This has to be an extreme student loan horror example: assistance needed

[eddieryan]

I am 35 year old Boglehead and lightweight Mustachian. I recently learned just how awful my wife's student loan situation is and it's keeping me up at night. She took out $156,000 in federal loans (there are other loans she took out and paid off, but these two loans are the basis of our problem) and the payments were due in late 2007 after she obtained her PharmD. She did a residency for a year and got a good job immediately. Without going into the details, she went into forbearance several times over several years and interest was capitalized to the tune of $67,000 which was added onto the principal. The principal ballooned to about $220,000. We got married in 2013 and I was aware she was dealing with a student loan crisis, but I didn't force myself into this situation until last week. So here I have been living a Mustachian lifestyle for the last 4 or so years, maxing my 401k and Roth, contributing to our two kids 529 plans, driving my old paid off pick up truck, etc., and realizing now that $19,500 in interest alone was paid in 2017 to the servicer, Navient, which based on my internet research is the spawn of satan in the lending world. I should have faced this sooner, but part of me just wanted to ignore it. Now I can't. Here is the current path we are on with this loan:

Principal: $212,500   Interest: 6.375%
Current monthly payment minimum: $1,250. Current payments she is making: bi-weekly $750
Time remaining: 25 years
Payments made to date: $100,000
Wait, what? Original principal of $156k, $100k in payments made and current principal is $212,500? Yup.
Total payments on this path until paid off: approx $540,000.

She has never gone into default, which in hindsight probably would have been the best thing in order to reach a settlement back when her financial situation was worse than today. We gross over $200,000 together and we don't qualify for any federal student loan forgiveness (RECAPE may be the only exception, but I don't think that would be a viable option anyhow given how much we would need to pay due to our income and likely we wouldn't qualify).

I have reached out to some attorneys, notably Josh Cohen based in Vermont who seems to be the foremost legal expert in the student loan field, but I haven't heard back from anyone in over a week and I'm not sure any attorney could really do anything for us considering we are in good standing on a loan. We need Navient to lower the interest or work out a deal with us, somehow. These terms are completely egregious and it feels like a human rights violation. There are several recent class action suits against Navient for mishandling student loans and encouraging forbearances rather than offering alternate options, however we wouldn't have qualified for any of those plans anyhow given the date the loans were taken out and our current income. We don't get to write off student loan interest due to our income. Our credit scores are solid and I can't find a refinance rate below 5%. I'm at a loss on what we can do here. I get that she accepted brutal terms, was young and naive by agreeing to the terms, but our best argument is that my wife had several medical emergencies and had to pay medical bills, but is it not excessively punitive to capitalize interest so severely on an original principal of $155k? I'm curious if this is actually legal. We are on a path to pay $540,000 over 25 years. I simply refuse.

Is anyone aware if Navient has ever reduced interest rates or capitalized interest? I assume they will simply take the position that my wife signed forbearance paperwork and agreed to terms, even though their reps never fully explained the impact of capitalized interest in her situation. She truly did not realize what was happening and now we are older, wiser, and dealing with crushing consequences. I'm currently getting all of my ducks in a row; I just received the promissory note and reviewed the account history and requested forbearance paperwork and I'm educating myself on student loans. I have not divulged anything to Navient about our financial situation yet. I was not aware that nearly 1.5 trillion dollars in student loans were deposited into trusts and traded on the NYSE. Default rates are out of control and this is starting to remind me a lot of the subprime mortgage crisis. In all of my reading on the internet, I have not come across a student loan situation like this one and I'm looking for some creativity and any advice from people who have been able to negotiate with lenders. Please, help!

[dmac680chi]

Also do you have a budget? If so how much is the budget and can you cut back on some things? If you make $200k between the two of you can you dedicate at least half to paying off these loans?


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[wawot1]

Can you refinance with SoFi or Laurel Road or something like that and get a better rate? 

This might be helpful:

https://www.whitecoatinvestor.com/refinancing-student-loans-best-tips/

[MrThatsDifferent]

This is horrible and wish I could offer something to help. All I can think of is: either you borrow the money against the equity of your house to pay the loan in one fell swoop, or you dedicate the next 3 years to living off of one income to pay it all off. Horrible choices, but minimum payments for 25 years isn’t possible.

[shuffler]

You're "sitting on $400k".  Why not just pay it off, and avoid all the interest?

[MrThatsDifferent]

You're "sitting on $400k".  Why not just pay it off, and avoid all the interest?

