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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: AmandaS1989 on November 09, 2015, 06:24:43 PM

Title: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 09, 2015, 06:24:43 PM
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.





Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM 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.

Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Paul der Krake 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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*
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: K-ice 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?

Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM 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....
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Pooplips 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Dee18 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. 
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: chubbybunny 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.

Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Guesl982374 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: CU Tiger 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.



Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: PARedbeard 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!
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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!
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: mm1970 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: StacheInAFlash 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....
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM 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 (http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228) 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: StacheInAFlash 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!
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Paul der Krake 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.

Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: K-ice 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.


Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Catbert 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Lady Fordragon 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. 
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Louisville on November 10, 2015, 02:02:32 PM
Sorry if this was covered already.
What degree did you get with all that borrowed money?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 10, 2015, 02:07:25 PM
Bachelor's in Accounting
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Louisville 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: BBub 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!
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: jwright 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: pompera_firpa 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Louisville 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Runrooster 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?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: BBub 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Runrooster 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: mandy_2002 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. 
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 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.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: COlady on November 11, 2015, 10:54:24 AM
I'm a bit surprised that you've had such a hard time finding a job in accounting. I'm in accounting and I live in the Denver metro area and accounting is booming, even entry level. I talked to one of my friends that is a hiring manager the other day, she is with a small firm, and they're paying entry level people $52,000.  PWC is starting grads off at $55,000.  I started at $38,000 out of school in 2006 (holy cow I'm approaching 10 years).  I think you're grossly underpaid. Hopefully you're getting good experience? What kind of work have you been doing? Did you get decent grades? I would keep looking for better paying jobs.

Also, are you planning on taking the CPA exam? If you can pass the exam that will drastically increase your earning potential and open doors for you.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Runrooster on November 11, 2015, 10:57:47 AM
Im failing at the quote function, but now is open enrollment time to assess your health plan for the new year.  Im not sure if you can switch in time to deposit into the hsa in December, but for next year that will help.

I also crossposted (edit) with you, that I can see why the loan interest is currently low but that doesn't have to stop you from paying more of it this year to lower your agi.  I would do that before raising the 401k. Note you still need to contribute 2000 since the savers credit is a 50% match.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Easye418 on November 11, 2015, 10:58:42 AM
Holy shit.... I have $63k in Student Loan debt as well between myself and my wife, but we bring home 3 TIMES your income.  I feel like its hard to breathe, you must feel like you are DROWNING.

I would start snowballing debt (smallest loan to pay off) and living to the absolute bare bones.  When you feel small victories, you will feel better about yourself.

Also, fine ways to earn more money or raise your income.  From what I remember, Accountants should make at least $40-$50k a year.  Sounds like you are making slightly less?

Good luck, I feel your pain.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 11, 2015, 12:18:28 PM
I'm a bit surprised that you've had such a hard time finding a job in accounting. I'm in accounting and I live in the Denver metro area and accounting is booming, even entry level. I talked to one of my friends that is a hiring manager the other day, she is with a small firm, and they're paying entry level people $52,000.  PWC is starting grads off at $55,000.  I started at $38,000 out of school in 2006 (holy cow I'm approaching 10 years).  I think you're grossly underpaid. Hopefully you're getting good experience? What kind of work have you been doing? Did you get decent grades? I would keep looking for better paying jobs.

Also, are you planning on taking the CPA exam? If you can pass the exam that will drastically increase your earning potential and open doors for you.

I am from a town of around ~20k people and live close to larger cities. I was also surprised it was so hard to find an accounting job. But then again, it seemed like every one I applied to had a bunch of applicants. And the economy in our area wasn't very good during much of this time either. I know I'm probably grossly underpaid, but it was my only option. I did not want to be stuck at Lowe's for the rest of my life.

I feel like I am getting good experience though. I do bookkeeping and payroll and will be trained on corporate tax returns, 1099s, and property tax returns when the next tax season pops up. My grades were pretty decent. I did have some Cs in some of my accounting classes but I am more of a learn by doing and my teachers were all 'read the book and you'll figure it out' types. I did have above a 3.1 overall when I graduated though.

I would love to pass the CPA exam. I attempted the BEC section once, got a 65. Then tried AUD twice and got a 72 and 68. I had to stop though, as I was putting the costs of tests and study materials on a CC since I didn't have the money to pay out of pocket. I would like to have a nice cash reserve set aside for just that before I get started again. But I found the NINJA system from Jeff Elliot and it is VERY cheap and good so the materials won't be as expensive.


Holy shit.... I have $63k in Student Loan debt as well between myself and my wife, but we bring home 3 TIMES your income.  I feel like its hard to breathe, you must feel like you are DROWNING.

I would start snowballing debt (smallest loan to pay off) and living to the absolute bare bones.  When you feel small victories, you will feel better about yourself.

Also, fine ways to earn more money or raise your income.  From what I remember, Accountants should make at least $40-$50k a year.  Sounds like you are making slightly less?

Good luck, I feel your pain.

I know 63k is bad but I know someone who graduated with 125k so every time I think of my student loans and go 'oh God 63k!' I think about that dude and breathe a sigh of relief that mine are half that.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: COlady on November 11, 2015, 12:42:58 PM
You might consider asking your firm to pay for you to take the CPA exam and pay for Becker review courses. Make sure you study adequately before taking the exams so that you pass. It takes so much time and dedication but I promise you that it's worth it.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 11, 2015, 12:46:56 PM
You might consider asking your firm to pay for you to take the CPA exam and pay for Becker review courses. Make sure you study adequately before taking the exams so that you pass. It takes so much time and dedication but I promise you that it's worth it.

Yeah I don't think that's gonna happen. I asked about that in my interview and he said it wasn't a possibility. Oh well, a lot of firms make you stay on a certain period of time after they pay that for you so screw it, I'll do it myself.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: COlady on November 11, 2015, 01:15:52 PM
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.

Amanda, this is great advice provided above. Others have provided great advice too. Many of us are in this field and are telling you you're very underpaid. Don't you want to be paid what you are worth AND get experience? This is why you went to school! So you don't have to pay your dues as long...you still have to pay your dues but you know what I mean. I gross the equivalent of $133k a year in salary now and I didn't get to where I'm at by being a nice, young, compliant girl. I've had to learn to be a young, respectful, forward woman. You've got to change your mindset.

$40,000 per year would be more reasonable per http://www.indeed.com/salary?q1=Staff+Accountant&l1=Winston-Salem%2C+NC

Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: COlady on November 11, 2015, 01:19:53 PM
AND the worst thing your boss can say is, "sorry I'm not able to give you a raise right now". At least hen he knows you're thinking about money and with be looking for a raise or possibly looking for a new job.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 11, 2015, 01:23:28 PM
Thank you COlady. I do want to be paid what I'm worth. But I'm so afraid that I might get let go if I ask for more. My boss has two sons finishing up accounting degrees. My Dad is afraid he might let me go and hire them instead. So I am afraid to kind of shake up the status quo. Maybe in another year or so once I get some actual tax prep experience I can start looking.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: jwright on November 11, 2015, 01:25:06 PM
So, bookkeeping and payroll doesn't pay as well as tax/audit/consulting in the accounting world.  However, if you are making $29,000 this year as a full time worker, that's more like $14 per hour.  And if the firm won't help defer costs of the CPA exam (a standard industry perk), they don't have an interest in your professional development. 

