Author Topic: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?  (Read 33130 times)

AmandaS1989

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So Ive been thinking about doing a case study for a week or so and finally decided to do it. So heres whats going on. Ive got around 63k in student loans and Im feeling a little overwhelmed. I want to start chipping away at some of them to get the balances down, even just a little, before I plan on refinancing. But I dont quite know how I should approach this so any advice is appreciated. So heres the financial info:

Gross pay: $1395.83 twice monthly
Before Tax Deductions:
401k: $55.83 (this is 4% which my employer matches 100%)

Taxes:
FICA-SS: $86.54
FICA-MED: $20.23
FIT: $142.41
NC SIT: $62.00

Take-home pay: $1028.82 (this is one penny less on my second check)

Okay now for the debts:

1 personal loan from LendingClub that I used to pay off high-interest CCs
Balance of $2650 @ 8.18$ with an APR of 10.98%
Monthly payment of 83.27 (1st payment is this month on the 19th)

1 no interest until July next year CC: $827.14

Student loans by lender:

ACS
PLUS Loan: $1808.65 @ 8.5% ($105.53/month)

Campus Partners
Perkins Loan: $10557.95 @ 5% ($352.14 every 3 months; I take $60 out of each check and put it aside)

AES
Subsidized Stafford Loan: $3462.35 @ 6.8% ($50/month)

Nelnet (Im enrolled in income-based repayment with these. Payment is $0/month until September 2016)
Group A: $4546.57 @ 6% Subsidized Stafford
Group B: $9163.44 @ 6.8% Unsubsidized Stafford
Group C: $5553.12 @ 5.6% Subsidized Stafford
Group D: $8693.46 @ 6.8% Unsubsidized Stafford
Group E: $5542.68 @ 4.5% Direct Subsidized
Group F: $7581.93 @ 6.8% Direct Unsubsidized
     $4499.81 @ 6.8% Direct Unsubsidized
Group G :$4000.00@ 3.4% Direct Subsidized

Monthly Expenses:
Grocery: $480 (for 4 people x 3 weeks)
Gas: $240 (35.5 mile one-way commute)
Insurances:
   Health: $153.33
   Life: $21.15
   Dental: $39
Phone: $92.12 (planning on paying it off with tax money and switching to Ptel's 30/month plan)
Personal Loan: $83.27
Perkins Loan: $120
AES Loan: $50
Plus Loan: $105.53
Internet: $25
Medicine (mine and mom's): ~$30
Household Supplies: $60-80
Roth IRA: $100
Taxable Invest Acct: $30
No interest CC: $25
Out to eat: $40 We were going out to eat once a week but I've decided we will cut back to maybe every other week instead
Ok I think that's everything.

So Im already paying the minimum on the Plus loan, Perkins loan, and the one from AES. What Im most interested in hearing from everyone is which loan from Nelnet should I focus my extra cash on? I am hoping to pay off my PLUS loan when I get my tax refund and then see about refinancing some of my loans with Earnest. At the very least Id like to refinance any loan over 6%. Why am I not doing this now you may ask? I was turned down by Sofi because of the amount of debt so I decided to try and pay some down or off before I tried to refinance with Earnest. Im hoping to refinance around March next year.






MDM

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #1 on: November 09, 2015, 06:54:47 PM »
401k: $55.83 (this is 4% which my employer matches 100%)
Good!

Quote
Taxes:
FIT: $142.41
NC SIT: $62.00
Federal looks high by ~$25/paycheck.  You might want to verify this, and if so, submit a new W-4 so you can put the money toward the high interest loans now rather than giving the IRS an interest-free loan until you get your refund.

Quote
Balance of $2650 @ 8.18% with an APR of 10.98%
PLUS Loan: $1808.65 @ 8.5% ($105.53/month)
Subsidized Stafford Loan: $3462.35 @ 6.8% ($50/month)
These are the ones I'd pay off ASAP if not sooner.

Quote
Monthly Expenses:
Grocery: $480 (for 4 people x 3 weeks)
Insurances:
   Life: $21.15
Just checking: the federal tax calculations referenced above assumed you file single - is that correct?

Quote
Roth IRA: $100
Taxable Invest Acct: $30
No interest CC: $25
Laudable, but putting this toward the high interest loans would likely be even better.


AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #2 on: November 09, 2015, 07:53:33 PM »
401k: $55.83 (this is 4% which my employer matches 100%)
Good!

Quote
Taxes:
FIT: $142.41
NC SIT: $62.00
Federal looks high by ~$25/paycheck.  You might want to verify this, and if so, submit a new W-4 so you can put the money toward the high interest loans now rather than giving the IRS an interest-free loan until you get your refund.

Quote
Balance of $2650 @ 8.18% with an APR of 10.98%
PLUS Loan: $1808.65 @ 8.5% ($105.53/month)
Subsidized Stafford Loan: $3462.35 @ 6.8% ($50/month)
These are the ones I'd pay off ASAP if not sooner.

Quote
Monthly Expenses:
Grocery: $480 (for 4 people x 3 weeks)
Insurances:
   Life: $21.15
Just checking: the federal tax calculations referenced above assumed you file single - is that correct?

Quote
Roth IRA: $100
Taxable Invest Acct: $30
No interest CC: $25
Laudable, but putting this toward the high interest loans would likely be even better.



I have taxes withheld as single with no dependents but I file as HoH with one dependent. I claim my brother and get the EITC as well as the exemption. I know I should probably adjust my withholding. Before I didn't quite trust myself not to blow that extra money, plus I was afraid of not having enough taken out. But I might adjust it for 2016.

I was going to just pay the minimums on those three loans and then pay them off substantially if not all the way but maybe I should pay the extra on those. Especially that PLUS loan (8.5% ugh). I've been so focused on the Nelnet loans (probably because the balance is close to 50k for those) and I didn't really focus on those three. If I pay more on the PLUS loan now, that less I have to take out of my taxes. Maybe instead of 105.53 I can put 155.53 or something like that. An extra 50/month for this month through March would be an extra $250 I could take out of my tax refund to pay off other stuff.

I'd really like to keep my IRA at 100/month. I'm 26 so I have lots of compound interest time to take advantage of. Same thing for the taxable investment account. And the $25/month towards the no interest CC is the minimum payment. Can't go any lower than that.

I do have $890 in a savings account. Do you think I should take any out of it to put towards my debt or leave it be? That's my emergency fund.