What? Weird. On Christmas 2017, 3 months ago, you were 33 with no kids and $400k. Now, and with 2 kids!?! Can I borrow your time machine?

[Ben Kurtz]

Quit bitching and moaning.

Your only legal choices are:

1. Come up with a family payment plan between you and your wife; or
2. Divorce your wife.

One can't even get out of student loans in bankruptcy.

This has been a slow-moving tidal wave of financial horror in your wife's life for literally 15-20 years, given the timeline you report -- she entered repayments over 10 years ago, so she must have been a student for 6+ years before that. $150,000 was a lot of money back in 1999, and 6 3/8% interest was not (and is not) an unreasonable rate for student loans; behold the power of compound interest. I'm sure Navient are scoundrels of the first order, but they didn't do this. Math did this. And your wife's unwillingness to confront math for 15 years did this. And your unwillingness to confront math for the past 5 years did this.

Your wife didn't take out a calculator before signing the papers, and you didn't do your financial due diligence before signing up for the biggest financial commitment of your life (signing the marriage license) -- and you want this to be somebody else's fault? You're a grown man. Go look at yourself hard in the mirror and then punch your own face.

That being done, sit down and face facts. Your wife should refinance down to 5% / 25 year terms immediately. The difference between that and 6 3/8% over the life of the loan is an extra $50,000 of interest payments over the life of the loan under a normal amortization schedule, or nearly a quarter of all the interest to be paid. The fact that you dismiss the 5% interest rate as an immaterial improvement only proves that, despite having awoken to this mess, you still haven't pulled out a calculator and actually analysed your situation. You would have been better off doing this a year or two ago, when rates were at rock-bottom lows, but 5% is still quite a help, and the past is in the past. Moreover, the immediate interest savings up front can allow you to continue paying $750 bi-weekly, but have more of each payment go towards principal, which will accelerate paydown considerably and save even more aggregate interest. A 5% loan on 20 year terms should have nearly the same monthly payment amount as 6 3/8% on 25 year terms, but save you around $90,000 in aggregate interest payments.

Beyond that, the divorce suggestion was not entirely a joke. I don't mean a "scream and shout and break all the wedding china" divorce, but if you read the fine print and determine that it would be better for her to be single, to qualify for an interest deduction, to qualify for some income-based forgiveness program, or some other such thing, then I wouldn't put it beyond the realm of the possible to get divorced "on paper" so she can take advantage of those programs. But that should be part of a well-thought-out plan. Actually divorcing your spouse is rarely a good financial move.

Bottom line: A 1-to-1 income to student loan burden among high-income medical professionals is entirely normal these days. Even good, according to some people. Go surf over to White Coat Investor (https://www.whitecoatinvestor.com/classic-blog/) to read about doctors with far worse ratios, and to get a lot of advice and nitty-gritty detail on refinancing and paying down student loans. Complaining about Wall Street isn't going to solve your problems. Facing facts and taking the required action will.

[thd7t]

You need to do a real case study.  This will give people a way to answer you that helps, rather than just letting you pick and choose.

https://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/

[jax8]

This is horrible and wish I could offer something to help. All I can think of is: either you borrow the money against the equity of your house to pay the loan in one fell swoop, or you dedicate the next 3 years to living off of one income to pay it all off. Horrible choices, but minimum payments for 25 years isn’t possible.

I was going to suggest this.  A coworker's mom refinanced her house to pay off his significant student loans, because the refi rate had much better interest than his student loans.  He makes payments to his mom. (That's some serious parental trust there, but, it works for them.)

Question--did your wife have parents or anyone else co-sign on these things?  Or is she the sole signer?  Just asking because if she is the lone debtor, then when she dies the loans will die, too.  If her parents signed, then she is doubly responsible for making sure she isn't saddling her elderly parents with an insane, unpayable debt if she drops dead tomorrow.

Cash out whatever equity you two have in the house and empty savings accounts to pay off the student loan.  Keep the money in the 401Ks and other protected accounts, but bottom out everything else.  The problem is that these loans WILL NEVER GO AWAY.  She can't claim bankruptcy and get rid of them, but worst case scenario, you guys can pay them off with your house money and then sacrifice the house in bankruptcy. 

[shawndoggy]

This is a rough thing to say, but if you are considering paying off the loans off from existing assets, it might also be a good idea to speak with a family law (divorce) attorney first about entering into a post-nuptial agreement that addresses the distribution of marital assets if you ever did get divorced.  If you are moving money from "your" column to pay off a debt in "her" column, that may not matter if you subsequently divorced... meaning you'd just split the marital estate. 

