishes to you as well, this is excellent feedback.
@Account Closed - I was thinking the same thing with respect to @Marcus Johnson post.
It's not really about the amount of their or your student loan or if 5 years is too long or short to pay it off. Each person's life circumstance vary; perhaps they had other financial obligations, kids, mortgage etc. or just decided to stretch it as long as feasibly possible. It is however a common theme in many metropolitan areas that wage levels could use some boosting to keep pace with cost of living. Regarding which strategy works best for you, it's also what you feel comfortable with. Some may be of the mindset that if you find yourself in a 12 round heavyweight bout, you don't dance around for 12 rounds and risk getting hurt if you can take out the opponent in the first.
@Account Closed - Well said Mike, well said. Going to keep an open mind throughout the education process and let my real estate path grow as I continue to learn. Interested in hearing what other strategies people utilize when faced with difficult financial situations.