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #3 on: November 09, 2015, 08:10:53 PM »
Life insurance: who is this for?

Something is not adding up with regards to your gas usage. 71 miles a day, times 21 working days per month, that's just under 1,500 miles per month. At $2.2/g, you are either driving a lot more than just for your commute, or your car gets a horrible 13.7MPG.

Stop putting $30/month in a taxable account: that's for people who've already maxed out all their tax advantaged space.

MDM

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #4 on: November 09, 2015, 08:15:10 PM »
I have taxes withheld as single with no dependents but I file as HoH with one dependent. I claim my brother and get the EITC as well as the exemption. I know I should probably adjust my withholding. Before I didn't quite trust myself not to blow that extra money, plus I was afraid of not having enough taken out. But I might adjust it for 2016.
That makes a huge difference!  Why wait to adjust the W-4?  If the case study spreadsheet calculations are correct (you should verify), your total federal income tax for 2015 will be ~$330.  Get your money now and use it to pay off those high interest debts.

Quote
I'd really like to keep my IRA at 100/month. I'm 26 so I have lots of compound interest time to take advantage of. Same thing for the taxable investment account.
See guidelines below.  Current 10 year Treasury rate is ~2.3%, so a literal interpretation would indeed put the IRA ahead of the extra debt payment on the 6.8% loans.  Not the 8.5%.  I'd pay the debt, but admit it's a close call.  The taxable investment, however, should not be considered until the debts are gone.

In the lists below, thinking "first your 457 (if you have one), then your 401k and/or 403b" wherever "401k" appears is likely correct.   
Differences of a few tenths of a percent are not important when applicable for only a few years (in other words, these are guidelines not rules).   
   
WHAT   
0. Establish an emergency fund to your satisfaction   
1. Contribute to 401k up to any company match   
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.   
3. Max HSA    
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level   
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)   
6. Fund mega backdoor Roth if applicable   
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.   
8. Invest in a taxable account with any extra.   
   
WHY   
0. Give yourself at least enough buffer to avoid worries about bouncing checks   
1. Company match rates are likely the highest percent return you can get on your money   
2. When the guaranteed return is this high, take it.   
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.   
4. Rule of thumb: traditional if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between (or see   
   http://forum.mrmoneymustache.com/investor-alley/deciding-between-roth-and-traditional-ira-based-on-marginal-tax-rate/
   if you want even more details on that topic.)
5. See #4 for choice of traditional or Roth for 401k   
6. Applicability depends on the rules for the specific 401k   
7. Again, take the risk-free return if high enough   
8. Because earnings, even if taxed, are beneficial   
   
The emergency fund is your "no risk" money.  You might consider one of these online banks: http://www.magnifymoney.com/blog/earning-interest/best-online-savings-accounts275921001   
      
If your 401k options are poor (i.e., high fund fees) you can check http://forum.mrmoneymustache.com/investor-alley/to-401k-or-not-to-401k-that-is-the-question-43459/ for some thoughts on "how high is too high?"   


Quote
I do have $890 in a savings account. Do you think I should take any out of it to put towards my debt or leave it be? That's my emergency fund.
See point #0 above - I'd leave this alone.

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #5 on: November 09, 2015, 08:21:06 PM »
For the gas, my 2004 Saturn Ion gets around 30mpg. I do use my car for more than just work. I run errands in it as well. I usually end up driving around 500 miles a week sometimes more.

I know it doesn't make sense to put the money in a taxable account since I can't yet afford to max out my tax-advantaged accounts. Really I have no idea why I did that. I had a total brain fart. Would Betterment let me just roll it over to my IRA?

The life insurance is for me. I have enough coverage on me to pay off my student loans, funeral costs, and to pay off my parents' mortgage since if I die I obviously won't be around to take care of them when they're older. I know some people see life insurance as a waste for people my age and I've been told its not my place to provide for my parents in the event of my death (even by my parents themselves) but I want them to have a nest egg to help them take care of themselves if I'm not there to do it for them.

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #6 on: November 09, 2015, 08:26:02 PM »
Maybe I'll talk to my boss tomorrow about adjusting my withholding for the rest of this year. Only three more paychecks left (God is it really November already?) but you're right, who should I wait?

I don't qualify for an HSA unfortunately. Oh well. My 401k I picked the funds for back in June before I discovered MMM. I might take a look at those investments again this week or on the weekend. I'm not sure if I like the plan anyway. Its a group variable annuity with Symetra and the fund options looked so-so to me. But I'll look at them again because when I picked them originally I wasn't even thinking about fees *Gibbs-slaps self*

MDM

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #7 on: November 09, 2015, 08:44:50 PM »
Maybe I'll talk to my boss tomorrow about adjusting my withholding for the rest of this year. Only three more paychecks left (God is it really November already?) but you're right, who should I wait?

See https://www.irs.gov/Individuals/IRS-Withholding-Calculator.  That web site won't calculate the EITC, nor the saver's credit, so you have to enter those under "other credits." See (and verify) the spreadsheet calculations for those: ~$134 for the saver's credit and ~$1114 for the EITC.  You'll probably get "single with 8 exemptions" or similar as a suggestion for the W-4.

It will then caution you to increase withholding in 2016.  If, however, your total tax due in April 2017 is less than $1,000 you won't owe any penalty - just need to have the money available to pay it.

Note that all the above calculations ignored SL interest, so your tax owed will be even lower once that is subtracted.

K-ice

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #8 on: November 09, 2015, 08:50:11 PM »
Ok. It looks like you have a bit over $560 surplus every month.

That is a great start.

There are a few places to cut expenses. Start with that $30 taxable savings.

I'll take a look at how to hit those 13 debts later.

I don't have spread-sheet access right now.

When the Cc interest is due, what do you think the % will be?


MDM

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #9 on: November 09, 2015, 09:02:11 PM »
Ok, so this gets even more interesting when taking a closer look at the saver's credit, EITC, and HoH filing status.

If you contribute enough to your 401k (~$6,200 for the year) to get your AGI below $27,375, you get to use the full $1,000 saver's credit, taking your total federal tax owed to ~$0 - and you still get ~$1900 in EITC credit so the IRS will pay you the $1900.

That could be even better than paying off 8.5% debts....

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #10 on: November 10, 2015, 04:30:54 AM »
Ok, so this gets even more interesting when taking a closer look at the saver's credit, EITC, and HoH filing status.

