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How to solve the student loan crisis?

Discussion in 'Sports and News' started by Stitch, May 19, 2012.

  1. Stitch

    Stitch Active Member

    According to this guy, just land a six-figure salary once you graduate. and you can pay off $90,000 in loans in seven months.

    http://finance.yahoo.com/news/wiping-out--90-000-in-student-loans-in-7-months.html
     
  2. wicked

    wicked Well-Known Member

    Just gotta wonder what exactly he's putting in that there flask...
     
  3. LongTimeListener

    LongTimeListener Well-Known Member

    Mihalic also took steps that financial advisers typically say are a no-no: He liquidated his individual retirement account, drawing a tax penalty, and stopped contributing to his 401(k), even though his employer offers a matching contribution.

    He should be asking Harvard for a refund if he graduated from their business school and is still that motherfucking stupid.
     
  4. Stitch

    Stitch Active Member

    I wonder Mihalic is part of the Dave Ramsey cult.
     
  5. Starman

    Starman Well-Known Member

    Damn, I should have kept this in mind when I listed "salary requirements" when I was applying to 10,000-circ. 5-day dailies.
     
  6. Yodel

    Yodel Active Member

    Been a long time since I listened to Ramsey, but I don't think he preaches against saving for retirement.
     
  7. HejiraHenry

    HejiraHenry Well-Known Member

    He favors a balanced approach and probably would not approve of blowing up the 401K. But, this guy can now probably sleep pretty well at night. So there's that.
     
  8. BTExpress

    BTExpress Well-Known Member

    Don't see anything terribly egregious in his decision.

    Blowing up a 401(k) at age 29 makes a lot more sense than blowing it up at 39 or 49. It's not like he had half a million in there at that age.

    And if he saved $40,000 in interest, then he's just as well off starting from scratch, debt free, at 29. Plenty of time to rebuild the retirement account on that salary with no crushing debt.
     
  9. LongTimeListener

    LongTimeListener Well-Known Member

    Who said he'd have to blow up his 401K at age 39 or 49? Why would that be the assumption?

    All he would have had to do is put himself on an aggressive plan to pay everything off in 3-5 years, with the funds he has coming in, and he'd be well ahead of the game. Instead he chose to immediately forfeit roughly 38 percent of his retirement savings -- the 10 percent penalty for early withdrawal and the probably 28 percent he pays in income tax.

    So if he withdrew $50,000, he just flushed $19,000 down the toilet. And this is to say nothing of the thousands of dollars in free money the company was willing to give him that he refused to take, in addition to reducing his own tax burden by putting his own money away.

    Extraordinarily stupid.
     
  10. The Dave Ramsey "cult?" Just curious what makes you say that.
     
  11. novelist_wannabe

    novelist_wannabe Well-Known Member

    I think BTE hit the salient point here. To me, it looks like he did the math and decided that if it were a push -- and with your numbers ($19k plus employer 401k contribution of probably $6k [$100,000 x 6 percent]) it looks he's coming out ahead if he's saving $40k in interest -- he'd just as soon not have that debt hanging over him. Now, he can throw the money he's not using on student loan payments ($700 a month) at his retirement fund. Doesn't seem stupid to me at all.
     
  12. BTExpress

    BTExpress Well-Known Member

    He flushed $19,000 down the toilet to save $40,000 in interest. Net gain of $21,000. Smart.

    Paying interest is flushing money down the toilet. That's what this country can't get through its head.

    He only suspended his 401(k) contributions for the seven months he was paying off the loan. So the only "free money" he lost was what would have been matched over that tiny period. Maybe a few thousand. He's still way ahead.

    Now he can aggressively contribute to his 401(k) with no crushing debt, AND because he paid off that loan he probably has a stellar credit rating, which will save him money and make life easier down the road.

    People who attack debt like a piranha attacks meat are very rare ---- and rarely stupid. I made my final mortgage payment last September, and I cannot describe how liberating it is not to owe anything to anybody.
     
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