Thinking about the dissolution of your marriage (especially if things are going well now) is yucky business.

[NoStacheOhio]

You're "sitting on $400k".  Why not just pay it off, and avoid all the interest?

What? Weird. On Christmas 2017, 3 months ago, you were 33 with no kids and $400k. Now, and with 2 kids!?! Can I borrow your time machine?

Well this just got a lot more interesting ...

Yeah, Navient sucks.

No, there's nothing you can do beyond shoveling money into the hole.

[NaN]

You're "sitting on $400k".  Why not just pay it off, and avoid all the interest?

What? Weird. On Christmas 2017, 3 months ago, you were 33 with no kids and $400k. Now, and with 2 kids!?! Can I borrow your time machine?

Yeah, maybe he is contributing to a 529 before his 'two kids' are born? Entirely possible. The 33 in December in his previous post, and 35 now is a little strange. Maybe we can give him the benefit of the doubt that it was a typo, or maybe has age image issues and just lied or lied to mask his true identity to people who could connect the dots.

Regardless, I don't know what his 'sitting on 400k' from previous posts were about. Weird. We deserve OP to give us an explanation.

[Freedomin5]

What I got from the post was:  My wife made an uninformed and unwise financial decision and now we don’t want to bear the consequences of our actions (my wife for taking on a large student loan, and me for marrying someone whom I knew was in a financial crisis without first getting clarity into said financial crisis).

Yes, it’s a terrible hair on fire situation. But also, yes there is hope that it will go away, but both of you need to realize there are consequences to each of your choices. If you gross over $200K per year, you could knock out the loan in 2-3 years. How do I know? We are in the same boat, throwing $10k per month at a $200k loan, hoping planning for its disappearance in 1.5 years. We have a similar gross salary as you.

We used a HELOC because it had a lower interest rate.

Maybe shifting your perspective on it will help. Instead of viewing it as “not my fault” and “No way I’m paying that”, maybe turn it into your top priority. That’s what we did. The $10k comes out first from every paycheck, and we live off the remainder. If we are short for the month, we side hustle to earn extra money or we cut back on spending.

One final thought...is it possible to use credit cards to pay off part of the loan? Some credit cards have 0% interest for the first year or similar promotions. At least that will save you some interest, as long as you make sure to pay off the credit card before the super-high interest kicks in.

Also, perhaps your horse racing / gambling on horse bets fun money should be put towards paying off the 6+% loan.

[therethere]

I don't think ignoring the loans for the last 5 years, using the extra money on savings, and having kids gives you grounds to beg Navient for a reduced rate or hire a lawyer. You chose to skip to the next stage of life without paying off the last stage. Yes you paid a lot of interest but a "human rights violation"? Really? It's a student loan that your wife never paid back, even though she's been earning the higher salary that comes along with the degree for 10 years. And I hate student loans, they are predatory and private student loans are basically indentured servitude. But I signed on to it and had to deal with the consequences. You are the one with the power to get rid of the loan. There's no magic answer (unless you're willing to pay the minimums for 25 years on REPAYE). Blaming the student loan companies isn't going to get you anywhere now. If you're paying down your loan Navient isn't hard to work with.

DH and I had 200k+ loans from school with over 100k at 8.6%. It took 10 years of all our free cash and living on a 1k emergency fund forever (on maybe 110k avg income) . I kept detailed records and at one point calculated we would have been retired at 30 if we had no loans. We paid over 150k in interest.  At this time you can't think of the past and all the shoulda's you just have to start attacking it together and NOW. You have plenty of income. And you have the bonus of maxing your 401k for the past few years. The 401k can grow while you refocus your energy on the debt.

Earnest gives good rates to people with high 401k balances. Sofi appears to rely more on income. I'd check there to refinance and lower the rate. Then pay down that sucker. Every 6 months or so I'd recheck for lower rates. In fact, I just refinanced my Earnest loan (with Earnest again) to get ~1% rate drop.

[GetSmart]

If you gross over $200K per year, you could knock out the loan in 2-3 years. How do I know? We are in the same boat, throwing $10k per month at a $200k loan, hoping planning for its disappearance in 1.5 years. We have a similar gross salary as you.

We used a HELOC because it had a lower interest rate.