If you contribute enough to your 401k (~$6,200 for the year) to get your AGI below $27,375, you get to use the full $1,000 saver's credit, taking your total federal tax owed to ~$0 - and you still get ~$1900 in EITC credit so the IRS will pay you the $1900.

That could be even better than paying off 8.5% debts....

Holy Crap! I might have to wait to talk to my boss so I can run the calculations myself. I'm a pretty cautious person by nature. And maybe I can sit down with him and get his advice. We're a CPA firm and its that time of year where we're bringing in clients for tax planning. Maybe he'll help me with some tax planning of my own.

Ok. It looks like you have a bit over $560 surplus every month.

That is a great start.

There are a few places to cut expenses. Start with that $30 taxable savings.

I'll take a look at how to hit those 13 debts later.

I don't have spread-sheet access right now.

When the Cc interest is due, what do you think the % will be?



The interest on the CC will be 14%. That's actually the lowest interest rate I'll have.

Pooplips

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #11 on: November 10, 2015, 05:45:39 AM »
I was going to offer some advice but after reading all MDM's posts, your covered. +1 for everything MDM said.

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #12 on: November 10, 2015, 06:13:22 AM »
500 miles a week?  Take a few minutes to think how you can reduce this. Can you coordinate errands better?  Do more on your way to or from work?  Can you carpool?   It's not so common in the South, but in Vermont where I work in the summer people routinely meet at a convenient location and carpool the rest of the way to work together. 

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #13 on: November 10, 2015, 06:20:59 AM »
The errands I run on the weekends are to the grocery store and to pay bills. I also let my parents use my car in the evenings to pick up my mom from night school (its only a few miles twice a week), take her to and from church (again, a few miles twice a week), and when I go out and get gas in the evenings after dinner twice a week. I know I could probably get my gas on the way home from work but I am starving by the time I get off and if I went to the gas station then I know I would do something stupid and stop at some fast food place. Can't carpool to work unfortunately. Everyone else at my office (there's five of us including me) lives within 10-20 minutes of it. And no, moving is not an option. I do not want to live by myself. I enjoy living with my family and its cheaper for me really.

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #14 on: November 10, 2015, 06:38:41 AM »
Hi Amanda, I have a bit of a different take on your situation. I'm sure the math folks on here will disagree, but I think the number of different debts you have makes you perfect for the Dave Ramsey (snowball) method.  Instead of looking at your interest rate, tackle the smallest debt first, and then work toward the larger ones.

The reason I think that would work better for you is that you seem overwhelmed with the shear number of student loans.  You will be successful knocking out some debt faster if you close out the smallest ones first.  This is going to give you the emotional strength to keep it up.  Once a few are paid off, you'll have a bigger chunk of money to throw at the larger debts.  Yes, this is a plan based more on "emotion", but we are emotional people!  The way you prefer to take care of your family tells me that this is where you are led anyway. 

So yes, the math might say to tackle the higher interest first (I really do love MDM's plan), but I think you will feel more at peace with some of this debt GONE.


Guesl982374

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #15 on: November 10, 2015, 07:07:23 AM »
...Ive got around 63k in student loans...
...Gross pay: $1395.83 twice monthly...

That's a ton of debt for your level of income of $34K. Focus on increasing your income. Given that you live in the US you could potentially double or triple your income. Figure out what skills you can develop/have and how to market them (side business or FT employer).

http://www.mrmoneymustache.com/2013/07/25/50-jobs-over-50000-without-a-degree-part-1/
http://www.mrmoneymustache.com/2013/08/05/50-jobs-over-50000-without-a-degree-part-2/

Keep your living expenses flat/decreasing, increase income, and you'll see the debt get destroyed in a couple of years.

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #16 on: November 10, 2015, 07:29:13 AM »
Hi Amanda, I have a bit of a different take on your situation. I'm sure the math folks on here will disagree, but I think the number of different debts you have makes you perfect for the Dave Ramsey (snowball) method.  Instead of looking at your interest rate, tackle the smallest debt first, and then work toward the larger ones.

The reason I think that would work better for you is that you seem overwhelmed with the shear number of student loans.  You will be successful knocking out some debt faster if you close out the smallest ones first.  This is going to give you the emotional strength to keep it up.  Once a few are paid off, you'll have a bigger chunk of money to throw at the larger debts.  Yes, this is a plan based more on "emotion", but we are emotional people!  The way you prefer to take care of your family tells me that this is where you are led anyway. 

So yes, the math might say to tackle the higher interest first (I really do love MDM's plan), but I think you will feel more at peace with some of this debt GONE.



Suzanny I think you are right. I am definitely overwhelmed and I do believe that paying one of these off would help me build momentum to get the others paid for. I think I'll put extra money on the PLUS loan, the personal loan, and the loan from AES. If I can get that PLUS loan paid off first that'll help a lot.

This debt weighs on my mind a lot. My parents are actually a little concerned with how 'obsessed' I seem to be about it. My Dad told me not to let it 'rule my mind' or I'd go crazy.

Liberty Stache I know its a lot of debt relative to my income. I work for a very small firm so I'm surprised I actually make this much. I could double my income if I could get on at a large firm but I like where I work for now. As to side hustles, I'm not sure. I don't feel like I have enough experience yet to do anything with accounting. As to tutoring that I used to do, I don't know. I don't really have time through the week. Maybe on the weekends, but I'll admit I'm a very shy person so it would be hard for me to put myself out there.

CU Tiger

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #17 on: November 10, 2015, 08:20:49 AM »
I'd start like this:

$4499.81 @ 6.8% Direct Unsubsidized
$4546.57 @ 6% Subsidized Stafford
$5553.12 @ 5.6% Subsidized Stafford
$5542.68 @ 4.5% Direct Subsidized
$7581.93 @ 6.8% Direct Unsubsidized
$8693.46 @ 6.8% Unsubsidized Stafford
$9163.44 @ 6.8% Unsubsidized Stafford
$4000.00@ 3.4% Direct Subsidized

I would do them in this order. It is not the pure snowball or strictly per interest rate, but doing those two smaller ones at 6% and 6.8% would give you some quicker victories that would encourage you.

You sound like you want to make smart choices and get yourself out of debt slavery…but you also said some things that indicate you are comfortable with the status quo and like things as they are now. You like living with your family because it is familiar and easy and you are hesitant to get a side hustle because you are a shy person. You drive a lot because…you do errands (inefficiently) and you are used to driving people around evenings and weekends. You know it is not the smartest, but it’s what you are used to.

