EXCLUSIVE: Economists and estate planners also advise on how to manage your debt and assets in this period of high inflation.
Economists and estate planners want you to know there are ways to leverage inflation in favor of student debt cancellation, as well as manage student debt as you build wealth.
Ali Bustamante, deputy director of the Education, Jobs & Worker Power program at Roosevelt Institute believes lawmakers should be inclined to cancel student debt as they seek ways to spur economic circulation during this period of high inflation.
“If interest rate increases on the table, then families kind of need as many different avenues of shoring up their finances and canceling student debt,” Bustamante told theGrio.
The Federal Reserve is considering increasing interest rates and this could then increase the cost of servicing loans across the board — mortgages, cars, student debt, credit cards and the like. However, Bustamante points out that student debt policy hasn’t contributed to inflation for about two years since being implemented.
“We know that canceling and forgiving student debt permanently isn’t going to cause any inflationary pressures, either,” he added. “Policymakers should not be afraid of the inflation implications of canceling student debt, because, again, from the past few years, we know that it’s not going to contribute to inflation.”
Student loan borrowers and the Too Much Talent Band thank President Joe Biden and Vice President Kamala Harris for extending the student loan pause and now demand that they cancel student debt at a gathering outside The White House on January 13, 2022 in Washington, DC. (Photo by Paul Morigi/Getty Images for We, The 45 Million)
Like stimulus checks and other economic programs that were dished out during the pandemic, Bustamante believes canceling student loan debt should be applied with the same goal, to provide American consumers with more capital to spend in the economy.
While student debt cancellation proposals and plans are pending, borrowers are still strapped with burdensome debts that can place inheritance in jeopardy. Portia Wood, founding partner at the Wood Legal Group, specializes in estate planning that takes into consideration debt management and other personalized services.
The Wood Legal Group offers comprehensive estate planning, child guardianship planning, trust administration and probate litigation. Of these services, trust administration can be utilized when a person who stands to inherit a significant amount of money or assets has exuberant debt.
“We’re looking at more sort of asset protection trusts for the beneficiaries,” Wood told theGrio. “We don’t want to see someone who is on let’s say, an Income Based Repayment or maybe someone who is in default lose the benefits of their parents or grandparents hard work and labor, because of these mounting debts.”
But Wood also cautions that not everyone with debt should automatically put their inheritance in a trust.
For instance, borrowers who owe upwards of $75,000 or more who are also in a position to take on a property that is $250,000 could opt into a trust to hold onto the property.
(Photo: Adobe Stock)
“Because you have that gatekeeper, your creditors also can’t tap into that and attach it as a judgment or force the sale of her home or any of those things against you,” Wood explained.
In other cases, a person may want to liquidate the new asset to pay off the student loan debt. But in situations where it is more advantageous to hold onto the property, having a trust that is managed by an administrator can accomplish that goal.
“If somebody’s got $10,000 or $20,000 in student loan debt, receiving a house, they might be able to refinance that house and pay off that debt and then have full flexibility of the asset,” Wood underscored.
At face value, estate planning sounds like an out of reach service for everyday people, but you could find it more affordable and accessible than you initially thought. At the Wood Legal Group, the firm charges a flat rate for creating the estate plan, and then smaller fees to make adjustments as things change in life that could impact the initial plan.
Say you take an all expense vacation once a year, plan to go see Adele or Beyoncé at Coachella or even drop a few thousand dollars on some collectors item sneakers. Each of these activities could add up to the same amount of money to initiate your estate planning — $4,500 to $8,500 on average.
To continually assess and tinker with the plan to ensure as laws and personal circumstances change the plan accounts for the maximum amount you can inherit, the Wood Legal Group sends questionnaires every three years. The responses to the questionnaire help let the lawyers know if you qualify for new tax programs, need to adjust how an asset’s transition is structured or if a new asset needs to be added to the plan.
Wood also offers an annual maintenance program.
“My main focus is on intergenerational wealth transfer, particularly in Black and Brown communities,” Wood added. “That’s why we focus so much on education in our firm.”
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