If you didn't have a 3.0 GPA, you probably aren't going to get in with a Big 4, unfortunately.  My old firm was not interviewing anyone with less than 3.4.  BUT - I can look on Craiglist right now and find 10 jobs for bookkeepers paying $19-$20 per hour, and I think I am in lower cost of living than you.  I worked at a four person firm and they would have paid more than that.  You worked hard for a degree; please value yourself appropriately! 
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: COlady on November 11, 2015, 01:34:32 PM
Thank you COlady. I do want to be paid what I'm worth. But I'm so afraid that I might get let go if I ask for more. My boss has two sons finishing up accounting degrees. My Dad is afraid he might let me go and hire them instead. So I am afraid to kind of shake up the status quo. Maybe in another year or so once I get some actual tax prep experience I can start looking.

Do your parents rely on you for meeting their day to day living expenses? And yes, I agree with you, once you have some real tax prep experience under your belt other firms will look a you closer. Passing the CPA exam is another mark on your resume that hiring managers will look for. Who doesn't want to hire someone that is obviously a hard worker if they'll study for the CPA exam while working full time. Are you paid on an hourly or salary basis? It sounds like salary. That hourly rate is going to go down real quick come tax season assuming you're salary....
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: ShoulderThingThatGoesUp on November 11, 2015, 01:38:33 PM
Thank you COlady. I do want to be paid what I'm worth. But I'm so afraid that I might get let go if I ask for more.

I think this is really unlikely if it's done respectfully.

Quote
My boss has two sons finishing up accounting degrees. My Dad is afraid he might let me go and hire them instead. So I am afraid to kind of shake up the status quo.

In that case you should be applying for jobs all the time.

(Edit: quote tags.)
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 11, 2015, 01:44:21 PM
They only rely on me for three weeks of groceries, household supplies, and mom's medicines. Dad pays everything else. I would like to have at least a year or two of experience and at least two sections of the CPA exam passed before I go looking for something else. I am salary, but the others who work here said they didn't put in more than 45 or 50 hours a week during the busiest part of the season. So that's not bad at all. And during the summer we're only open til 12 on Fridays but only one of us has to be here. I maybe worked 5 or 6 Fridays between mid May and the end of September. So there are some perks. Gotta look on the bright side for now.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Genevieve on November 11, 2015, 02:48:37 PM
Non-compete agreements that say you can't work for anyone else for three years are are not enforceable as they are too stringent. If you read the language again, I bet it says something less stringent.

If you like the mentorship you are getting at the firm, that might be worth the lower salary. (But you can probably find a place that pays more and has a good boss.) If it's a lifestyle choice, that's OK too, though there is a price.

But don't let silly reasons hold you back from getting a raise, as it seems like you are underpaid. An extra $10k or $15k a year would be life changing for you.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Kaikou on November 11, 2015, 05:50:55 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.

Haven't read the whole thread, so maybe someone brought this up already... There is a cost to checking and rechecking to make sure that there is no unseen charges on your account, to getting a money order, to wasting time going here and there when you can combine trips. Your time is money and you are using it inefficiently. Please pick up the book Your money Your life. I have just started reading it, but I flipped through and it goes through the time cost analysis and walks you through to calculating how much money your really make when you take away the cost of time commuting, gas, errands etc. I feel like that would be a real eye opener for you.

As someone else mentioned Dave Ramsey is perfect for someone like you. You are hesitant to make the first step and you have an excuse for every reason to do more or different. Just something to think about. TIME IS MONEY!

How much do you value your time and resources?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Kaikou on November 11, 2015, 05:57:50 PM
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.

What books or cds or whatever do you recommend to develop this skill?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 11, 2015, 07:08:26 PM
Well I just made this month's payment on the PLUS loan. I put an extra $50 on it for this month. I'm hoping to put an extra $400 on it next month.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Gizsuat2 on November 11, 2015, 10:56:56 PM
A slightly different take, having just paid off $79K in three years.  I chose a number for our checking account, $5000.  I decided that, every single time I logged into our bank account and the balance was any amount over $5000, I would transfer the difference to my student loans immediately.

The psychological trickle down effect of that got the whole lot paid off.

Good luck!
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Trifele on November 12, 2015, 05:41:27 AM
Amanda -- just want to second what another poster said about your non-compete.  A three year blanket non-compete -- if that's what it is -- is not enforceable for someone in your position.  I would not worry about it.  In your position I would be looking around for other work.  Network, meet people, make connections.  All it takes is that one acquaintance who knows of a job opening . . .   Is there a young professionals group in your area?  Check out your local chamber of commerce -- they frequently have events, seminars and mixers. 

 
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 12, 2015, 06:07:42 AM
Thank you for your kind words and encouragement Trifele. It's always nice to know there are other people who know your struggle. Sometimes I feel like I'm the only one struggling since I see people I graduated with paying off their loans, getting married, getting their first home. Sometimes I feel like I'm falling behind. But then I kind of shake myself off and remember that I will never be happy if I judge my life and my accomplishments against someone else's. Old habits just die hard I guess. I don't think the non-compete is a blanket one. The language says 'Staff Accountant shall not compete with the business of Owner or its successors or assigns' and 'the term non-compete means the Staff Accountant shall not directly or indirectly own, be employed by, or work on behalf of any firm engaged in a business that is substantially similar and/or competitive with Owner in whole or in part'. Those are the clauses that spook me a little.

Networking events? I think the AICPA has those Young CPA events from time to time. I might look into those. Problem is I couldn't do any through the week since I have to get up early.

Gizsuat2 that is an interesting idea. I might have to modify that though. Maybe I can look at whatever I have left over at the end of the month and put that towards my student loans. And paying off 79k in three years! Wow. I'm hoping I can get mine paid off in 7 or 8. As long as I'm not paying these loans off after the age of 36 I'll be content. If I could pay them off in 5 I'd be so stoked.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: FIREby35 on November 12, 2015, 07:35:27 AM
I just want to throw my two cents in on how to start earning more money. I am a lawyer and I see many similarities between the two professions. At the end of the day, to earn money and be in control in your profession you will have to have your own clients. If you are working on someone else's clients they will always pay you a low amount. Think about it, you are easily replaceable (it took you how long to find a job?) and if you are paid too much then the partner doesn't make any money. Why would they deal with the hassle of an employee if they are not going to make money? Answer: They wouldn't. You should start paying attention to the economics of the situation. I work on "X" cases that bill "Y" in total fees. I am paid "Z%" of the total fees I generate. Is this fair? As a general rule in my business, an employee needs to generate 3X their salary to be worth the time.

