Author Topic: How to pay off 211K in student loans fast  (Read 10757 times)

prima

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How to pay off 211K in student loans fast
« on: September 21, 2012, 03:07:21 PM »
Hi,

I'm love paying the bills and see the student loan balances go down. I generated a spreadsheet to track the progress. It hurts me to see ~1300 going to interest every month not including the mortgage (170K at 4.5% for 2 years).I am always looking to how to save money.

Some background: I graduated 2 years ago, got married last year. My husband and I are both engineers pulling in ~150K a year. Unfortunetely for both of us, our parents were unable to help with education or living expenses. Also, the interest on some loans during the recession and without credit worthy cosigner was as high as 11.5% (ouch). Neither of us had a choice, we had to finish school and get a job ASAP. The student loan payment is killing us now, we sacrificed alot, but we can only afford to make the minimum payments. At this rate it will take us 20 years to pay off 211K :(.  How to accelerate the pay down and save money in interest? Any advice, techinique, encouragement is greatly appreciated.

fidgiegirl

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Re: How to pay off 211K in student loans fast
« Reply #1 on: September 21, 2012, 03:17:57 PM »
Can people still consolidate student loans?  What kinds of loans are they at such a high rate?

That's be the first thing I'd say . . . get the rate down ASAP.  Just not sure how.

Why would it take 20 years if you make $300K a year?  Maybe post some of your other expenses?

$_gone_amok

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Re: How to pay off 211K in student loans fast
« Reply #2 on: September 21, 2012, 03:41:21 PM »
Your student loan is bigger than your mortgage, ouch.

The best advise I could give you is to throw everything you got at your student loans. Making it a habit out of paying your loans as opposite of doing anything else.  Bonus check from work? Use it to pay down your loan. Grandma's holiday check? Use it to pay off your loan. Saved $50 a month by switching to prepaid cell phones? Pay $50 extra a month to your loans. By doing that I think you should pay off your loan twice faster.

CNM

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Re: How to pay off 211K in student loans fast
« Reply #3 on: September 21, 2012, 05:07:23 PM »
Perhaps if you posted more detail about your budget we can help you find areas to trim.  If you don't have a budget (meaning, how much money you spend per month on what) that is your step #1. 

Meadow

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Re: How to pay off 211K in student loans fast
« Reply #4 on: September 21, 2012, 05:17:25 PM »
Post your budget :0

happy

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Re: How to pay off 211K in student loans fast
« Reply #5 on: September 21, 2012, 07:33:19 PM »
In a nutshell: 1.re finance the loans to as low as interest rate as possible. 2.Pay all minimum amounts then pay extra of the highest interest loan. 3. Follow the laws of mustachianism, so you can pay more !

Lars

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Re: How to pay off 211K in student loans fast
« Reply #6 on: September 22, 2012, 12:04:19 AM »
Just a work of encouragement. With your excellent income, you should be able to enjoy a middle class lifestyle (ie what the average US household spends) and get your loans paid off in something like 5 years. If you are currently spending like an upper middle class couple you'll have to make a few changes but you can pay off your loans crazy fast and still spend more than most of the folk on these boards!!!

keith

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Re: How to pay off 211K in student loans fast
« Reply #7 on: September 22, 2012, 02:21:13 AM »
My husband and I are both engineers pulling in ~150K a year.

Along with posting the budget numbers, please confirm the income - is this 150k each? or total?

velocistar237

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Re: How to pay off 211K in student loans fast
« Reply #8 on: September 22, 2012, 07:40:59 AM »
Engineer 2 years out of school = $75K/year income, not $150K/year. If I'm wrong, which engineering field, and is your company hiring?

happy hit the nail on the head. The process now is to get help from the forum to bring your expenses down. In case you didn't notice, your hair is on fire. Everything should be on the table: selling a car, biking to work, not eating out, packing lunches, paying loans first and living off the rest, side jobs, etc.