If you want to make changes in your financial situation, it will help if you start by making changes to the way you think about things. Question every decision to see if you can make things more efficient/less costly. Like…if you are driving someone to night classes, why not fill the car up with gas when you are out doing that, rather than making a special trip. Do your errands on the same trips. Take Mom to school, drop by the grocery store and fill up your car at the gas station, rather than making three separate trips.

Why are you driving to pay bills? You can do that online, or you can mail in a payment for the price of a stamp (cheaper than a gallon of gas). Why can't Mom and Dad put gas in your car sometimes if they are using it four times a week? Ask the questions at least. Question everything to see if there is some way you can squeeze more money out to pay off your debts, which are substantial.

You used to tutor, right? You know you can do it, even if you are shy. So get out there, get some students, and make some extra cash. Or find a weekend job as a waitress or bartender and put every dime you make towards one of your student loan debts. Back in my broke days, I had a regular job and I worked at a store two evenings a week and every Saturday. Then later when I was a not-so-young newlywed with an unemployed-writing-his-thesis husband, I again worked a second job evenings and weekends. Was it super fun? No, but it wasn’t horrible either…we needed the cash, and any time I was working I was NOT spending money, so it was a win-win. It was such a short time compared to my whole life and it set me up for a debt free future. You are young, and if you are willing to put up with a short time of putting yourself out of your comfort zone, you will get rid of these debts and have the rest of your life to do what you like.



« Last Edit: November 10, 2015, 08:24:28 AM by CU Tiger »

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #18 on: November 10, 2015, 08:29:43 AM »
Hey Amanda,
I've already given my two cents on your debt on your previous post, but I wanted to check-in about what MDM said with regards to the ROTH. You do have plenty of time, and, overall, that money will beat most of your loans in terms payments vs. returns. However, you also say that the loan burden and financials are stressing you out. That, for me, is the most important thing to attack.

I'd suggest that you take your ROTH contributions to 0 and start using that money to payoff any loan over 5%. That extra $100 per month can go a long way in snowballing a few loans. Once those balances start to zero out, I guarantee you that you will feel better (and more in control). Once the high interest loans are knocked out, restart your Roth contributions. With an ROTH started and a 401k in the works, you already have a start. Now, it is time to attack a few loans directly, knock them out, and show your debt who's boss!

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #19 on: November 10, 2015, 09:11:17 AM »
Hey Amanda,
I've already given my two cents on your debt on your previous post, but I wanted to check-in about what MDM said with regards to the ROTH. You do have plenty of time, and, overall, that money will beat most of your loans in terms payments vs. returns. However, you also say that the loan burden and financials are stressing you out. That, for me, is the most important thing to attack.

I'd suggest that you take your ROTH contributions to 0 and start using that money to payoff any loan over 5%. That extra $100 per month can go a long way in snowballing a few loans. Once those balances start to zero out, I guarantee you that you will feel better (and more in control). Once the high interest loans are knocked out, restart your Roth contributions. With an ROTH started and a 401k in the works, you already have a start. Now, it is time to attack a few loans directly, knock them out, and show your debt who's boss!

PARedbeard I think you are correct. Dropping the ROTH contributions for now is a good idea and that does give me a big chunk of money to put towards that PLUS loan. I could put a big $260 payment to it from December to March. That would be an extra $1040! I could then pay off the last ~$800 with my tax money!

mm1970

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #20 on: November 10, 2015, 10:39:08 AM »
The errands I run on the weekends are to the grocery store and to pay bills. I also let my parents use my car in the evenings to pick up my mom from night school (its only a few miles twice a week), take her to and from church (again, a few miles twice a week), and when I go out and get gas in the evenings after dinner twice a week. I know I could probably get my gas on the way home from work but I am starving by the time I get off and if I went to the gas station then I know I would do something stupid and stop at some fast food place. Can't carpool to work unfortunately. Everyone else at my office (there's five of us including me) lives within 10-20 minutes of it. And no, moving is not an option. I do not want to live by myself. I enjoy living with my family and its cheaper for me really.
I would still focus on getting gas on the way home.  I have an hour commute home with picking up 2 kids in 2 different locations.  And then I have to cook dinner, so it's realistically 1.5 to 2 hours before I can eat.

So now I make sure to eat an apple about 1/2 hour before I leave work.

Same with groceries.

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #21 on: November 10, 2015, 10:46:29 AM »
I do eat a snack before I leave. Still ravenous when I leave. My town is cheaper to get gas in than the towns I pass through on the way home. But I wait until Wednesday evening after I pick Mom up from church as the gas station is just down the road.

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #22 on: November 10, 2015, 10:49:43 AM »
The errands I run on the weekends are to the grocery store and to pay bills.

What bills need paying in person in this day and age? This seems horribly inefficient. Set up online payments, and if whatever business is so old fashioned they don't do online payments, you should be able to mail a check. I don't think I've dropped off a bill payment in person in at least 10 years....

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #23 on: November 10, 2015, 10:51:20 AM »
My life insurance. Ugh I have to go out and get an actual money order for that and the PLUS loan. I tried to give the cash to my Dad so he could pay it for me when I'm at work and they wouldn't take it! You have to mail the payment in. They won't do online payments either.

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #24 on: November 10, 2015, 11:08:29 AM »
Ok, so this gets even more interesting when taking a closer look at the saver's credit, EITC, and HoH filing status.

If you contribute enough to your 401k (~$6,200 for the year) to get your AGI below $27,375, you get to use the full $1,000 saver's credit, taking your total federal tax owed to ~$0 - and you still get ~$1900 in EITC credit so the IRS will pay you the $1900.

That could be even better than paying off 8.5% debts....

Holy Crap! I might have to wait to talk to my boss so I can run the calculations myself. I'm a pretty cautious person by nature. And maybe I can sit down with him and get his advice. We're a CPA firm and its that time of year where we're bringing in clients for tax planning. Maybe he'll help me with some tax planning of my own.

Tax planning is a good idea in general, and appears particularly worth doing in your case.

Uploaded a new version of the case study spreadsheet that allows different numbers for "children under 17" vs. "children eligible for the EIC."  If the CPA's numbers come back significantly different from the spreadsheet calculations, please advise so it can be corrected for others.  Within the limitations described on the Instructions tab, it seems correct - but it is difficult to test all possibilities so any feedback is worthwhile.