Now, being in a small firm is actually a good thing. Usually that means there is less bureaucracy for decision making. To ramp up your income I would try to make a deal with your owners. If you bring in a client you want a percentage of the money. You will continue to do all their work on the agreed terms but also search out additional business. Any new business you bring in for them is "gravy" as you will be doing the client development and work. It is a "win-win" for the firm they get paid for business that doesn't currently exist and they don't have to do anything to get it. Just watch out for getting business from the places they get business. When I was working in a smaller law firm, I got 75% of the fee for clients I brought in. That was a pretty good deal.

Getting clients is the part that will increase your pay and give you control of your earnings. It really is not that hard. You just start going to community activities and telling people what you do. I'm on multiple board of directors, I started a scholarship and a free legal clinic. It can really be anything. If you go to community events over an extended period of time you actually just become friends with everyone and it doesn't feel like forced "networking." Once you become part of this community the referrals start flowing and your income will shoot through the roof. This is probably what the owners of your firm are doing.

In my community there are lots of places where they have entrepreneurship clinics. Most small business owners don't have a clue when they start out. If you go to those types of places and offer basic, easy advice (Register an LLC, Elect S-Corp, pay distribution to avoid 15.3% FICA tax or "now that you own a business don't forget to save for taxes there is no "boss" taking them out of your paycheck) you will start meeting clients. Offer the advice for free and, if they want you to do the paperwork then charge them a modest fee. Get them on the hook and when their business takes off, your business will take off. You service has lots of value and, when you show them how much you can save them in taxes, it will be a no-brainer to hire you. I always say the check I write to my CPA at the end of the year is my favorite because it earned me 10X in saved taxes.

Lastly, you don't have to have all the answers when you start. If you start talking with clients then they will start asking questions. If you don't know, you say, "That is a good question, what is your contact information. I am going to do some research and get back to you." Don't charge anything and get back with the answer. If they don't hire you, it doesn't matter. You will get asked that question a million times over your career and you just got the opportunity to have the answer ready next time. Your clients will teach you about the service they need if you just listen.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: StacheInAFlash on November 12, 2015, 08:33:14 AM
My Dad doesn't believe I should expect a raise after just a year.
...

My Dad is afraid he might let me go and hire them instead.

As you figure out your life, something tells me you should start listening to your dad with a grain of salt. These couple of blurbs of yours just really resonated with me, so I just wanted to offer some quick advice. I have a similar dad, always the pessimist, who truly means well but just constantly spews negativity and bad advice towards me. He thinks that the way the world worked for him is how it works for everybody and nothing will convince him otherwise despite the fact that our jobs/education backgrounds and lives are polar opposites. Sadly, I actually have an unspoken rule of almost always doing the exact opposite of what he says, as I know that his advice is completely wrong. So...don't let your well-intentioned, presumably lovely dad poison your mind and make you fearful to go after what you deserve. You don't need that right now, or ever. Given the fact that you are partially subsidizing their life should also make you think twice before listening to him...
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: asiljoy on November 12, 2015, 08:37:15 AM
Networking events? I think the AICPA has those Young CPA events from time to time. I might look into those. Problem is I couldn't do any through the week since I have to get up early.

You should always been networking even if you're not looking for a job. Yes, it builds contacts so that you may be able to find a job quickly if you need to, but it also keeps you up to date on trends, gives you a feel for what's going on elsewhere/how other people do things, and gives you a place to bounce questions as far as simple as "Is this reasonable?" to people who understand where you're coming from because they work on the same kind of thing you do/have had to jump the same hurdles.

Getting little sleep really sucks, but hustling to those meetings and binge drinking coffee will pay dividends in the long run.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: zephyr911 on November 12, 2015, 08:38:28 AM
How do you eat an elephant? ;)
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 12, 2015, 08:44:57 AM
How do you eat an elephant? ;)

One bite at a time ;)
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Trifele on November 12, 2015, 09:20:56 AM
Hi Amanda

Re: your comment -- "I don't think the non-compete is a blanket one. The language says 'Staff Accountant shall not compete with the business of Owner or its successors or assigns' and 'the term non-compete means the Staff Accountant shall not directly or indirectly own, be employed by, or work on behalf of any firm engaged in a business that is substantially similar and/or competitive with Owner in whole or in part'. Those are the clauses that spook me a little."

That is what I would call a blanket non-compete -- it purports to limit you from working as a staff accountant for any company that competes with your employer, with no geographical limitations.  Not enforceable.  I did a brief check of North Carolina case law on non-compete clauses, and the courts there severely frown on anything longer than two years.  In addition, the courts frown on companies trying to use them for 'regular' (not key, high-ranking) employees.  Third, there are no geographical limitations, which a court is going to find unreasonable as well. 

If you were to get another job in the same town working as an accountant, your company might try to complain about it, but I seriously doubt it would go any further.  What lawyer is going to advise them to sue based on something non-enforceable? 


Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 12, 2015, 09:23:44 AM
Thank you for clearing that up for me Trifele. Honestly, that was weighing on my mind a bit. Now if I get a better offer I won't have to worry about getting sued.

Can you give me the link to where you found this info?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Bracken_Joy on November 12, 2015, 10:12:38 AM
Thank you for clearing that up for me Trifele. Honestly, that was weighing on my mind a bit. Now if I get a better offer I won't have to worry about getting sued.

Can you give me the link to where you found this info?

That's not to say you won't get sued, just that they won't win.

=)
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 12, 2015, 01:04:11 PM
So I'm meeting with my boss tomorrow to see if he can help me with some tax planning. I'm hoping to do a mock tax return for 2015 tonight and see if he can check my figures tomorrow. Especially with this ACA advance tax credit stuff. I'm really hoping that if I do have to pay something back that it's not a lot.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Kaikou on November 12, 2015, 03:13:23 PM
I just want to throw my two cents in on how to start earning more money. I am a lawyer and I see many similarities between the two professions. At the end of the day, to earn money and be in control in your profession you will have to have your own clients. If you are working on someone else's clients they will always pay you a low amount. Think about it, you are easily replaceable (it took you how long to find a job?) and if you are paid too much then the partner doesn't make any money. Why would they deal with the hassle of an employee if they are not going to make money? Answer: They wouldn't. You should start paying attention to the economics of the situation. I work on "X" cases that bill "Y" in total fees. I am paid "Z%" of the total fees I generate. Is this fair? As a general rule in my business, an employee needs to generate 3X their salary to be worth the time.

Now, being in a small firm is actually a good thing. Usually that means there is less bureaucracy for decision making. To ramp up your income I would try to make a deal with your owners. If you bring in a client you want a percentage of the money. You will continue to do all their work on the agreed terms but also search out additional business. Any new business you bring in for them is "gravy" as you will be doing the client development and work. It is a "win-win" for the firm they get paid for business that doesn't currently exist and they don't have to do anything to get it. Just watch out for getting business from the places they get business. When I was working in a smaller law firm, I got 75% of the fee for clients I brought in. That was a pretty good deal.