prima

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Re: How to pay off 211K in student loans fast
« Reply #9 on: September 24, 2012, 08:42:49 AM »
I know a few of you asked for more details on my budget. Here is is:
Husband Student Loans 1800
My Student Loans 562
Mortgage 1305
Car loan 200
Credit Card 50 (transferred balance, 0% interest, i plan to pay it off in a few months)
Insurance 380 (cars, house)
Cell 185
Electric 250
Cable 55
Church 250
Total 5037 in bills every month, yikes, Income 7800 a mon (thatís ~75K/yeah each in automotive engineering, and yes right now they all are hiring). I know we are better off than some people, but when you think of debt to income ration then is really bad. Also, seems like things always come up. Recently we had plumbing issues, the main line was broken. Also, the electrical wiring failed in the half of the house. Lawn tractor broke (2.5 acre lot to mow) and etc. I would like to put more than just min on the loans, but then we wonít have the life for at least 10 years. With the min we are paying now, in accordance to Sallie Mae, husband's loans will be paid off in 2031, ouch. I know we will be better off in the future; however for now, do i pay as much as possible on loans, or pay min and live the life as well (like I have never been on vacay or seen a palm tree :(, I would like to do that hopefully before the kids arrive, which are in the plans)? And, I didnt mention, my hubby is into cars and racing which can be costly, it runs in his veins and there is no other option, its good for our both sanity. So I'm open to advice such as playing with balance transfer on credit cards to pay of student loans. Or does anyone know how and where to refinance the student loans, so far I dont know any bank and our credit is kinda shot with such a large ammount of debt. Sigh :(

Posthumane

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Re: How to pay off 211K in student loans fast
« Reply #10 on: September 24, 2012, 09:16:23 AM »
You mention that your husband is into cars and racing, and that there is no other option. Fine, I understand that. In that case though, since he is obviously very mechanically inclined, you can get rid of the new car with the car loan and get a used car. Maintenance won't be an issue since he should be able to do all the work himself. This will also allow you to reduce your insurance since you won't be required to carry more than liability/medical. So let's say that clears up 300/mo from your budget that you can put towards your student loans. As you pay off the highest interest loan your payoff rate will accelerate drastically. There are ways to keep a car hobby relatively inexpensive too. Look at low budget racing series such as ChumpCar, LeMons, or any of the Grassroots Motorsports challenges.

Can you clarify what you mean by living "the life" in your terms? You can certainly enjoy life, including things like occasional vacations, without lavish spending. That's what most of the MMM blog is about. Also, you mentioned that your hobbies and house maintenance costs are high, but you didn't include any of those things in your budget. Find out how much you are actually spending on these things on average, and determine whether they are really worth that much to you. If you think that you really need an extra 2.8k/mo of discretionary spending then I don't think you have quite got the message yet. You can easily throw an extra 1000 towards your loans right now and still have lots left over each month, more than many people on this board.
« Last Edit: September 24, 2012, 09:20:25 AM by Posthumane »
2013 Savings goal met. 2014 savings goal: $100k.
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prima

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Re: How to pay off 211K in student loans fast
« Reply #11 on: September 24, 2012, 09:43:19 AM »
You are right, we are not starving yet. I didnt include the everyday expenses.
Food 500 (we cook, including lunches at work, no going out or fast food. sometimes pizza on friday, and breakfast on Sunday)
Gas 500 (me - 30 min commute, hubby - 50 min commute).
So after that it leaves me 1500 a mon of money to play with, i am curently actively paying down the credit card balance, 1000 a mon. But i will admit i fail to keep the budget tight, or at least i dont know how to stick with it, cause we always run out of money and endup using the CC for food and gas. Is it better to keep cash or use the debit card (joint account)?
Also, the car payment is on used older car, not new, and hubby does all the maintenance on it as needed. However, we had no cash saved to pay for it so we had to get a loan. The previous car i had was my college ride, i had to upgrade.
And here is the break down of the loans and interest
Name       Interest   Balance
CC#1       0                   4,160
CC#2       12                   334
CC#3       17                   564
Car       5.5                   6,824
Student Loan #1   6.625    19,746
Student Loan #2   3.75    11,810
Student Loan #3   4.5    1,379
Student Loan #4   6.8    2,771
Student Loan #5   6.8    4,970
Student Loan #6   6    4,770
Student Loan #7   6.8    6,532
Student Loan #8   5.6    4,755
Student Loan #9   8    4,318
Student Loan #10   11.5    2,162
Student Loan #11   7.75    12,927
Student Loan #12   6    4,566
Student Loan #13   6.8    2,180
Student Loan #14   6.8    6,899
Student Loan #15   9.25    15,127
Student Loan #16   4.5    10,554
Student Loan #17   4.5    8,416
Student Loan #18   4.5    14,922
Student Loan #19   8    21,341
Student Loan #20   9.75    34,882
Student Loan #21   8.5    15,929
Mortgage     4.5    170,399
Note: private engineering school is not cheap!!! My kids are going to Community college!!! Iam not paying for mine and their education. By the time i will be done paying for mine - they will start college. (BTW - i dont have kids yet lol)