Maybe shifting your perspective on it will help. Instead of viewing it as “not my fault” and “No way I’m paying that”, maybe turn it into your top priority. That’s what we did. The $10k comes out first from every paycheck, and we live off the remainder. If we are short for the month, we side hustle to earn extra money or we cut back on spending.

One final thought...is it possible to use credit cards to pay off part of the loan? Some credit cards have 0% interest for the first year or similar promotions. At least that will save you some interest, as long as you make sure to pay off the credit card before the super-high interest kicks in.

Definitely ^^ this. 

How is it you're making 200k / year and only paying $19.5 k / yr on this loan ?  Where's the rest of your money going ?  Living on one salary and putting the other net salary (less 401k max ?) on the loan will get rid of it in a couple of years. This may seem impossible but surely you can find ways to make it happen.

I was also going to suggest the CC route - but you have to be vigilant about paying them or rolling them over to another 0% when the promotional offer is up.  Also beware that you may be paying 3-5% up front for the advance.

Also is there any language in the loan that prevents you from making payments more often than bi-weekly?  If you get paid weekly - have an automatic payment scheduled the day after your check is deposited every single week.  Then throw every bonus, tax return, birthday money, cash back from CC's, sell some stuff -- and put it all towards this loan on the day you receive it.  The faster you pay it down the less interest you will pay I'm guessing.

Just get it over with -- lesson learned.

And what is the story with the 400k in a taxable account ?  Take 100 of that and take one year's salary to ditch the loan -- you could be done by the end of 2018. 

[MrUpwardlyMobile]

This isn’t an example of Navient being bad.  This is a case where face punches are in order...

First,You haven’t looked at your finances with you wife in 5 years of marriage?  That not boglehead or mustachian... that’s just crazy pants behavior...

Second, why don’t you have a budget?

You make 200k annually (possibly have 400k sitting around)...  you could easily pay this whole thing off in 36-48 months....

Refinancing is not a one and done thing. Your credit scores may be decent, but your debt load is ridiculous and your payment history is apparently full of unnecessary forebearances.... you have a higher balance than your original loan balance and have not even been keeping up with interest payments...

Here is how high income, high credit people refinance huge student loans.  You refinance first on a 10 year plan (25 years is so bad a plan that it hurts my brain).  Take a 5% rate.  Pay $3600/ month for the next 12 months. Refinance again and get a lower rate again. Increase payments to $4000/month and refinance again after 9 months. Rinse and repeat every 9 months until you have 3% interest or less. Keep cutting your budget and increasing payments.


Please don’t post dramatic claims of human rights violations... it cheapens actual human rights violations.  This isn’t even that hard of a plan to manage, but it’s time to stop deposits into a 529. You can’t plan for kids’ futures when you haven’t paid for your wife’s education yet.

I refinanced $150k in loans in January 2016.  I am currently at a little under 69k.  I expect to pay off in January 2019. 

[MrUpwardlyMobile]

This is horrible and wish I could offer something to help. All I can think of is: either you borrow the money against the equity of your house to pay the loan in one fell swoop, or you dedicate the next 3 years to living off of one income to pay it all off. Horrible choices, but minimum payments for 25 years isn’t possible.

This is my life and I don’t really consider it “horrible,” tedious yes, frustrating at times, but far from “horrible,” it’s just the cost of business.

Huge debts are pretty typical for professional degrees, and living on one income until it’s paid off is actually a great option if it’s available. Many people who have huge professional debts are also the primary bread winner for their family and don’t necessarily have that option.

I consider it a luxury that I’m able to put nearly all of my income towards debt while my DH pays our bills. I would say that’s pretty sweet, not horrible.

Malkynn is a perfect example of why this is totally manageable.

[Nick_Miller]

Here is the current path we are on with this loan:

Principal: $212,500   Interest: 6.375%
Current monthly payment minimum: $1,250. Current payments she is making: bi-weekly $750
Time remaining: 25 years
Payments made to date: $100,000
Wait, what? Original principal of $156k, $100k in payments made and current principal is $212,500? Yup.
Total payments on this path until paid off: approx $540,000.

So based on $212,500 * .06375 = the loan is accruing interest of $13,546.88 per year, and she is paying a grand total of $19,500.00 per year toward the loan, so a reduction of  $5,953.12 for the first entire year.

You're right; that's not something you can continue.