Getting clients is the part that will increase your pay and give you control of your earnings. It really is not that hard. You just start going to community activities and telling people what you do. I'm on multiple board of directors, I started a scholarship and a free legal clinic. It can really be anything. If you go to community events over an extended period of time you actually just become friends with everyone and it doesn't feel like forced "networking." Once you become part of this community the referrals start flowing and your income will shoot through the roof. This is probably what the owners of your firm are doing.

In my community there are lots of places where they have entrepreneurship clinics. Most small business owners don't have a clue when they start out. If you go to those types of places and offer basic, easy advice (Register an LLC, Elect S-Corp, pay distribution to avoid 15.3% FICA tax or "now that you own a business don't forget to save for taxes there is no "boss" taking them out of your paycheck) you will start meeting clients. Offer the advice for free and, if they want you to do the paperwork then charge them a modest fee. Get them on the hook and when their business takes off, your business will take off. You service has lots of value and, when you show them how much you can save them in taxes, it will be a no-brainer to hire you. I always say the check I write to my CPA at the end of the year is my favorite because it earned me 10X in saved taxes.

Lastly, you don't have to have all the answers when you start. If you start talking with clients then they will start asking questions. If you don't know, you say, "That is a good question, what is your contact information. I am going to do some research and get back to you." Don't charge anything and get back with the answer. If they don't hire you, it doesn't matter. You will get asked that question a million times over your career and you just got the opportunity to have the answer ready next time. Your clients will teach you about the service they need if you just listen.

i like this
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 12, 2015, 06:18:17 PM
So I'm meeting with my boss tomorrow to see if he can help me with some tax planning. I'm hoping to do a mock tax return for 2015 tonight and see if he can check my figures tomorrow. Especially with this ACA advance tax credit stuff. I'm really hoping that if I do have to pay something back that it's not a lot.
It will be interesting to see how that goes.

The usual rules of thumb would have you in Roth accounts, not traditional.  In your specific situation, however, it appears the opposite is true.  The numbers immediately below are guesses at your current situation from numbers in the OP.  In short, you invest $1,340 in your 401k, pay $1,007 in federal + state tax, and have $28,590 for expenses/loans/etc.

CategoryMonthly
Comments
Annual
Salary/Wages for earner #1$2,792$33,500
401(k) / 403(b) / TSP / etc.$112Room to increase?$1,340
Employer Match$112$1,340
Income subject to IRS tax$2,680$32,160
Federal Total Income$2,680$32,160
Federal tax$172015 rates, HOH,stand. ded., 2 exempt.$200
State/City tax$67Guess, using 5.75% * Fed. Taxable$807
Soc. Sec.$173Assumes 1 earner paying$2,077
Medicare$40$486
Total income taxes$298$3,570
Income before other expenses  $2,382$28,590


Filing Status31=S, 2=MFJ, 3=HOH
# Exempt.2
# Children for EIC1
Earner #1Earner #2
Ages260
# of earners1
Total Income$32,160
Std. Deduct.$9,250
Act. Deduct.$9,250
Exemption$8,000
SL int. (approx.)$871
AGI$31,289
MAGI$32,160
Taxable$14,039
1040 Tax$1,448
Saver's credit$134
Tax after n-r credit$1,314
Child Tax Cred.$0
EIC$1,114
Net Tax$200
Monthly$17
State tax$8075.75%
VersionV7.02

Loans:Orig. Prin.Orig. LengthCurr. Prin.Yrs leftRate
Student Loan$1,8091.528$1,80928.500%
Student Loan$10,5589.4126$10,5589.41265.000%
Student Loan$3,4627.35$3,4627.356.800%


The numbers below here are a "what if?" you put $5,256 (again, assuming all other numbers are correct) into your 401k plan.  In short, you invest $5,256 in your 401k, get a refund of $1,146 from federal + state tax, and have $26,827 for expenses/loans/etc.

The extra $3,916 invested changes your annual take home pay by only $1,763 due to the increased credits.  That seems a much better deal than paying off 8.5% loans.

You may not be able to divert that much into your 401k in the time remaining in 2015.  You could put that much into a traditional IRA.  That may still be a great deal due to the saver's credit, although not as great a deal as using the 401k due to the EIC.  Doing the calculations for the tIRA is, as the saying goes, "an exercise left to the student." ;)

And it 's also possible that all of this is wrong due to errors in assumptions or spreadsheet calculations.  Again, it will be interesting to see what your boss says tomorrow - good luck!

CategoryMonthly
Comments
Annual
Salary/Wages for earner #1$2,792$33,500
401(k) / 403(b) / TSP / etc.$438Room to increase?$5,256
Employer Match$112$1,340
Income subject to IRS tax$2,354$28,244
Federal Total Income$2,354$28,244
Federal tax-$1442015 rates, HOH,stand. ded., 2 exempt.-$1,728
State/City tax$49Guess, using 5.75% * Fed. Taxable$582
Soc. Sec.$173Assumes 1 earner paying$2,077
Medicare$40$486
Total income taxes$118$1,417
Income before other expenses  $2,236$26,827


Filing Status31=S, 2=MFJ, 3=HOH
# Exempt.2
# Children for EIC1
Earner #1Earner #2
Ages260
# of earners1
Total Income$28,244
Std. Deduct.$9,250
Act. Deduct.$9,250
Exemption$8,000
SL int. (approx.)$871
AGI$27,373
MAGI$28,244
Taxable$10,123
1040 Tax$1,012
Saver's credit$1,000
Tax after n-r credit$12
Child Tax Cred.$0
EIC$1,740
Net Tax-$1,728
Monthly-$144
State tax$5825.75%

Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 13, 2015, 06:38:21 AM
So I'm meeting with my boss tomorrow to see if he can help me with some tax planning. I'm hoping to do a mock tax return for 2015 tonight and see if he can check my figures tomorrow. Especially with this ACA advance tax credit stuff. I'm really hoping that if I do have to pay something back that it's not a lot.
It will be interesting to see how that goes.

The usual rules of thumb would have you in Roth accounts, not traditional.  In your specific situation, however, it appears the opposite is true. 


So what you're saying is a Traditional IRA might make more sense instead of a Roth IRA. I'm going to see what my take-home pay would be if I were to change my 401k contribution to 6%. I am kind of afraid to change my withholding because if my brother gets a job during 2016 I'd have to change my withholding status back to single to have enough tax withheld right? I really don't wanna owe the IRS any money when I do my 2016 return.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Proud Foot on November 13, 2015, 09:24:37 AM
Amanda,

As others have said, you are definitely underpaid for what you are doing.  I had similar grades as you when I graduated college and was able to get a job doing audits for a regional firm where I lived. You mentioned the AICPA but you should really look at your state society of CPA's.  I was able to get a membership while I was taking the exams and it was only $50 per year. They put on multiple networking opportunities for young professionals and I was also able to access the job postings on the society website where only members were able to access.  Many of the smaller firms in my area only posted jobs there and did not do much advertising elsewhere.  You can also use the society to find a list of firms who have offices in your area.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 13, 2015, 10:27:15 AM
Thank you Proud Foot. I will have to look into the membership costs then.

