You're going to want to pay attention to these changes with Federal Student Loan Debt because they can make a huge difference for the number of people who could eventually buy real estate and that might be you. Treasury Department Just released new guidance on how you could receive a Federal student loan relief. Now this is different from what Joe Biden has previously been working towards, which is the 10 to 20 000 of student loan forgiveness. This has been held up in many lawsuits and right now looks so darn paused that it's probably just never going to happen.

As a result, the Treasury Department has revised their guidance and introduced a new potential system that could help millions of individuals see their payments for student loan debt. Federal Student Loan debt cut by more than half and supposedly the loan system is going to become more manageable. The new system called repay with an E at the end ties uh repayments basically to your family size and income kind of like the previous IDR or income driven repayment systems, but this plan is a slightly more expanded and a little bit larger in terms of how much of a discount you could get on your federal student loans. So remember previously, under the old IDR rules, if you made your payments for about 20 years on many federal student loans, you could see the rest of the balance of four given depending on your income and family size.

Now the numbers have changed a little bit and the new plan says that after 20 years of making payments, you could see your federal student debt forgiven as long as you make the following minimum payments: Five percent of discretionary income for undergraduate loans. Discretionary income, of course, is any kind of income that you have above and beyond General basic needs like food and rent. And usually what they do is they just take the Federal Poverty line and multiply that by a percentage. Talk about that percentage in just a moment.

So what you want to write down though, is if you have an undergraduate student loan with the Federal government, five percent of your discretionary income needs to be made for 20 years on most loans. There's an exception for loans around twelve thousand dollars. We'll talk about that in just a moment, but you write down undergraduate loans five percent of discretionary income. Under the new plan, that's half of what the old plan was, which was 10 of your discretionary income.

Graduate students, however, will pay 10 percent of their discretionary income and if you hold both of these degrees and Loans related to both of them, then there will be a treasury Department sort of waiting formula in terms of okay, well you know say 70 is towards graduate, maybe 30 is towards undergrad, and they'll weight that for the five and ten percent. Now for what discretionary income is. So the old system was that you would have to make payments on your federal student loans if you had any income in excess of 150 percent of the Federal Poverty line. which that was Twenty thousand Four hundred dollars for singles, Forty one thousand Six Hundred dollars for a family of four.

So as soon as you start making more than that money, say you're single and you start making more than twenty thousand Four Hundred dollars. Under the new plan, you would pay five percent towards undergraduate or ten percent of your income towards graduate loans. The new plan changes these numbers. so the new plan says that you can actually make up to thirty thousand Five hundred dollars or 200 25 percent of the Federal Poverty line.

Or if you're a family of four up to sixty Two thousand Four Hundred dollars and make Zero monthly payments on your Federal student loans. That means if your family four you makes sixty Two thousand Four Hundred dollars and your Federal student loans The new plan. As long as you sign up for it, you go to Student8.gov to learn more. Obviously, that's Studentaid.gov You sign up for that plan.

You could potentially make zero payments, and that's way up from the Forty One thousand Six hundred dollars for a family four of income that it previously was. Keep in mind that if you file jointly with your spouse, your spouse's income is included in that calculation. If you're married and you file separately, it is not included. But then there are other implications towards potentially your taxes.

You always want to talk to a CPA when it comes to taxes, but that's interesting because now you're only going to pay five percent above thirty thousand Five hundred dollars. Uh, if you have an undergraduate loan and you're single, or ten percent above thirty thousand, five hundred dollars if you're single with graduate loans, and then again, the family number a family of four, a sixty two four, and then scales for family size in between. Uh, that's pretty incredible. And this is going to reduce the amount of money people are paying towards their student loans dramatically.

But on top of that, if you have small loans, there's also a new plan. Now, if you have loans of twelve thousand dollars or less, you actually now need to just make monthly payment events for 10 years instead of 20 years to see your debt canceled. So this is kind of where Biden's trying to sneak in the like ten thousand dollar forgiveness thing. Just make payments for 10 years and we'll cancel the rest and again.

In order for you to be eligible for making payments, you have to be making more than that federal poverty land. Now for small loans every a thousand dollars, every one thousand dollars that you have a loan of in excess of twelve thousand dollars adds one year of repayment time. So if you have twenty thousand dollars of a student loan, that's eight years, more than twelve thousand. So you'd have to make payments for 18 years to be subject to cancellation.

