By Joseph Reinke, CFA, CEO of FitBUX
I often tell others, “Every financial product has its purpose and if used correctly can be an effective component of your personal finance arsenal.” However, many using Federal income-driven repayment (“IDR”) plans are misusing them. This article discusses the number one reason why IDR plans are misused by student loan borrowers.
There are many risks associated with using IDR to repay your student loans. Most, if not all, of these risks are mitigated by….saving the money you aren’t paying. That is the primary fact that individuals do not consider when going on an IDR plan. They drop their payment and use that as an opportunity to spend rather than save.
IDR plans have been available for a relatively short period. However, on a daily basis we at FitBUX see individuals that are already encountering this risk associated with IDR plans. Those that saved were able to change their strategy without a problem because they gave themselves options by saving. Those that didn’t save have put themselves in a horrible situation. Moral of the story…If you are going on IDR, make sure you SAVE.
An Easy Way To Customize Your Repayment Strategy
The technology we are building at FitBUX gives you the ability to compare various student loan repayment strategies that are customized to you. If you would like to test the technology for free, sign up to be part of our beta test.