I met with my boss and got some good info. I was actually calculating the amount of withholding I had wrong. I was including my FICA with my FIT. Oops. But we did a mock tax return for me and he advised me to definitely file HoH and claim my brother as I would owe the state money if I filed single. I also asked what my take-home pay would be if I upped my 401k contribution to 6% instead of 4 and he will get back to me with that number later today.

As for my withholding amounts and status I think I will leave it where it is for now. I'd rather be safe than sorry. But if I want to change it anytime next year he says he can do that for me no problem. The mock tax return also stated I'd get around $3000 back for 2015 so I'm pretty happy about that. That amount was before SL interest, 401k, and education expenses deductions too so hopefully it'll be higher.

EDIT: Also, would anyone be willing to give me some advice on my 401k? I picked the funds right when I started, and back in June I had no idea about how much fees could cost me in the long run so I'm pretty sure I need to take a second look at what I'm investing in. I can post the funds available vs what I'm invested in later tonight or tomorrow.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 13, 2015, 01:27:12 PM
So what you're saying is a Traditional IRA might make more sense instead of a Roth IRA. I'm going to see what my take-home pay would be if I were to change my 401k contribution to 6%. I am kind of afraid to change my withholding because if my brother gets a job during 2016 I'd have to change my withholding status back to single to have enough tax withheld right? I really don't wanna owe the IRS any money when I do my 2016 return.
I also asked what my take-home pay would be if I upped my 401k contribution to 6% instead of 4 and he will get back to me with that number later today.

As for my withholding amounts and status I think I will leave it where it is for now. I'd rather be safe than sorry. But if I want to change it anytime next year he says he can do that for me no problem. The mock tax return also stated I'd get around $3000 back for 2015 so I'm pretty happy about that.

Your filing status (HoH w/ your brother as a dependent vs. single) will make a huge difference to your federal taxes.  The earlier you can know this for 2016 the better for your tax planning.

As your mock tax return results are consistent with what the case study spreadsheet (have you tried it?) calculated, I'll assume it will also be correct for filing single. 

The difference between the two (HoH vs. single) for 2015 is ~$2500.  How your brother's employment situation affects your overall cash flow (e.g., amount of money you can put toward loan payoff) is another issue.

You might benefit from some advice I received in a situation similar to yours.  A few months after I started with this company, I did some calculations, took them to a senior person, and asked who could check them.  He said, "Nobody is going to check them.  We expect that you are doing professional work and doing it correctly."  Now this wasn't for something critical - if it had been, his response would have been different - but it was a good message for me to hear.  I did go back, double checked, assured myself I had done it correctly, and eventually that was confirmed in practice.  You are 26 years old, have a degree in accounting, and people will be paying you to help with their taxes.  You can do this yourself!

For example, you shouldn't need your boss to tell you how much your semi-monthly paycheck will change if you go from 4% to 6% 401k contribution.  At the very least you should do this yourself and compare your answer to his.

All the above is background to the response to your sentence quoted at the top of this post (emphasis added): "...a Traditional IRA might make more sense...".  You need to understand whether it does or not, and why.  You should also understand why the same contribution amount in your 401k vs. a traditional IRA may have different effects on your federal taxes (maybe the state taxes also).

Working at an accounting firm, I'd expect you have access to professional tax software.  If not you could buy TaxAct for ~$25 or less.  When it comes to your actual tax returns, you should either do your own calculations or use software with a warranty.  For strategy exploration, however, a spreadsheet (http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228) can be helpful. 

The graphs below show federal taxes vs. two different things for your HoH filing status:
1) Gross income, with 4% 401k contributions
2) 401k contributions, with constant $33.5K gross income

These look much different for single filing status.

(http://s16.postimg.cc/4h0fjtoyd/screenshot_54.png)

(http://s16.postimg.cc/7ml1a17kl/screenshot_53.png)
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 13, 2015, 01:48:06 PM
The only difference I can see between a 401k and an IRA is that you can sock away $18k instead of $5.5k. I know if I increase my 401k to 6% then that will be $83.75 deducted pre-tax. I did a calculation with an online calculator for what my take-home pay might be but I think it's wrong as the FIT goes up. That can't be right. If I increased my 401k contribution, my taxable income would go down, so in theory my FIT should go down too. Here's my results from the calculator:

Semi-monthly Gross Pay

$1,395.83
Federal Withholding

$175.78
Social Security

$86.54
Medicare

$20.24
North Carolina

$62.00
401k

$83.75
 

Net Pay

$967.52

Calculation Based On

Tax Year
2015
Gross Pay
$1,395.83
Pay Frequency
Semi-monthly
Federal Filing Status
Single
# of Federal Exemptions
0
Additional Federal W/H
$0.00
State
North Carolina
Filing status
Single
Allowances
0
Additional State W/H
$0.00
401k
6%
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 13, 2015, 04:12:19 PM
The only difference I can see between a 401k and an IRA is that you can sock away $18k instead of $5.5k.
There is also a difference in how these affect the EIC.  The 401k amount is contributed by your company and never appears as part of any entry on Form 1040, so it is not included in your income for EIC purposes.  Doing your own tax return by hand (or at least with the help of a spreadsheet you do yourself) for a few years should be very worthwhile for you, both personally and professionally.

See http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/ for discussion along these lines.

Quote
I know if I increase my 401k to 6% then that will be $83.75 deducted pre-tax.
Correct.

Quote
I did a calculation with an online calculator for what my take-home pay might be but I think it's wrong as the FIT goes up.  That can't be right.
You are right, that is wrong.  Find a different online calculator.  Which did you use?

Quote
Here's my results from the calculator:
Federal Withholding of $175.78/paycheck is way too much for you.

TaxCaster (https://turbotax.intuit.com/tax-tools/calculators/taxcaster/) and the IRS Withholding Calculator (https://apps.irs.gov/app/withholdingcalculator/) both estimate $2,588/yr, or $107.83/paycheck, as your federal tax liability for 2015 if you
- file single
- have $33,500 gross income
- contribute $2,010 to your 401k
- have $871 in student loan interest

The MMM case study spreadsheet estimates $2,587/yr for the same inputs.  I'd believe TaxCaster and the IRS. :)

Repeat after me: ;)
"I DO NOT want a tax refund when I send in Form 1040.  That means I gave the IRS an interest-free loan, while I am stuck paying atrociously high interest rates on my loans.
I DO want to have a small amount due, maybe $100, when I send in Form 1040.  That means I was able to take the extra take-home pay and reduce the balance owed on those student loans."

Once you believe the above, adjust your W-4 accordingly.  See https://www.irs.gov/pub/irs-pdf/p505.pdf for the background.  For 2016 you could try the IRS Withholding Calculator linked above and compare it to your own calculations.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 14, 2015, 12:55:35 PM
Wow that Pub 505 has a LOT of good info in it. I'll probably have to go over it multiple times to absorb all of it. As to calculating my paycheck with a 6% contribution to my 401k I will probably still ask my boss to estimate what my take-home pay will be because no matter what I calculate myself the software he uses could give a different result. I know we've had to make adjustments with it on a few clients' payroll because it took out too much or too little for some people. So the only way to know for sure is to run it with the software he uses to make our checks.