StacheInAFlash

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #25 on: November 10, 2015, 11:10:41 AM »
Sounds like another reason to drop this life insurance that you don't need. At the very least, switch to a normal company that operates in the 21st century and then also drop it to a smaller amount as nobody needs to pay your student loans if you die because they should forgiven. As others have already mentioned, a big part of getting started with paying off huge loans and turning your life around is to start optimizing where you can. This is an easy place to optimize!

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #26 on: November 10, 2015, 11:23:49 AM »
For the love of [deity of your choice], combine trips! And get a free checking account with unlimited checks instead of driving to get a money order.


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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #27 on: November 10, 2015, 11:54:59 AM »
So I worked on the debt calculator spread sheet.

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

I kept your minimum payments & assumed you had an extra $500 per month to put towards the debt.  I think you can probably find another 100 to 200 with some of the suggested budget changes but $500 was my starting point.

The Great news is that you can have the PLUS, lending club and CC all paid off by April 2016.

This was assuming a $2000 tax refund that I put on the second page of the spread sheet in April 2016.
(Without that refund they are all still paid off by July)

Focus on those because of the high interest and low value.

You can run a few scenarios.

Snowball (lowest balance first) Total interest $18,949.28  last debt paid 8 years 1 month
Avalanche (lowest interest first)  Total interest $15,645 last debt paid in 7 years 8 months

Custom  (a mix of lowest value and interest) Total interest $15,746  last debt paid in 7 years 8 months

You can also run a horrific scenario with no extra payments and it will take over 22 years to climb out of debt.

Here is how I entered the custom data.

Lending Club    2,650.00    10.98%    83.27    2
PLUS                 1,808.65    8.50%    105.53    1
Perkins     10,557.95    5.00%    120.00    8
AES Safford    3,462.35    6.80%    50.00    4
CC no interest    827.14    0.00%    25.00    3
A                       4,546.57    6.00%    -      6
B+D+F 4499.81    30,018.83    6.80%    -      5
C                      5,553.12    5.60%    -      7
E                      5,542.68    4.50%    -      9
G                      4,000.00    3.40%    -      10

The last column shows the custom pay off order.  I had to group all your 6.8% loans together

I am not savvy with the tax implications of paying one before the other so you can change the "custom" order to be more tax advantaged.

I hope that helps.  I will try to send the spread sheet in a PM.



Catbert

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #28 on: November 10, 2015, 12:02:14 PM »
You've gotten lots of good advice (even if it wasn't all identical) but I have one suggestion that I'm not sure has been touched on.  On your 0% cc set payments so the entire balance is paid off the month before the 0% period is up.  No need to pay it off earlier, but you don't want to end up paying several months interest at 14%. Also keep an eye out for other 0% cc offers.  Just be sure to not transfer more than you can pay off in the teaser period.

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #29 on: November 10, 2015, 01:24:36 PM »
For the love of [deity of your choice], combine trips! And get a free checking account with unlimited checks instead of driving to get a money order.



I do have a free checking account and I walk to get the money order. I might order some checks though.

Sounds like another reason to drop this life insurance that you don't need. At the very least, switch to a normal company that operates in the 21st century and then also drop it to a smaller amount as nobody needs to pay your student loans if you die because they should forgiven. As others have already mentioned, a big part of getting started with paying off huge loans and turning your life around is to start optimizing where you can. This is an easy place to optimize!

I do have the day off on the 25th. I might just see about switching life insurance companies and dropping the insured amount by half.

So I worked on the debt calculator spread sheet.

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

I kept your minimum payments & assumed you had an extra $500 per month to put towards the debt.  I think you can probably find another 100 to 200 with some of the suggested budget changes but $500 was my starting point.

The Great news is that you can have the PLUS, lending club and CC all paid off by April 2016.

This was assuming a $2000 tax refund that I put on the second page of the spread sheet in April 2016.
(Without that refund they are all still paid off by July)

Focus on those because of the high interest and low value.

You can run a few scenarios.

Snowball (lowest balance first) Total interest $18,949.28  last debt paid 8 years 1 month
Avalanche (lowest interest first)  Total interest $15,645 last debt paid in 7 years 8 months

Custom  (a mix of lowest value and interest) Total interest $15,746  last debt paid in 7 years 8 months

You can also run a horrific scenario with no extra payments and it will take over 22 years to climb out of debt.

Here is how I entered the custom data.

Lending Club    2,650.00    10.98%    83.27    2
PLUS                 1,808.65    8.50%    105.53    1
Perkins     10,557.95    5.00%    120.00    8
AES Safford    3,462.35    6.80%    50.00    4
CC no interest    827.14    0.00%    25.00    3
A                       4,546.57    6.00%    -      6
B+D+F 4499.81    30,018.83    6.80%    -      5
C                      5,553.12    5.60%    -      7
E                      5,542.68    4.50%    -      9
G                      4,000.00    3.40%    -      10

The last column shows the custom pay off order.  I had to group all your 6.8% loans together

I am not savvy with the tax implications of paying one before the other so you can change the "custom" order to be more tax advantaged.

I hope that helps.  I will try to send the spread sheet in a PM.




Thank you for running that for me. Actually I've run some numbers and gotten an estimated tax refund amount of 4000. So hopefully that's the amount I get. I can really pay some stuff off then.

You've gotten lots of good advice (even if it wasn't all identical) but I have one suggestion that I'm not sure has been touched on.  On your 0% cc set payments so the entire balance is paid off the month before the 0% period is up.  No need to pay it off earlier, but you don't want to end up paying several months interest at 14%. Also keep an eye out for other 0% cc offers.  Just be sure to not transfer more than you can pay off in the teaser period.

I've got enough in my savings account that I can pay it off if I need to. I check it at least once a week (to make sure no one's stolen my info and charged anything on it). I also have the date marked for 1 week before it goes up to 14%.

Thank you for all your suggestions everyone. You've definitely given me some things to think about. I do believe I will shop around for some better life insurance.

Lady Fordragon

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #30 on: November 10, 2015, 01:35:57 PM »
Definitely some good advice given here.  I'm also a fan of a mix of the snowball & avalanche methods when paying off debt.  Gives you those emotional wins to motivate you to keep going. 

Louisville

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #31 on: November 10, 2015, 02:02:32 PM »
Sorry if this was covered already.
What degree did you get with all that borrowed money?