And I will beat you up with a wet noodle, but not much more than that, because I pretty much accepted my student loans "as the family pet" (as Dave Ramsey would say), paying just the minimum for years and years and years. Then about 1 3/4 years ago, I got serious when I joined this forum and I've doubled the minimum payments, and now I'm looking at a payoff in 4 years (maybe 3!) instead of 20.

I would echo the others who suggested you provide a detailed case study. We need to know what options you have before we can really give meaningful advice.

[MrThatsDifferent]

You're "sitting on $400k".  Why not just pay it off, and avoid all the interest?

What? Weird. On Christmas 2017, 3 months ago, you were 33 with no kids and $400k. Now, and with 2 kids!?! Can I borrow your time machine?

Yeah, maybe he is contributing to a 529 before his 'two kids' are born? Entirely possible. The 33 in December in his previous post, and 35 now is a little strange. Maybe we can give him the benefit of the doubt that it was a typo, or maybe has age image issues and just lied or lied to mask his true identity to people who could connect the dots.

Regardless, I don't know what his 'sitting on 400k' from previous posts were about. Weird. We deserve OP to give us an explanation.

You can read his actual post, it says he doesn’t have kids and doesn’t plan to, now he has two, 3 months later. Unless he deletes it.

[MrThatsDifferent]

Sitting on $400k. Age 33. 350k mortgage, house worth 500k. 120k yearly income. No holdings. No kids. Not planning on having kids. No debt besides mortgage. Plan on working until mid 50s. Obviously you max all tax deferred accounts going forward and max Roth. Do you pay down half the mortgage, drop 100k in a taxable vtsax, 25k in bonds, then dca 100k into taxable vanguard index over a few years? Do you pay off mortgage then dca the rest in a taxable acct? There are many options and no wrong answers, but curious on the board's opinions considering high valuations today. Its a great position to be in but tough to pull trigger. Been sitting on 400k too long. Risk tolerance is high.

[GuitarStv]

If you divorce your wife, she declares bankruptcy, then you remarry would that square it all away?

[NoStacheOhio]

If you divorce your wife, she declares bankruptcy, then you remarry would that square it all away?

Federal student loans survive bankruptcy. Sometimes they'll discharge for death or permanent disability.

[therethere]

I'm debating whether this is a troll post or not. Just in case it isn't....

#1 is DO NOT COSIGN ANY REFINANCING.
#2 determine whether her parents are cosigned on the loans. If they are, you should definitely refinance ASAP to get them off the loan.

You've got two options: Payments are based on a generous 5k budget (w/out loans) and 200k salary.

A) Drop your retirement and extra savings to bare minimum to get the 401k match (est was 4%). Blast the loan until its gone. ~36 payments of 6500/month.
B) Keep 401k's and IRA's maxed out. Stop 529's. Throw everything extra to the student loan. ~65 payments of 3860/month AND no losing retirement savings.

[Easye418]

Not to derail,  but I must  be the only one who had a positive experience with Navient.  I always had a pleasant time whenever I had to call them to switch things up.  I finished my loans with them though.  Also, I have had good experience with Great Lakes. 

It was amazing for churning credit card bonuses until they took away credit card payments :(

[therethere]

Not to derail,  but I must  be the only one who had a positive experience with Navient.  I always had a pleasant time whenever I had to call them to switch things up.  I finished my loans with them though.  Also, I have had good experience with Great Lakes. 

It was amazing for churning credit card bonuses until they took away credit card payments :(

Navient was really easy to work with on my end too. I even made daily payments at one point. I wish I knew about the credit card payments when it existed. Never once was my payment mis-applied. I think the majority of people that claim Navient is awful are on the non-standard repayment plans, on some deferments, or don't apply their payments to the correct sub-loan. People actually paying their loans don't have nearly as many problems and aren't complaining. Mail in a check with the full account number (of the target loan, not the grouped loan) and you're good to go. People like to blame the loan company for not informing them of financial basics like compounding interest or details of student loan policies (that they didn't create). Really, a lot of it has to do with not being an informed consumer. Which I get, I had no idea what I signed up for either but I figured it out.

[NoStacheOhio]

Not to derail,  but I must  be the only one who had a positive experience with Navient.  I always had a pleasant time whenever I had to call them to switch things up.  I finished my loans with them though.  Also, I have had good experience with Great Lakes. 