I've also been looking at the funds I've invested in for my 401k and I am not very happy with the choices I made. Man some of these fees are high! Here's what I picked back in June when I knew nothing about fees or low-cost index funds:

1. Dreyfus Socially Responsible Growth Fund - Initial Shares  Fee: .84%  (Growth)
2. Fidelity VIP Contrafund Portfolio - Initial Class Fee: .63%   (Growth)
3. Franklin Income VIP Fund - Class 2  Fee: .72%  (Balanced)
4. Franklin Small-Mid Cap Growth VIP Fund - Class 2  Fee: 1.05%!  (Aggressive Growth)
5. Invesco V.I. American Franchise Fund - Series 2 Shares  Fee: 1.20%!!  (Growth)
6. Franklin US Gov't Securities VIP Fund - Class 2  Fee: .74%  (Fixed Income)
7. Templeton Global Bond VIP Fund - Class 2  Fee: .76%  (Fixed Income)

I have really got to change my elections. These fees are ridiculous. I wish my boss would go with Vanguard. The smallest fee is still at .50% and the highest is at 1.87%!!



Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Exhale on November 14, 2015, 01:20:01 PM
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.  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. 

These resources might help:
- Ask For It: How Women Can Use Negotiation to Get What They Really Want by Babcock & Laschever
- Quiet: The Power of Introverts in a World That Can't Stop Talking by Susan Cain
- https://www.ted.com/talks/amy_cuddy_your_body_language_shapes_who_you_are?language=en


Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 14, 2015, 01:51:24 PM
Wow that Pub 505 has a LOT of good info in it. I'll probably have to go over it multiple times to absorb all of it. As to calculating my paycheck with a 6% contribution to my 401k I will probably still ask my boss to estimate what my take-home pay will be because no matter what I calculate myself the software he uses could give a different result.
Yes, sometimes there would be as much as a nickel's difference between what our calculations and what the company would withhold.  Really annoying. ;)
In other words, you should do your own calculations to ensure you understand enough to get close, but don't worry if the payroll software differs by a few pennies from your result.

Quote
I've also been looking at the funds I've invested in for my 401k and I am not very happy with the choices I made. Man some of these fees are high! ... These fees are ridiculous. I wish my boss would go with Vanguard.
See https://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401%28k%29_plan.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 14, 2015, 01:59:21 PM
The differences were more than a nickel. They were like $15 or $20! I did get a calculation of around $121 for Fed though. Do you know any good calculators that can also do state and FICA taxes as well?

I might have to have a talk with him about the 401k. I don't think he'll want to change though. There's just five of us counting him and the others are perfectly fine with the way the plan is. But maybe when he gets back on the 23rd I can sound him out. Or better yet, talk to the payroll lady. She's worked with him for 8 years, she should be able to give me an idea on how he'd react about this.

That TED talk was good Exhale. I'd heard something about the 'power-posing' before but hadn't given it much thought. I also realized that a lot of the time at a computer I'm sitting hunched over towards my computer screen, ankles crossed and generally just curled inward. Maybe if I start sitting up straighter, and stop trying to make myself smaller, that can help me a little.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 14, 2015, 05:32:42 PM
The differences were more than a nickel. They were like $15 or $20! I did get a calculation of around $121 for Fed though. Do you know any good calculators that can also do state and FICA taxes as well?
A $20 per paycheck (aka $480/yr) difference is more than just round-off error.  There is either a mistake in someone's calculation, or different inputs or assumptions are being used.

Not familiar with the quality of state calculators, except for the commercial ones such as TaxAct, TurboTax, etc.

FICA taxes are much more straightforward.  What do you get for FICA taxes in the MMM case study spreadsheet, and how does that compare with your paycheck amounts?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 14, 2015, 06:00:50 PM
In the case study spreadsheet the FICA comes out to way more than what comes out of my paycheck. In my paycheck I have $106.77 taken out for FICA-SS and FICA-MED. But in the spreadsheet it comes out to $213.51. Why the devil am I getting such a huge difference? Is my boss not taking out enough FICA? I did enter $167.50/month (6%) as my 401k contribution but I still got the same FICA amounts as you did calculating a 4% contribution. Am I entering it wrong MDM?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 14, 2015, 06:28:51 PM
Spreadsheet has "monthly" and "annual" amounts.

If it was a commercial program, it might also display semi-monthly, biweekly, quarterly, or user-configurable frequencies, but.... ;)

$106.77 * 2 = $213.54.  That seems close enough to $213.51. :)
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 14, 2015, 06:34:08 PM
Yep I got it now. *grins sheepishly* I realized that the amount taken out of my check is just for one check and the spreadsheet amount is for both checks. When I divide the spreadsheet amount by 2 then I get the same amount that's withheld from each check. *slaps forehead* So I figured that out but the state is off. The spreadsheet calculates around $75.50 for each check for state. When I multiply .0575 by the 2680 you got for taxable income I don't get the 67 you got I get 77. I'm not that bad at math am I?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 14, 2015, 06:49:58 PM
So I figured that out but the state is off. The spreadsheet calculates around $75.50 for each check for state. When I multiply .0575 by the 2680 you got for taxable income I don't get the 67 you got I get 77. I'm not that bad at math am I?
Your math is ok.  The difference is in the assumptions used. 

State+local taxes are estimated at some % of Federal "Taxable".     
    - Here, "Taxable" = AGI - Exemptions - Standard Deduction. 
    - You can change the % in cell H30.  If you want, you can add a formula for your state in cell G30.

See the cells that go into the calculation in this picture:
(http://s23.postimg.cc/5cdiwh8sn/screenshot_88.jpg)

Does that make sense?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 14, 2015, 07:19:52 PM
Ah I see now. Thank you MDM. So in my spreadsheet I am calculating a 6% 401k contribution and a $500 SL interest deduction (I know it'll probably be more than that for 2016 but I like to guess more conservatively with these things) so I get an AGI of $30982 and a taxable income of $24682. So state tax on a yearly basis comes out to $1419 so I get a monthly amount of $82 for state. So a pretty decent tax savings there and a small one on federal. And if I am figuring this correctly then my take-home pay would be $2624 pay after 401k deduction - $565 total taxes = $2059 / 2 = %1029.50. So my take home pay would go up by a whopping .68 :) However if I increased my contribution to 7% then my take home pay would go down to 1018. So I don't want to go any higher on the contributions unless I get a raise. Although since the funds in the 401k suck I probably won't go higher than 6%. I wonder though, if he doesn't want to switch to a different 401k provider, then maybe I could set up a 401k with Vanguard and he can send my contribution and his matching part to it. Is that legal?
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 14, 2015, 08:50:03 PM
...a $500 SL interest deduction (I know it'll probably be more than that for 2016 but I like to guess more conservatively with these things)
Conservative is better than overly optimistic, but not as good as reasonably accurate.  You may not know now how aggressively you will pay the SLs in 2016, but by at least ~June 2016 you probably will.  It's generally a good idea to shoot for accuracy when you are investigating possibilities - but see below about appropriate conservatism.