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #32 on: November 10, 2015, 02:07:25 PM »
Bachelor's in Accounting

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #33 on: November 11, 2015, 06:08:25 AM »
Well I didn't get to play around with that spreadsheet K-ice gave me yesterday. I had a migraine develop on my way home from work and by the time I got home it felt like a jackhammer was going off in my forehead. Feeling a lot better now so hopefully I can play around with this spreadsheet and get some ideas.

I think I might use $400 as my snowball number and hold on to that extra $100 as a just-in-case measure. At the end of the month if I didn't need it for an emergency then I'll probably put it on that PLUS loan. I'm excited to get started with this next month. This month I plan on paying an extra $50 on the PLUS loan and next month I'll try to put at least $400 extra. But I'll have to divide it up between checks and take $200 out of each to do it. At least that's the plan anyways. I'll look at my budget when I get home this evening and make sure I haven't left anything out.

Louisville

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #34 on: November 11, 2015, 07:16:40 AM »
Bachelor's in Accounting
Excellent. So, the good news is there's no reason your salary shouldn't ramp up pretty quickly. Take heart.

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #35 on: November 11, 2015, 07:21:42 AM »
Bachelor's in Accounting
Excellent. So, the good news is there's no reason your salary shouldn't ramp up pretty quickly. Take heart.

Hopefully. I work for a VERY small firm so I'm not too confident that my salary will ramp up, so to speak. I also signed a non-compete agreement good for three years after I leave. My friend says it means I can't work in accounting at all for that time period but I don't think that would actually be enforceable.

MDM

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #36 on: November 11, 2015, 07:23:04 AM »
Actually I've run some numbers and gotten an estimated tax refund amount of 4000. So hopefully that's the amount I get. I can really pay some stuff off then.

On form W-4 is this language:
  "I claim exemption from withholding for 2015, and I certify that I meet both of the following conditions for exemption.
  Last year I had a right to a refund of all federal income tax withheld because I had no tax liability, and
  This year I expect a refund of all federal income tax withheld because I expect to have no tax liability.
  If you meet both conditions, write Exempt here"

If that fits your situation, you might as well do so immediately and start getting an extra $142.41 in every pay.

If you are having $142.41*24 = $3,418 withheld and expect $4,000 back from the IRS then it fits for 2015.  Might be worth checking on state taxes also.

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #37 on: November 11, 2015, 07:27:05 AM »
Actually I've run some numbers and gotten an estimated tax refund amount of 4000. So hopefully that's the amount I get. I can really pay some stuff off then.

On form W-4 is this language:
  "I claim exemption from withholding for 2015, and I certify that I meet both of the following conditions for exemption.
  Last year I had a right to a refund of all federal income tax withheld because I had no tax liability, and
  This year I expect a refund of all federal income tax withheld because I expect to have no tax liability.
  If you meet both conditions, write Exempt here"

If that fits your situation, you might as well do so immediately and start getting an extra $142.41 in every pay.

If you are having $142.41*24 = $3,418 withheld and expect $4,000 back from the IRS then it fits for 2015.  Might be worth checking on state taxes also.

I have definitely got to schedule some time to discuss this with my boss. I'd be too afraid to pull the trigger on something like that without an expert opinion.

BBub

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #38 on: November 11, 2015, 08:20:21 AM »
Liberty Stache I know its a lot of debt relative to my income. I work for a very small firm so I'm surprised I actually make this much. I could double my income if I could get on at a large firm but I like where I work for now. As to side hustles, I'm not sure. I don't feel like I have enough experience yet to do anything with accounting. As to tutoring that I used to do, I don't know. I don't really have time through the week. Maybe on the weekends, but I'll admit I'm a very shy person so it would be hard for me to put myself out there.

Hi Amanda - good luck with everything! I agree that you need to increase income.  ASAP. 

Change the mindset that you work for a small firm & they can't afford it.  BS - show them your worth & they'll find a way to afford it.  You don't work for a nonprofit.  Open your mind up to the possibility of changing jobs too.  The numbers don't work in your current situtation.  With approx $75k in debt and about $25k take home... well, even at a 50% savings rate you are looking at SIX YEARS to get to zero.  That's 32 years old.  And that would not include things like buying a house, or having a child, or doing whatever else you may want to do.  And you are not saving 50% currently, so really you are on pace to carry this debt for decades at your current salary level.  Double your take home & you could pay off the debt in as little as 2-3 yrs.  Easily.  Triple take-home and you could pay everything off sooner & be sitting on a few hundred grand by your 30th bday.

And the great thing?  It's absolutely possible for you to double or triple your income.  The only barrier is in your mind.  IMO, read some books about how to sell.  Listen to podcasts.  It really is a learned skill.  Even if you aren't naturally forward or extroverted - the art of selling & negotiating is a learned skill.  And if you learn how to do it, you will make a hell of a lot more money in your lifetime than otherwise.

Good Luck!

jwright

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #39 on: November 11, 2015, 08:24:57 AM »
I don't know how much experience you have, but my public accounting firm has a branch in Triad and starting salaries for new grads are at least mid-40Ks.  I'm willing to bet your non-compete is unenforceable, and doesn't it usually refer to your firm's clients? 

Increasing you income is the fastest way to greater financial freedom.

pompera_firpa

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #40 on: November 11, 2015, 08:28:30 AM »
Hopefully. I work for a VERY small firm so I'm not too confident that my salary will ramp up, so to speak. I also signed a non-compete agreement good for three years after I leave. My friend says it means I can't work in accounting at all for that time period but I don't think that would actually be enforceable.

Okay, one of the things you need to do after you get your student loan situation sorted is to find out (if you don't already) the specifics on that non-compete.  There are a lot of different types, and there are (supposed to be) limitations on it besides time, i.e. geographic location and exact explanations of what KIND of work you're barred from doing.

Once you know what you're up against, you can start to formulate a plan. Will you need to move in order to have a chance to work in those three years? If so, start thinking about where to go-- if you'll have to move anyway, it'll be a chance to really make it count. Somewhere that you can live AND work, and not have to drive everywhere. Start some research.

(Note: you do not actually have to move! I just firmly believe that knowing your options puts you in a better position than not.)

And regarding side hustles while shy-- yeah, I hear ya. Online-type side hustles may be more your thing, and I'd look at this as an investment, too-- creating options for yourself, networking, honing your non-accounting skills, that sort of thing.