It was amazing for churning credit card bonuses until they took away credit card payments :(

Navient was really easy to work with on my end too. I even made daily payments at one point. I wish I knew about the credit card payments when it existed. Never once was my payment mis-applied. I think the majority of people that claim Navient is awful are on the non-standard repayment plans, on some deferments, or don't apply their payments to the correct sub-loan. People actually paying their loans don't have nearly as many problems and aren't complaining. Mail in a check with the full account number (of the target loan, not the grouped loan) and you're good to go. People like to blame the loan company for not informing them of financial basics like compounding interest or details of student loan policies (that they didn't create). Really, a lot of it has to do with not being an informed consumer. Which I get, I had no idea what I signed up for either but I figured it out.

We had a hell of a time getting them to correctly calculate my wife's IDR. They just stonewalled us and threw us on administrative forbearance.

[skuzuker28]

Not to derail,  but I must  be the only one who had a positive experience with Navient.  I always had a pleasant time whenever I had to call them to switch things up.  I finished my loans with them though.  Also, I have had good experience with Great Lakes. 

It was amazing for churning credit card bonuses until they took away credit card payments :(

Navient was really easy to work with on my end too. I even made daily payments at one point. I wish I knew about the credit card payments when it existed. Never once was my payment mis-applied. I think the majority of people that claim Navient is awful are on the non-standard repayment plans, on some deferments, or don't apply their payments to the correct sub-loan. People actually paying their loans don't have nearly as many problems and aren't complaining. Mail in a check with the full account number (of the target loan, not the grouped loan) and you're good to go. People like to blame the loan company for not informing them of financial basics like compounding interest or details of student loan policies (that they didn't create). Really, a lot of it has to do with not being an informed consumer. Which I get, I had no idea what I signed up for either but I figured it out.

Same for me.  I did everything online, so it was really easy to make sure that everything was being applied the way I wanted it to be.  Even the final payment was super easy to calculate.

[ShoulderThingThatGoesUp]

Sitting on $400k. Age 33. 350k mortgage, house worth 500k. 120k yearly income. No holdings. No kids. Not planning on having kids. No debt besides mortgage. Plan on working until mid 50s. Obviously you max all tax deferred accounts going forward and max Roth. Do you pay down half the mortgage, drop 100k in a taxable vtsax, 25k in bonds, then dca 100k into taxable vanguard index over a few years? Do you pay off mortgage then dca the rest in a taxable acct? There are many options and no wrong answers, but curious on the board's opinions considering high valuations today. Its a great position to be in but tough to pull trigger. Been sitting on 400k too long. Risk tolerance is high.

Well, that’s weird. Just tossing different situations at the board and seeing what happens?

[MrUpwardlyMobile]

I think we all concluded this was a troll post...we probably should have realized earlier.

[eddieryan]

Thank you all for the feedback. I'm actually feeling much better after going through the responses.

First and foremost, this is a real situation and I'm not a troll. My previous post titled "How would you allocate money in THIS scenario" is not MY scenario. I wish it was. That post was the result of a discussion with one of my bosses who came across a $400k inheritance from a family member, has no debt, no kids, a great income, etc. and had been sitting on the inheritance for years--literally doing nothing with it--because she doesn't know finance. I pitched her on Bogle philosophy and was curious on the board's response on what to do with it after I spoke with her. That post is several short fragment sentences of HER bio, not mine, and the post overall was just several short fragments headed by the title "How would you allocate money in THIS scenario".  My apologies to all for not prefacing that post with a proper background and anything misleading or technically inaccurate of my own situation that developed from that post. If you read my entire post history (there isn't much) you will see I work in insurance and got into indexing around 2014. I don't post often and mostly read the investment board and I highly value the advice on this board and respect all feedback.

To address a primary topic, this loan was never cosigned. It was recommended I shouldn't cosign and I'm not following that logic. This subject has been difficult to even broach as my wife becomes defensive and comments she'll just pay the loan for the rest of her life whenever I brought it up, so I backed off to avoid conflict. I finally requested her account information and had no idea on the history of the loan, the basis of the principal, etc. We are at a point where we're working together on it and she knows I'm trying to help.