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so I get an AGI of $30982 and a taxable income of $24682.
You are assuming filing with single (not HoH) status, correct?  If so, there is another $4000 (actually $4050 in 2016) that you will subtract to get taxable income - see the case study spreadsheet (CSS) calculations for details.

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So state tax on a yearly basis comes out to $1419
Note that the actual NC state tax calculation may differ from the assumptions used in the CSS - you should check that.
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so I get a monthly amount of $82 for state.
Not sure how $1419/yr becomes $82/mo.

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And if I am figuring this correctly then my take-home pay would be $2624 pay after 401k deduction - $565 total taxes = $2059 / 2 = %1029.50. So my take home pay would go up by a whopping .68 :)
I get $1048.63 but that's with $871 SL interest so close enough.

Also note that the semi-monthly take home depends on your W-4 settings.  The CSS assumes you adjust the W-4 to match exactly the actual tax due.

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However if I increased my contribution to 7% then my take home pay would go down to 1018. So I don't want to go any higher on the contributions unless I get a raise.
Actually (using the $871 SL interest assumption), increasing the 401k contribution to $177/mo (or 6.34%) would increase your take home pay to $1053.18 due to a $200 saver's credit (again, assuming your W-4 is adjusted accordingly).  Here is where you would want to be somewhat conservative: the $200 saver's credit applies if your AGI is $30,500 or below.  If it is $30,501 the saver's credit is $0.

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Although since the funds in the 401k suck I probably won't go higher than 6%.
See http://forum.mrmoneymustache.com/investor-alley/to-401k-or-not-to-401k-that-is-the-question-43459/

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I wonder though, if he doesn't want to switch to a different 401k provider, then maybe I could set up a 401k with Vanguard and he can send my contribution and his matching part to it. Is that legal?
Doubtful.  Pretty sure a 401k is described by a legal document and applies company-wide.

Keep at it - this will all make sense!
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 14, 2015, 09:34:44 PM
I am assuming a filing status of single to see what will get taken out of my check if I increase the 401k contribution. I would like to keep my withholding at the single rate, at least for a while. If we get to June and my brother still hasn't found a job I might adjust my withholding. It is neat to see the differences filing statuses and exemptions can make though.

I got the 1419 by multiplying the 5.75% NC tax rate by the taxable income of 24682. Although I do think I calculated the monthly tax rate for state wrong. It looks like it should be ~$118.25/month or ~$59.13 per check.

It looks like if I change to HoH, 2 exemptions, 7% to 401k and 800 SL interest then I can get a take-home pay of $1166.59 if my math is correct.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 15, 2015, 12:05:49 AM
Attached is a version of the CSS with specific calculations for NC state income tax in cell G30.  That might be of specific interest to you and any other North Carolinians.

What may be of more general interest is the chart overlaying cell J73 and thereabouts.  It is a way to analyze "what if?" options that (to me at least) fits the "picture is worth 1000 words" equation.  To make good use of it may require some familiarity with Excel data tables, but at least for this case study you may be able simply to look at it.  The main thing it shows are the locations of "step changes" in the tax code.  For your single filing status that occurs with the saver's credit.  For the HoH filing status there is the saver's credit and the EIC.

I've been assuming the entries below describe your single and HoH situations:
Cell  Single  HoH
G2       1        3
G3       1        2
G4       0        0
G5       0        1

Use it if useful, ignore it if not.  The graph is the embodiment of a vague idea I've had for a while and this case study catalyzed that work - so thanks!  The generic version has been uploaded to the Google Drive location mentioned in http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/ and http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: mandy_2002 on November 15, 2015, 12:22:22 AM

I might have to have a talk with him about the 401k. I don't think he'll want to change though. There's just five of us counting him and the others are perfectly fine with the way the plan is. But maybe when he gets back on the 23rd I can sound him out. Or better yet, talk to the payroll lady. She's worked with him for 8 years, she should be able to give me an idea on how he'd react about this.


I believe the "to 401k or not" post talks about it, but most low fee 401k providers won't touch small group plans. We're talking total balances above several million before they will even consider you. Mark this as one benefit to changing jobs to a larger firm :).

You mention there are fees in the 0.5% range. Are any of these things that you would invest in? Most people believe in total stock market funds / ETF's or S&P 500 indexing. Do a bit of research on these lowest fee funds and see what you are working with.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 15, 2015, 05:39:43 AM
Attached is a version of the CSS with specific calculations for NC state income tax in cell G30.  That might be of specific interest to you and any other North Carolinians.

What may be of more general interest is the chart overlaying cell J73 and thereabouts.  It is a way to analyze "what if?" options that (to me at least) fits the "picture is worth 1000 words" equation.  To make good use of it may require some familiarity with Excel data tables, but at least for this case study you may be able simply to look at it.  The main thing it shows are the locations of "step changes" in the tax code.  For your single filing status that occurs with the saver's credit.  For the HoH filing status there is the saver's credit and the EIC.

I've been assuming the entries below describe your single and HoH situations:
Cell  Single  HoH
G2       1        3
G3       1        2
G4       0        0
G5       0        1

Use it if useful, ignore it if not.  The graph is the embodiment of a vague idea I've had for a while and this case study catalyzed that work - so thanks!  The generic version has been uploaded to the Google Drive location mentioned in http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/ and http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228.


I'm always happy to help people put on their thinking caps. ;) It is helpful to look at the different scenarios. I learn better when I have something to look at and can see how it is done. Although looking at those excel formulas makes my head hurt. I really need to improve on my excel skills.

Well mandy I will definitely be taking a look at the investments with lower expense ratios. Ideally I would like to have every investment in my portfolio at less than 1% so we'll see how it goes. Once I get a thousand saved up I can move my IRA to Vanguard at least.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: TheDudeReturns on November 15, 2015, 06:23:45 AM
Lots of charts and jibber-jabber. Looks like you have a chunk of federal loans and are a recent graduate. Just go on a PAYE (or if you're not eligible, REPAYE) plan and pay off the minimum on your loans. Based on your situation, you would probably pay $0-$100 monthly for eligible loans and then capitalization of interest is limited to 10% of original loan amount. After 20 years of PAYE, you will have the loans discharged and, if things haven't changed by then, pay tax on the "forgiven amount" as income. Take a look here: http://askheatherjarvis.com/

Don't be in a rush to pay off student loans. They are essentially free money now. You would be in a far better position having those $60k in loans plus $60k in cash versus $0 in loans and $0 in cash.

Student loans are discharged in event of death, so no reason to have life insurance based on that FYI, with the exception perhaps of some of the weirder loans that you have. I would not have shared your tax situation with your boss. Now they know that you *need* this job and may work you harder rather than hiring more people. I know I would, especially if you are salaried.   