Louisville

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #41 on: November 11, 2015, 08:28:53 AM »
Bachelor's in Accounting
Excellent. So, the good news is there's no reason your salary shouldn't ramp up pretty quickly. Take heart.

Hopefully. I work for a VERY small firm so I'm not too confident that my salary will ramp up, so to speak. I also signed a non-compete agreement good for three years after I leave. My friend says it means I can't work in accounting at all for that time period but I don't think that would actually be enforceable.
Non-competes are for  contracting situations. That is, you're working for a contracting company, and you can't leave them to go FTE for the client.
I don't even understand how it would apply to an FTE. Do you work with some proprietary knowledge or technology, above and beyond accounting stuff? If you can find a significant bump in salary somewhere else, leave. Are they actually going to take the time to track you down and sue you? How are they even going to know what you're doing when you leave them? All that being said, never sign a no-compete again.

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #42 on: November 11, 2015, 08:39:57 AM »
Not trying to burst your bubble but few professionals know the ins and outs of your tax situation.  That is, the average paying client won't be eligible for the retirement savings credit or eitc.  It's also, you know, better to read up on it yourself. I'm not sure when you finished school but if you were full-time for the spring (5 months) you can't take the savers credit.  If you have been out of school for more than a year, I'm baffled by your salary.  $17 sounds like what I'd expect a college intern to make, or a college grad untested employee.  If they've put a year of training into you, they should value you enough to pay better.

My initial thoughts: changing Roth to traditional will lower your agi, as will hsa contribution, which can be done pretty late in the year.  Isnt student loan interest also above the line, up to 2500?  Since you're already doing $2700, you only need another $1000 to get under $27k. The savings is not exactly $1000, because you will get $200 at a higher agi, or $400 at an in between, but $600 match on $1000 is worth grabbing.  Crunch some numbers to see if the hsa makes more sense.

Eta: if you can do a pretax hsa and then use it for premiums, that makes more sense to me than the IRA or extra 401k over $2000.  I would focus on the loans first and max out 401k later. I'm guessing you filed taxes last year, how much has actually changed?
« Last Edit: November 11, 2015, 09:13:55 AM by Runrooster »

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #43 on: November 11, 2015, 09:33:43 AM »
Not trying to burst your bubble but few professionals know the ins and outs of your tax situation.  That is, the average paying client won't be eligible for the retirement savings credit or eitc.  It's also, you know, better to read up on it yourself. I'm not sure when you finished school but if you were full-time for the spring (5 months) you can't take the savers credit.  If you have been out of school for more than a year, I'm baffled by your salary.  $17 sounds like what I'd expect a college intern to make, or a college grad untested employee.  If they've put a year of training into you, they should value you enough to pay better.

My initial thoughts: changing Roth to traditional will lower your agi, as will hsa contribution, which can be done pretty late in the year.  Isnt student loan interest also above the line, up to 2500?  Since you're already doing $2700, you only need another $1000 to get under $27k. The savings is not exactly $1000, because you will get $200 at a higher agi, or $400 at an in between, but $600 match on $1000 is worth grabbing.  Crunch some numbers to see if the hsa makes more sense.

Eta: if you can do a pretax hsa and then use it for premiums, that makes more sense to me than the IRA or extra 401k over $2000.  I would focus on the loans first and max out 401k later. I'm guessing you filed taxes last year, how much has actually changed?

I graduated in May 2012 but couldn't find an accounting firm willing to hire me until this past May. So I've only been at this job for 6 months. I tried and tried after I graduated to find an accounting firm willing to hire me, but always got beat out by someone with experience or the positions all required at least one year or more. I got hired on at Lowe's as a cashier in September '13 and still kept hunting for an accounting job. I finally found the firm I'm at now and got hired this past May. The $17/hr I'm getting isn't a lot for an accountant but its better than the $10 I was getting at Lowe's.

I'm not eligible for an HSA unfortunately. I have around $335 of student loan interest though. Might be around $400 by the end of the year.

My income last year was just $15960. This year's looks to be close to $29,100. Can't quite remember off the top of my head and my calculation sheet's at home.

I don't know how much experience you have, but my public accounting firm has a branch in Triad and starting salaries for new grads are at least mid-40Ks.  I'm willing to bet your non-compete is unenforceable, and doesn't it usually refer to your firm's clients? 

Increasing you income is the fastest way to greater financial freedom.

Do you mind me asking which firm? I did apply with McGladrey's Greensboro office and the Greensboro offices of the Big 4. I got a phone interview with McGladrey but nothing with the others. I don't think I'd want to work for Big 4 though. Too many people burn out working for them.
« Last Edit: November 11, 2015, 09:36:09 AM by AmandaS1989 »

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #44 on: November 11, 2015, 10:14:02 AM »
Well good news. I am meeting with my boss on Friday to discuss my withholding and do a little tax planning for next year. He said I could change my withholding for December's paychecks if I wanted. Even just a little extra money in each would be great.

BBub

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #45 on: November 11, 2015, 10:20:32 AM »
Not trying to burst your bubble but few professionals know the ins and outs of your tax situation.  That is, the average paying client won't be eligible for the retirement savings credit or eitc.  It's also, you know, better to read up on it yourself. I'm not sure when you finished school but if you were full-time for the spring (5 months) you can't take the savers credit.  If you have been out of school for more than a year, I'm baffled by your salary.  $17 sounds like what I'd expect a college intern to make, or a college grad untested employee.  If they've put a year of training into you, they should value you enough to pay better.

My initial thoughts: changing Roth to traditional will lower your agi, as will hsa contribution, which can be done pretty late in the year.  Isnt student loan interest also above the line, up to 2500?  Since you're already doing $2700, you only need another $1000 to get under $27k. The savings is not exactly $1000, because you will get $200 at a higher agi, or $400 at an in between, but $600 match on $1000 is worth grabbing.  Crunch some numbers to see if the hsa makes more sense.

Eta: if you can do a pretax hsa and then use it for premiums, that makes more sense to me than the IRA or extra 401k over $2000.  I would focus on the loans first and max out 401k later. I'm guessing you filed taxes last year, how much has actually changed?

I graduated in May 2012 but couldn't find an accounting firm willing to hire me until this past May. So I've only been at this job for 6 months. I tried and tried after I graduated to find an accounting firm willing to hire me, but always got beat out by someone with experience or the positions all required at least one year or more. I got hired on at Lowe's as a cashier in September '13 and still kept hunting for an accounting job. I finally found the firm I'm at now and got hired this past May. The $17/hr I'm getting isn't a lot for an accountant but its better than the $10 I was getting at Lowe's.