palvar

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Re: How to pay off 211K in student loans fast
« Reply #12 on: September 24, 2012, 12:11:54 PM »
Well, firstly, you need to track your budget better if you are going to see where you are coming up short.  My wife and I use AceBudget - it's a cheap smartphone app that allows you to easily track every expense.

$250 seems like quite a lot for electricity - are you just looking at an air conditioning heavy month?

Jamesqf

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Re: How to pay off 211K in student loans fast
« Reply #13 on: September 24, 2012, 12:25:19 PM »
Cut the cable, cut the cell to a pay-as-you-go, and look at why your electric bill is so outrageously high.

Get rid of the car loan, and when you buy an affordable used car (or cars) make sure you get one that gets decent gas mileage.  $500 for gas is just insane, even with those commutes.

Likewise, you don't need a lawn tractor to mow 2.5 acres of lawn, 'cause you don't need 2.5 acres of lawn.  Turn some of it into garden/native plant area.

Meadow

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Re: How to pay off 211K in student loans fast
« Reply #14 on: September 24, 2012, 03:31:35 PM »
You are not in a position to own a home if you cannot deal with maintenance, insurance and repairs.  I think your house payment is too high as well.  I would rent a cheaper place, move closer to work to reduce the commute (move within biking distance of at least one job) and share one car, cut insurance to just liability, reduce your food budget (it's just 2 people right?).  Plenty of other areas to cut.  You need to make a real  budget that accounts for repairs, gas, used clothing and everything in between.  Try to read a lot of the articles on this blog, particularly "The True Cost of Commuting"

Forcus

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Re: How to pay off 211K in student loans fast
« Reply #15 on: September 24, 2012, 04:10:04 PM »
This is just my opinion so please don't take offense. I don't think sufficient fear is being driven by the student loan debt. That is an INSANE amount of money. It sounds like you are discovering what I (and perhaps others) discovered in the recession - just because people have an estate (2.5 acres qualifies as one), drive newer cars, take vacations, doesn't mean everything is alright. Smile because you discovered it early and have time to recover. Then slash everything you need to to get rid of that debt. I think the house should be put up for sale (if possible to downgrade enough to make a difference ~e.g. 100k or more). The car racing needs to be shelved or the husband needs to figure out a cheaper way to go racing - someone suggested Chumpcar, even cheaper (and low risk) is autocrossing. Based on my experience racing, that is quite a bit of money going out the door.

Another thing that should drive fear - making $150k a year and having to use CC's for fuel and food. That is absolutely crazy. I'm not trying to offend you in any way (and God knows I do some things that some people here would punch me in the face for) but I think it hasn't really sunk in to the degree it needs to.

Lars

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Re: How to pay off 211K in student loans fast
« Reply #16 on: September 24, 2012, 04:36:18 PM »
I think there are three important questions to ask yourself and your spouse:

How fast do I want to pay off the debt? Anything between 4 and 20 years is achievable. If you maintain current payments plus the thousand once credit cards are paid, it would be paid off in 8 or so years.

How much are the two of you willing to change your lives?

What is your first short term goal? ie Pay all debt above 10%, Spend less than $4000 next month not counting student loans, etc   


Sylly

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Re: How to pay off 211K in student loans fast
« Reply #17 on: September 24, 2012, 04:41:26 PM »
So after that it leaves me 1500 a mon of money to play with, i am curently actively paying down the credit card balance, 1000 a mon.
That looks like a step in the right direction. Are you saying you have been doing this (i.e. paying 1k/mo into CC)?