Now, there are also some changes here. Bottom: Thirty percent of owners via these changes would basically qualify for 83 percent reduced payments. It's important to know that parents who have taken taken out loans are excluded through the parent. Plus Loans They are excluded.

if you are a delinquent by 75 days or more. you're automatically enrolled in the new payment system, which is actually really beneficial that it wasn't that way previously. However, if you are in default, you get enrolled in the old school. uh, Payback plan, not the new repay plan.

Now, keep in mind two things. One, right now, this is Biden's proposal. so it's going to go through 30 days of public comment first, and we'll see if potentially lawsuits come out after that. But first, we gotta go through review and proposal periods in the whole bureaucratic process, so this isn't set in stone yet, but it looks better than the straight up cancellation.

Also, if your student loan debt is canceled before 2025, you do not have to pay taxes on the canceled amount. So let's say you pay 30 in taxes and you get ten thousand dollars of cancellation. You might have to pay income tax on that, which would be about three thousand bucks, right? but that income tax provision is removed through 2025. So ideally you want to see your loan get canceled by 2025.

Or hopefully they extend the sort of forgiveness period for owing taxes on debt that you had forgiven. So usually if you get a debt forgiven, it's considered income and you have to pay taxes on that anyway. Gets a little tricky, but the point is so far, this all sounds good. but then again, we know when it comes to the government things that sound good I Always end up having some caveat.

Okay, now we gotta talk real estate. So first of all, I want you to think about how lower payments make a big deal for when it comes to buying real estate every single monthly dollar of debt expense that you have. In other words, if you have a credit card payment of one dollar per month, you have to earn two dollars and 34 cents more per month just to pay or buy or qualify for the same amount of house. In other words, every dollar of debt you have can substantially reduce your purchasing power.

So reducing your monthly payments via this new student loan program actually increases your purchasing power for Real Estate by a lot. The rule of thumb is every dollar of debt you have per month in payments equals two dollars and 34 cents of income. It's a lot you all know. I'm a big fan of buying real estate I Got programs on building your wealth on real estate zero to millionaire real estate investing course for example and many others Coupon code down below Got a real estate housing startup Love Real Estate One of the great things about having the amount of payments that you have to make on a federal student loan debt on let's say, undergraduate loans.

for example, going from 10 of your disposable income to five percent is that your minimum repayment per month halves. In that scenario, that actually reduces your debt to income ratio, which enables you to buy more real estate. Now this is not not saying you want to go out there and splurge on a more expensive white picket fenced house, but it is to say that we know the net worth of homeowners is somewhere around 20x that of tenants. And if you want to break the cycle of poverty, you must must understand the systems of capitalism which reward people who hold assets through both bust cycles and boom.

Cycles assets make you rich. and if you could start by putting three percent down five percent down, maybe even getting credits to where you're putting zero percent down on a home and you get a good deal. On top of that, you can explode your net worth, no longer paying money to a landlord and renting, and instead actually building your wealth by owning real estate. That's at least my opinion.

I'm a big fan of owning real estate. That's how I became a Millionaire Real Estate Real Estate Real Estate. Now this Student Loan program obviously could also face Court challenges. That's the other issue.

This is basically a backhanded way of conducting small student loan forgiveness. Again, your loans could get canceled after 10 years of payments if your loan is less than twelve thousand dollars, and again, uh, you know you add a year for every thousand dollars you have more than that. But either way, the minimum repayments required to get to 20-year cancellation isn't that high now. I'm not the biggest fan of Trying to minimize your income so that you don't have to pay more in student loan debt, right? I'm a big fan of what can you do to go increase your income and then just ultimately pay off your student loan debt and actually buy real estate.

But in the short term, this is potentially really good relief for student loan borrowers. Now, some people might say this could have an inflationary impact, and it could because people are going to have a larger amount of disposable in income. But hey, student loan debt is a big burden for up to 400 30 million. Americans That's just federal student loan debt.

not to include all the other crazy forms of student loan debt we have. So these changes could be a big shift for individuals to not just get their finances, maybe more in order under the inflation that we've already seen. But hopefully folks can start looking at getting into assets like owning stocks, real estate, bonds, and building their wealth. If you want to learn more, make sure to subscribe to the channel.

Check out the programs on building your wealth link down below and thank you so much for watching.