I'm not eligible for an HSA unfortunately. I have around $335 of student loan interest though. Might be around $400 by the end of the year.

My income last year was just $15960. This year's looks to be close to $29,100. Can't quite remember off the top of my head and my calculation sheet's at home.

This comes back to sales & negotiation skills.  I have been hired twice since college - on the spot both times, never had to show a resume.  That wasn't luck or an accident.  I wasn't born this way.  I learned the skills through reading books, listening to CD's, practicing, selling door to door (which sucked), getting rejected thousands of times in my younger years before figuring out how to appeal to people.  I did all of this due to a burning desire not to be poor.  I started out like you. Age 23 w/ $45k in loans and a $32k salary.  And now I'm 30, the investments just surpassed 250k & the momentum is on my side.  DW is quite shy.  She has stepped way out of her comfort zone to learn and implement these skills & she is now pulling down close to $100k at 28 yrs old.  She works in the pricing department of a smallish company - not a job you'd think pays very well.  She probably earns double the salary of some of her co-workers who do the same thing because she has figured out how to navigate through the management politics, demonstrate her value, play the right card at the right time & get big raises.  It is so doable, and even more so in a smaller company where the salary policy isn't so rigid.  You just need the confidence & skills.  And that's on you to develop and learn.

When a person is destitute, it's easy to get trapped in the mindset that there is a huge scarcity of money in the world.  Nothing could be further from the truth.  Bank accounts in the US alone hold $3 trillion & that money changes hands 6 times per year.  So roughly $18 trillion dollars will slosh around in the US this year.  And the next, and the next.  Going from $30k salary to $60k or $600k is nothing in relation to the amount of money up for grabs.  You just have to figure out how to use your brain to capture a teeny tiny fraction of that money.  The stakes are high, and it's on you to figure it out.  Just know that it IS possible.

Runrooster

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #46 on: November 11, 2015, 10:31:28 AM »
1. Know the difference between income (gross) and adjusted gross, which is reduced by 401k and student interest.  That 27k line for the savers credit is black and white, so make sure you've accounted for how the year end paychecks will come in.  Your boss should be able to help with this.  Also if you've only done $1200 between 401k and IRA due to the mid year job, definitely bump to $2000.

2. I'm not use what ineligible for hsa means.  Does it mean you're on a high deductible plan, or that your firm doesn't subsidize you for an HSA?  You can contribute even if your employer won't withhold it pretax or offer a match.

3.  You have $63k in loans above 5%, that sounds like more than $443 a year to me.  If it isn't: pay it! If you can afford it, what I'd do is get retirement contributions to 2k and then bump loan payments to reduce agi to that 27000 mark.  It sounds like your in forbearance, which limits your required payments but does not stop interest accrual.  You might be allowed to make payments against that interest which will be deductible completely.

4.  Run your taxes and adjust withholding to get back whatever you've overpaid already.  Possibly at a zero tax liability.  You can increase your withholding in February.  At the very least, be prepared to get your refund as soon as the W2 shows up in January.
« Last Edit: November 11, 2015, 10:46:47 AM by Runrooster »

mandy_2002

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #47 on: November 11, 2015, 10:35:42 AM »
I think your loan payoff and monthly fees have been well covered, and now your pay should be addressed with your boss.  You currently make $17/hour.  Do you know how much the firm charges for your time?  Knowing this will show you how much they value you.  Obviously they have overhead costs, but if they are charging $60-$80 per hour for your time, you should be getting more than $17.  Women tend to undervalue themselves, and assume that if we deserve more money, it will be offered.  It will not.  Ever.  You can request a salary review at 6 months or a year, but it has to be you requesting it.  If you are a workhorse, doing a good job and getting the jobs done in an accurate and timely manner, they should have no reason to deny your value. 

If not, get your year of experience, look back at the companies that you had issues with when you didn't have the experience, verify the non-compete does not apply, and get the heck out of there. 

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #48 on: November 11, 2015, 10:37:50 AM »
1. Know the difference between income (gross) and adjusted gross, which is reduced by 401k and student interest.  That 27k line for the savers credit is black and white, so make sure you've accounted for how the year end paychecks will come in.  Your boss should be able to help with this.  Also if you've only done $1200 between 401k and IRA due to the mid year job, definitely bump to $2000.

2. I'm not use what ineligible for hsa means.  Does it mean you're on a high deductible plan, or that your firm doesn't subsidize you for an HSA?  You can contribute even if your employer won't withhold it pretax or offer a match.

3.  You have $63k in loans above 5%, that sounds like more than $443 a year to me.

4.  Run your taxes and adjust withholding to get back whatever you've overpaid already.  Possibly at a zero tax liability.  You can increase your withholding in February.  At the very least, be prepared to get your refund as soon as the W2 shows up in January.

I'm not on a HDHP and everything I've read about HSAs says you need to have a HDHP to be eligible for one.
Not all of my loans are above 5%. Some are as low as 3.4%. That $335 interest is from when I started paying back the loans in August. My Perkins loan was deferred until August and my AES loan didn't come due until September. The PLUS loan is not in my name, so I can't claim the interest. I am going to sit down with my boss on Friday and run some numbers though to see if I can cut out my Fed tax withholding altogether in December.

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #49 on: November 11, 2015, 10:43:45 AM »
I think your loan payoff and monthly fees have been well covered, and now your pay should be addressed with your boss.  You currently make $17/hour.  Do you know how much the firm charges for your time?  Knowing this will show you how much they value you.  Obviously they have overhead costs, but if they are charging $60-$80 per hour for your time, you should be getting more than $17.  Women tend to undervalue themselves, and assume that if we deserve more money, it will be offered.  It will not.  Ever.  You can request a salary review at 6 months or a year, but it has to be you requesting it.  If you are a workhorse, doing a good job and getting the jobs done in an accurate and timely manner, they should have no reason to deny your value. 

If not, get your year of experience, look back at the companies that you had issues with when you didn't have the experience, verify the non-compete does not apply, and get the heck out of there. 

We're not an hourly rate firm. We charge our clients a monthly fee that covers our services such as bookkeeping and payroll. In May is when I have my yearly review so I am hoping for a raise then if things go well. If not, then I might start looking around. My Dad doesn't believe I should expect a raise after just a year. But then again, he's only ever worked in factories, not in a professional setting.