But i will admit i fail to keep the budget tight, or at least i dont know how to stick with it, cause we always run out of money and endup using the CC for food and gas. Is it better to keep cash or use the debit card (joint account)?
I'm just looking for clarification here. When you say 'run out of money' do you mean use up the remaining ~500 (the 1500 above, minus 1000 going into CC payment), or you somehow use up the a large enough chunk of that 1500 to not put 1000 into the CC debt? And by 'using the CC for food and gas', do you actually mean you're putting additional balance (that's not getting paid off immediately) into the CC?

As for your question, IMO you need to track your spending better, and debit card will probably make this easier. You can also use your CC this way, but you need to have the discipline to pay the balance in full at the end of the statement period (this is what I do). I personally don't use cash often (too much hassle, and not easily trackable), but if you still have a tendency to 'borrow' money using your CC, putting them away and forcing yourself to only spend available money, be it cash or debit, may not be a bad idea.

prima

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Re: How to pay off 211K in student loans fast
« Reply #18 on: September 24, 2012, 07:18:18 PM »
Thanks everyone for advice. You are right, I need the boot in the *** to better manage the finances. I guess I just got too excited to have some money (i grew up very poor, never had anything as a child), but I really donít have anything until I get rid of the debt first. So I spoke to my husband, we are get rid of the smart phones, carpool to work (heís transferring closer to my job), he found a little side job to pay for his racing and I will tighten the budget. I will pay off the CCs and cut them up; there is no need to borrow more money. I want to be FI, and even though Iím a baby at this - I can do it with all your help. I will keep you posted on my progress.

kkbmustang

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Re: How to pay off 211K in student loans fast
« Reply #19 on: September 24, 2012, 07:49:47 PM »
That's a huge step. Congrats! The Hubs and I are just starting our MMM journey, too. You are in good company.

herisff

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Re: How to pay off 211K in student loans fast
« Reply #20 on: September 24, 2012, 08:25:20 PM »
Congratulations on taking action! However, you really need to see where your money is going. You can't properly allocate your money until you know what you're spending and where it's going.

Many people here like to use Mint.com to track their spending. I personally prefer You Need A Budget. Whatever you do, start tracking for at least a month. It can be really eye opening.

Forcus

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Re: How to pay off 211K in student loans fast
« Reply #21 on: September 25, 2012, 07:38:36 AM »
Congratulations on taking action! However, you really need to see where your money is going. You can't properly allocate your money until you know what you're spending and where it's going.

I second this. A lot of little leaks equal one big leak. I know because we still have a lot of leakers!

alandjackson

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Re: How to pay off 211K in student loans fast
« Reply #22 on: September 25, 2012, 10:39:24 AM »
If you haven't, you need to also read the archives of this blog (it contains most of the answers you are looking for).  Living frugally doesn't mean giving up the good life, you just need to find different fulfilling and fun things to do.

Obvious places to start include moving closer to your work, getting a cheaper car, and getting food costs under control.  There is plenty of time for living on a large plot of land away from the city and having nicer cars after that debt is paid off.  You might just find that after living cheaply for 5 years while you pay the debt off will drain your desire for consumption at the same time!

Jamesqf

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Re: How to pay off 211K in student loans fast
« Reply #23 on: September 25, 2012, 12:21:07 PM »
There is plenty of time for living on a large plot of land away from the city and having nicer cars after that debt is paid off.