I do not have a current budget for this year, but in past years I have made them. I am currently working on one now: here is a snapshot of our financial situation:

Wife salary- $130k
Mine- $75k
daycare for two children: annual expenses $30,000. I contribute max $5k to daycare spending account, pre-tax. Wife can only contribute about $2k to daycare pre-tax due to high income restriction (she can also only contribute 6% to 401k due to high income restrictions and they match 6%).
Wife's vehicle (plead for her to buy used vehicle, lost that battle): around $4500 annual in payments.
Current student loan payment: $18k--this fluctuates a little and will go up slightly or down slightly. Min payment is $1250/month.
my HSA: $2k
No more Roth contributions, no more 529 (had been doing about 3k/annual).
mortgage: $1553 (3.625 rate)
auto insurance: $105
20 yr term life policies of $250k for each of us (plus practically free premium for work life plans covering 4 x yearly salary on each): $450 a year
utilities: $4k
cable $2k (she claims she has to have it)
cell phones $1400
I have been maxing 401k --can no longer do this obviously. Will cut to 6% company match. Company pays up to 10-15% annual bonus and I may defer bonus to 401k given it avoids 22% fed tax and company also matches bonus deferment to 401k at 6%.
Medical Bills arising from multiple surgeries after copay (would rather not get into details) approx $10,000
wife's credit card: need to find out--ballpark $3k balance
food/gas: $6,000 (this needs work--rough estimate)
misc child expenses: $10,000 (5 month old is on ELECARE, $40 a can due to allergy).
AGI for last year was about $163k.

After reading responses, I have shifted into ass-kicking mode. We are going to attack this loan by refinancing, but first I'm trying to make sure the principal is really correct given the negative press on Navient. They are facing several class-action suits for misapplied interest, among other things. I want to make sure they calculated the capitalized interest properly and didn't make errors before we move away from them. There are two federal loans. I am planning to take ownership of a $65k loan and attack it myself to give her relief and let her know I'm in this to help. I also like the control I will have on this loan in my name. We use joint and separate checking accounts and I want to connect this loan to mine and punch it in the neck. She will refi $147,500 separately. Rates will be close to 5% but we're still trying to get best deal. She will do a 7 year refi and have payments comparable to what she is currently paying and I'm going to do something similar. I found out lenders will match a rate if you provide proof of the lower rate you are offered. This leads me to CommonBond, who has provided excellent service so far and hopefully they match the lowest rate we can find from competitors.

I have been playing with a loan amortization excel spreadsheet but I haven't found a good one specifically for student loan amortization. Based on my math, if we can pay everything in off in 7 years, we are saving around $175k. I still need to verify figures with the proper spreadsheet and as we go through this, I'm hoping we can continue to pay more aggressively.

Thank you again for the feedback. Your responses have truly helped shift my thinking on this. I will be returning to address more specific points and questions posted--do not have enough time on my hands at this moment.

[Apple_Tango]

Good luck! I would just go Dave Ramsey style on this. Temporarily stop maxing your 401k, HSA, and IRA and just throw it all at the student loan (although I would keep contributing up to any match). . So that would be an extra $25k or so on top of the 18k minimum payments you’re already making. Then on top of that I would buckle down, no restaurants, no vacations, take a second job, extra shifts, whatever. Once your kids are in school they probably won’t need 30k for daycare anymore. So between all that, I would try  to find at least an additional 50k (should be doable with an income of 200k) In total  you would be paying somewhere around 90-95k per year if you did all this. 2-3 years of that will knock the sucker out. No need to extend the torture for 25 years!

As for your question of is it legal for Navient to do this...yes. Interest is a scary thing when it’s working against you! Refinancing to the 5% will help a little, but the main thing will be just to haul ass.

[Freedomin5]

You also need to talk to her about her spending. Given her credit card debt, financed car, $2000 cable, $700 phone (I’m assuming 2 phones, one of which is hers), she sounds like she is outspending her low six-figure income. With a loan that big, she cannot afford a fancy new car or whatnot.

But tread carefully. Good luck.

[Llewellyn2006]

".....and it feels like a human rights violation". You've gotta be shitting me. Are you serious?

[NoStacheOhio]

daycare for two children: annual expenses $30,000. I contribute max $5k to daycare spending account, pre-tax. Wife can only contribute about $2k to daycare pre-tax due to high income restriction (she can also only contribute 6% to 401k due to high income restrictions and they match 6%).

I may be wrong, but I think the $5k dependent care FSA limit applies per household

[fuzzy math]

You also need to talk to her about her spending. Given her credit card debt, financed car, $2000 cable, $700 phone (I’m assuming 2 phones, one of which is hers), she sounds like she is outspending her low six-figure income. With a loan that big, she cannot afford a fancy new car or whatnot.

But tread carefully. Good luck.