Going to be honest, at 26 with what, 3 years of "cashier experience" at Lowe's (you don't need an accounting degree for this BTW), you are not competitive for a Big 4 style position. Big 4 is for "accounting bros" who think it is "cool" to be living in the big city/suitted down while only making $10k-$20k more than the average accounting position (but at a terrible hourly rate since they are there 60-80+ hours weekly). Actually, just avoid "public" accounting entirely. It looks like you took this position to stay exposed to that area. They probably said something along the lines of "unlike a Big 4, you get exposure to all functional areas of accounting here." Screw that. With your background, get into a federal/state/local government "accounting" job, work less, make more on an hourly or even annual basis, and then have loan forgiveness (without tax penalty) after 10 years. The Big 4 ship has sailed for you, as that is for 21 year olds that they can "trick" into thinking Big 4 is all that.

Accounting is beyond flooded for everyone's information. There are so many schools with accounting associates, bachelors, masters, etc. and plenty of people just like OP who have the degree but are working in positions where they don't need it (think store manager, office worker, etc.). If you want to be a CPA, you need an accounting degree, otherwise it is just sort of "there." Yes, it's the better business degree you can get, but it's still not the "golden ticket" professors make it out to be.

TL; DR: OP enjoy life, go on PAYE/REPAYE, don't make all these charts and crap and tracking about this stuff
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: MDM on November 15, 2015, 09:38:03 AM
...You would be in a far better position having those $60k in loans plus $60k in cash versus $0 in loans and $0 in cash.
In some cases (e.g., dire emergency) yes - due to having the cash on hand.  In other cases (e.g., life goes on normally) no - due to the cost of the very high interest rates on those loans.

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TL; DR: OP enjoy life, go on PAYE/REPAYE, don't make all these charts and crap and tracking about this stuff
That is one perspective.  Nice thing about the MMM forum is the variation in perspectives.  We can also give OP kudos for getting a better understanding of her situation and having the responsibility to repay the loans she took to get her accounting degree.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 15, 2015, 10:35:03 AM
It's always good to get multiple perspectives on a situation. I would like to pay the loans back as I did borrow that money in good faith. I will try to relax though in regards to the Nelnet loans. I almost felt like they were breathing down my neck and I absolutely had to get them refinanced by May or something. I think I'll give myself a little breathing room instead of inducing a heart attack. I still want to get them refinanced, but the world won't end if I don't do it in May. Really I have until July or so before I need to re-apply for the IBR. So that'll give me a few extra months to pay down the other high-interest loans.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: TheDudeReturns on November 15, 2015, 10:49:29 AM
It's always good to get multiple perspectives on a situation. I would like to pay the loans back as I did borrow that money in good faith. I will try to relax though in regards to the Nelnet loans. I almost felt like they were breathing down my neck and I absolutely had to get them refinanced by May or something. I think I'll give myself a little breathing room instead of inducing a heart attack. I still want to get them refinanced, but the world won't end if I don't do it in May. Really I have until July or so before I need to re-apply for the IBR. So that'll give me a few extra months to pay down the other high-interest loans.

Don't fall for the "good faith" argument. PAYE/REPAYE is in the terms of the loans, so you are following their rules (if federal). You don't need IBR (which is another plan like PAYE/REPAYE) as it is more complex and less valuable. As under PAYE, capitalization (interest on interest) is limited to 10% of the original amount, there really is no reason to stress as you also more than likely can pay very little based on your income as well as have a decent amount discharged at the end.

Also, taking the argument further, your professors did not act in "good faith" as they (like most business professors) probably led their students to believe they'd be making $50k-$100k plus. I'm sure compared to your classmates, you are doing a lot better than most.

I don't know how a federal refinance works (I don't have loans), but really all of your loans should be at one servicer. Whatever you do, DON'T go from federal to private (via So-Fi or something like that). It is beyond foolish to get a 2% reduction in interest and lose all the benefits federal loans provides (like PAYE and loan discharge). So-Fi makes sense for big wage earners who are at the 10 year standard payment plan anyway, but even then, you are talking about a few thousand or tens of thousands in difference over 10 years, so really not worth the hassle IMO.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 16, 2015, 06:06:49 AM
I might look into the PAYE thing when it comes time to reapply for the IBR. I might have to weigh the benefits of consolidation vs refinancing in more depth.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: oneday on November 17, 2015, 07:34:18 PM
Also, taking the argument further, your professors did not act in "good faith" as they (like most business professors) probably led their students to believe they'd be making $50k-$100k plus.

If OP feels that paying back her loans is what she needs to do to maintain her integrity, well, I don't see her giving up that mindset based on something you think her professors may have said.

That being said, finding all possible means of reducing payments will not compromise one's integrity, as long as those means follow the rules, such as IBR or REPAYE.  That's what we all do with taxes, right?  We look to legally minimize our tax burden.


Don't fall for the "good faith" argument.

Would you mind laying this out for me?  I'm not sure I understand what the good faith argument is, but I'd like to.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: Kaikou on November 18, 2015, 03:47:03 AM
Also, taking the argument further, your professors did not act in "good faith" as they (like most business professors) probably led their students to believe they'd be making $50k-$100k plus.

If OP feels that paying back her loans is what she needs to do to maintain her integrity, well, I don't see her giving up that mindset based on something you think her professors may have said.

That being said, finding all possible means of reducing payments will not compromise one's integrity, as long as those means follow the rules, such as IBR or REPAYE.  That's what we all do with taxes, right?  We look to legally minimize our tax burden.


Don't fall for the "good faith" argument.

Would you mind laying this out for me?  I'm not sure I understand what the good faith argument is, but I'd like to.
From wikipedia:
"Good faith (Latin: bona fides) is fair and open dealing in human interactions. This is often thought to require sincere, honest intentions or belief, regardless of the outcome of an action."
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: AmandaS1989 on November 19, 2015, 06:56:46 AM
Well it looks like I'll only have around $50-100 left at the end of this month to put as extra towards next month's PLUS loan payment. I had forgotten about my half of the property taxes for the land we inherited from my grandmother. That works out to about $87. Then I have to put back another $60 to pay for my filling next month. Grrr I really wanted to be able to put that extra money on it in December. But maybe during December I can put aside an extra $150-200 towards it.

I'm trying not to stress myself out about it. Stressing about something doesn't help and it sure doesn't pay it down any faster either. I'll just try to relax and think about the fact that I have five days off for Thanksgiving. Even if on one of those days I have to see the oral surgeon about my wisdom teeth. After all the wisdom teeth are out I might cancel the dental insurance. That'd save me around $480/year.
Title: Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
Post by: marynikum on September 26, 2016, 03:01:12 PM
Hey Amanda,

Jumping in here way late in the game, but I wanted to mention the option of putting your student loans on automatic repayment to save yourself 0.25% interest.  It's not much, but when you're talking about 7 years of repayment, it adds up!  You can even switch the day that it's due on to make sure the money is there (I personally pay my student loans on my payday that doesn't line up with my rent payment).  It was a no-brainer for me!

Best of luck.  I hope it goes well for you!