There can also be some resetting of what "nice" means.  For instance, a used Mazda Miata is not particularly expensive, but it's a lot more fun to drive - especially for someone interested in racing - than a lot of newer, more conventional and expensive cars.

simonsez

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Re: How to pay off 211K in student loans fast
« Reply #24 on: September 25, 2012, 03:42:57 PM »
No need to panic over the credit cards.  The balances are low.  Just be sure to wipe the balances every month and you are fine.  If you are not already doing this, then throw money at them since they have the highest interest rates. And if by "cut them up" you mean canceling the accounts, that is not your best option either.  Just have them be manageable where you zap the balance every month.  This way your debt utilization ratio is reasonably low, your average age of your active credit lines keeps increasing each month, and most importantly you don't have any late payments (35% of your FICO score).  I'd say a decent credit score is important to you since it seems like you are open to the idea of different housing and vehicles so it could help to have a high credit score to get the better borrowing deals (assuming you're not able to currently purchase a house/car outright right now).  Plus, CC rewards can be a nice bonus to receive, especially when you are already zapping them every month and not paying any interest.  I use my CC and get rewards on things I would buy anyway.  I just make sure my debt utilization ratio stays under 10%.

As for your loans, once your 2 credit cards with interest rates are being paid off each month (no interest being paid since none is accruing because balance is wiped every month), and all your other bills are being paid including your minimum student loan payments, throw an extra several hundred at Loan #10.  I mean in addition to the minimum monthly payment.  You should be able to specify with your lender to make custom one-time payments on specific loans of your choosing provided you are already paying the minimum amount which is a small amount on every loan.  Then just keep making the minimum payments and throwing several hundred or whatever you can extra at the highest remaining interest rate loan.  There are a few other little student loan tricks you can do like using auto-debit options for a .25% interest rate reduction and moving your loan payment to the beginning of the pay period (one-time principal payment boost that incrementally helps every month after that).  Also, as your equity increases via whatever you decide to do with your housing situation, talk to your bank.  If your student loans are federal, Uncle Sam is earning the interest.  But maybe one day your equity and situation will be tempting enough to a bank that they might decide they would like a slice of the action and would want to loan you the money to pay off the federal loans so the bank(s) could earn the juice.  My college roommate graduated from grad school with 60k in debt with the weighted interest % around 7%.  After talking to his credit union, he was able to borrow 50k @ 1.9% plus he had 10k cash on hand and saw his minimum monthly (standard 10 year plan with 120 equal payments) go from ~$700 down to under $500 (after the 10k cash was paid off).  That isn't the norm but it never hurts to talk.  Someone will usually want to be on the receiving end of the interest portion of your student loan debt at some point down the road.

twinge

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Re: How to pay off 211K in student loans fast
« Reply #25 on: September 25, 2012, 04:16:50 PM »
Would you feel comfortable with the idea of using some of your church donations to knock off some of your high interest loans and then after those are knocked out use those savings to "pay back" your planned tithe?  Maybe work out a plan with someone at your church?  The expected percentage of income may be different given that you undertook a huge debt load to get that income.    I think you could be on such a more solid financial footing --and in a better position to be consistently generous--if you knocked out a few of those high interest student loans asap. 

Slackerjo

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Re: How to pay off 211K in student loans fast
« Reply #26 on: September 26, 2012, 05:04:24 AM »
Did you buy a house before or after school? How much did the house add to your total debt load? Personally, if you are drowning in debt, there is no room for hobbies.
Also check out nomoreharvarddebt.com for tips on how to kill a huge debt. It's pretty hard core but then again, he is no longer a slave to his debt and can enjoy the benefits of his expensive Harvard education.

offroad

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Re: How to pay off 211K in student loans fast
« Reply #27 on: September 26, 2012, 07:59:22 AM »
what happens if you move to another country.  Say Ireland, or New Zealand.  And after getting citizenship, you happen to go bankrupt?

Yes you can not discharge under USA law your personal debt.  But at these slavery indeptedness, would it be tempting to move to another country?  Not sure if you can be expedited for failure to pay indebtedness.  Rendition for a school loan?


prima

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Re: How to pay off 211K in student loans fast
« Reply #28 on: September 26, 2012, 11:30:44 AM »
LOL Jamesqf, itís a very interesting idea. Unfortunately, I did come from a dif country and believe me, I will NEVER go back.

grantmeaname

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Re: How to pay off 211K in student loans fast
« Reply #29 on: September 27, 2012, 10:36:03 AM »
It's not exactly moral to dodge paying something you're perfectly capable of paying because you don't want to anyway, in my opinion. Not that the OP was considering it, but I have to throw that out there: 'can' is not the same as 'should'.