Kevin O'Leary's Top Tip For Paying Off Student Loans
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- Опубликовано: 20 сен 2018
- More than 44 million Americans currently have student loans, and Americans held nearly $1.38 trillion in student debt at the end of 2017, according to the New York Federal Reserve.
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For the young people who are just now taking on student loans, personal finance expert Kevin O'Leary has a word of advice: Pay them off immediately.
"Get rid of that student debt right up front while you're young and frisky, that's the time to do it," the star of ABC's "Shark Tank" tells CNBC Make It.
His advice? Instead of paying a little bit at a time, make paying off your student debt your No. 1 priority after graduation.
"You should pay that loan off in 36 months if you can do it," O'Leary says.
That "means you're cutting back your lifestyle significantly. You're spending up to 40 percent of your paycheck just to get rid of it. Why? Because it's a very nasty thing to have hanging over your head for a very long period of time," he explains.
Indeed, even Baby Boomers are still paying off their student loans, according to analysis of 2017 student loan data by Experian. Boomers, ages 50 through 70 in Experian's report, held an average student loan balance of $36,246.
There are 6.8 million student loan borrowers between the ages of 40 and 49, according to 2016 data from the Federal Reserve. Together, those graduates hold a collective $229.6 billion in debt.
While many young people imagine it will be easier to pay off their loans later in life when they have a higher salary, O'Leary argues that by that point, you will also have higher expenses, less time and more responsibility.
"The minute you establish a lifestyle and you start going out for dinner, and you start dating or you get married, all of a sudden, you have all kinds of other expenses, not necessarily just paying off your loan," O'Leary says.
"That's why you want to pay your loan off as fast as you can, before your lifestyle starts to really creep in on you and make you spend more on things like vacations, and dating, and dinners, and when a child comes along, all of those expenses."
Plus, the earlier you pay off your loan, the more you save in interest payments over time.
Student loan interest rates are "generous at the beginning, but over the long term that interest really adds up," O'Leary says. For federal undergraduate student loans, the interest rate is 5.05 percent for the 2018-2019 academic year, up from 4.45 percent last year.
For a loan of $50,000 with that interest rate, paid off over 10 years with a minimum payment of $50 per month, a graduate would end up paying $14,473.25 in interest, according to a calculator by PrivateStudentLoans.guru.
In order to pay off that $50,000 loan in just three years, a borrower would have to make payments of $1,500 per month, according to the calculator. But by funneling so much money toward monthly payments and reducing the length of the loan, the total amount paid in interest falls by almost $10,000 down to $4,616.36, according to the calculator.
O'Leary argues the short-term focus is worth the long-term savings.
"I know it sounds like a lot, but really smart people figure this out pretty quickly and they focus on getting rid of that debt," O'Leary says.
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Kevin O'Leary Shares His No. 1 Piece Of Advice For Paying Off Student Loans | CNBC Make It.
So true. The interest was eating me alive. Over 100k. But thanks to the repayment pause i started paying back as quick as i could. Today i made my last payment and im free from student loan debt.
Congratulations!!!!
I did! Went from 56,000+ to $15,000 in a little over a year!
Goated. Man this j made me feel a lot better
What was your method? You were paying what, $2k a month or something
Thank you for writing tis comment, you are a living legend.
paid off 93K in 2 years
no i need nothing from you, but why do you sound so bitter? maybe you should work harder@@moreayf2319
@@moreayf2319yes he did that’s why he commented
That’s truly remarkable! I am transferring that success to me. Thx. 😊
Agreed wholeheartedly. I’m writing this in May 2024, last year August 2023 I decided I need to get serious about my student loans. I started with 132K in debt and currently at 109K. Still a long way to go, but I have hope today and I know I’m on the right track.
That's how you should treat ALL debt. Not just student debt.
No
No.Only bad debts.
Mortgage debt is fine
@@moreayf2319:D
Wish I had this advice long ago after graduation but THANK GOD mines were all forgiven under PSLF. Being debt free, my children will never know what student loans are. Saving for their college fees now….
Hi Kevin, we have four loans for four years of privet college for our daughter who did well and graduated. However the loans have come due, $120,000, and we need advice. We sill have a small mortgage left on our home, about 60 grand, and regular bills, no car payment, small credit payment. Should we consolidate the four loans? Should we refinance the house at a lower rate and pay off, then pay back the people who hold our mortgage? Do you have a better idea. We do not qualify for Public Service Loan PSLF. To add to the issue, I hold the loan, and I am 70 years old. Should we just spread the payments out after consolidation for the longest period and hope to make the monthly bills? After 25 years the unpaid debt falls off as forgiven, but by then we are paying a ridiculous amount in the long run.
I feel fortunate my parents are paying for my college.
Silver spoons taste better dont they
I feel fortunate pell and state grants helped me pay through college with money left over for me
@@Doors067 Indian colleges are relatively cheaper
@@afterburnerfox I am not from India. I grew up in the USA.
@@pranavpillai7778 Are you a doctor or a pharmacist?
My fiance has to spend 76% of her paycheck just to make the minimum payment. She's a teacher, only makes 40K, but has 6 figure debt. She had very bad (non existent) financial advice and was not aware of the mistake she made when she was 18. Now she's stuck with the debt, no going back. This is the reality of many students and young adults getting student loans. We need to cancel the debt for all federal and private loans immediately. We are ruining young Americans futures by not educating them properly before they make such crippling decisions about thier future.
The institutions forcing youth into a lifetime of debt, couldn't be responsible at all could they? No let's have tax players prop up these failed institutions instead.
Thank you CNBC Make it, and Thank you Mr O'Leary.
I pay 0% on my 10k remaining student loan debt and paying it as slowly as possible while inflation eats at the balance and I make 4% in money markets. So rather get an education in velocity banking.
Paying off student loans in 3 years would be 65k/year before the 14k interest annually. That is my full paycheck BEFORE taxes…with a full time job and a second income. Im set to do this in 5 years if I live with my parents which isn’t an option for many who have to go where the work is, or can’t live in a 55+ neighborhood, or want to have good mental health.
should we not save as much to payoff debt?
just compare the interest rate your getting on your savings and the interest rate you are paying on your loan. If the interest rate of the loan is higher pay it off.
Lol so at 26 I’m already screwed then I guess according to this plan. I’m married, own a house since 21, and am planning on trying for a baby within the next 1-2 years. Thankfully I only have a little under $28,000 in student loans but I still hate having that debt. But yes bills and being a real grown up does make it harder.
This is a joke right? Lol
I have to say sometimes I strongly dislike videos like this because yes, paying off student debt is important but most people don’t even have $400 in a emergency savings account… It’s a cycle of trying guilt trip you for redirecting your money to a place that might genuinely be better for you in one area (savings account) in case you lose that job that’s supposed to pay off all this debt (and in this economy totally feasible)! More videos should lead with “do what you can based on your circumstances and if it improves and you’re able to pay off more debt then do that”
Well if you have family move back in and use that rent money to pay off the debt asap.
Other ways are to not have student debt in the first place. Try to get scholarships, live with your parents. And if you can't get scholarship, start out at a community college with a degree in a high paying field.
I did all three and still owed tons, it is not cheap at all
@@Doors067 what did you study?
Lol I lived with my fam, went to community College to start, and got lots of grants, went to the only public university in my city, and I still owed over 20k 😂
Wow!
@@eeeeeeeeeeeeeeeeeo facts 😂
fresh grad staring out with 315k in student loans😅😅😅😅
Holy crap this is bad advice 🤣
No it isn’t you people just hate rich people
Why? I’d like to know what your reasoning is.
my student loans is a fruad i didnt even go to school or agree to it