I agree with this except I do not think you should tread lightly. You are in a position of power right now since your wife has come clean about her transgressions. You are the one going to fix the situation and you need to move on this stuff before she has time to stonewall you on all these things going on in your home. I'm sure your wife feels that she has earned these things after getting her PHarmD but the truth is she can't afford them.
Looking at your salary (75) vs your daycare costs, I'm not even sure you come out that much ahead honestly. Would working from home (you) or changing shifts (either of you or her to weekends) or going part time allow you to alleviate some of the burden you have? Are you in a HCOL? Do you have family to help or a neighbor or someone else who you could consider doing a care swap with? I think your situation is extreme enough that you need to take drastic measures.

The above quoted expenses are really not negotiable to keep. $150 a month for cable? You have a 5 month old and a toddler/preschooler!The older kid should be watching PBS which is available over the air. I would be surprised if your wife has time to actually watch tv. sling would give you the closest cheap approximation of cable, followed by Amazon (free if you have prime), Netflix and Hulu (carries NBC and ABC shows). Individual seasons of shows can be bought on Vudu or Amazon for $25ish. Find out what you really need to subscribe to to approximate what she was watching before. And no, 24 hrs a day of HGTV or the latest Housewives on inthe background isn't something that is allowed anymore.

I would also suggest previous commenters suggestions of pausing your retirement accounts, you don;t even have to do it for the whole year, just pause them for the first few months of the year to front load the student loan payments to save you additional interest.

[asiljoy]

daycare for two children: annual expenses $30,000. I contribute max $5k to daycare spending account, pre-tax. Wife can only contribute about $2k to daycare pre-tax due to high income restriction (she can also only contribute 6% to 401k due to high income restrictions and they match 6%).

I may be wrong, but I think the $5k dependent care FSA limit applies per household

That's what I was thinking.

[NoStacheOhio]

Would working from home (you) or changing shifts (either of you or her to weekends) or going part time allow you to alleviate some of the burden you have?

This is a really good point. Where is your wife working, clinical or retail? Pharmacy is one of the rare areas where people are super interchangeable (especially retail), but it's still high-paying. Could she moonlight or pick up substitute type work to cover for people on vacation?

[BeanCounter]

This is your opportunity to get on the same page with finances. I know that many people do it, but I'm not a big fan of separate finances for couples with children and a mortgage. I think it adds unnecessary complexity and it keeps you both from truly being on the same page with your budget. And it's even harder when you have income discrepancies between the two of you. Do you all truly discuss what you spend on yourselves each month? On clothing, hair, nails, entertainment etc? You need to get on the same page on the loans and to do that, you've got to attack the spending, including the small stuff.
When you've got those kinds of loans, plus a mortgage and daycare (that is another mortgage) you really need to live like a poor college student until the loans are paid off and the kids are in school. That means no cable, no expensive cell phone, driving old minivans, cheap vacations to the beach, not getting your nails done, cooking dinner at home at nights and bringing leftovers to work every day. I hate Dave Ramsey, but he's right on the money when he says "rice and beans, beans and rice".
But let me tell you from my own experience, because my DH and I did this, when you get to the other side and you realize that it's been ten years since you've had any real conversations about money other than "we need to move money out of savings to investments again, the cash has crept up again" or "hey, guess what, our investments hit $1M today, we're FI, want to get ice cream?" it will all be worth it. Your relationship will be a true partnership, and you'll never have to worry about money again.

[therethere]

I repeat. DO NOT COSIGN OR PUT A LOAN IN YOUR NAME. There is absolutely no reason to do this. Especially since your wife has the higher income. Anyone can pay down someone's student loan account without being on the loan. Just have her hand over her login. I pay my in-laws student loans with my account and their login. I've done the same for my husband's account. No issues.

If the loans are in your wife's name only, in the unfortunate event she dies or becomes disabled the loans will be discharged. If you refinance in your name only, or as a cosigner, and your wife becomes disabled or dies then you are on the hook for the loan. Do you really want to deal with death of a spouse AND paying off their loans at the same time? Especially since the only benefit to cosign is a slightly lower rate (if any at all). Oh, and maybe you go through troubles and divorce in a few years. She could stop paying the loan and you are on the hook by yourself again. I would find that likely (not the divorce, but the non-payment) based on her previous loan behavior.

[jax8]

Thank you all for the feedback. I'm actually feeling much better after going through the responses.


To address a primary topic, this loan was never cosigned. It was recommended I shouldn't cosign and I'm not following that logic. This subject has been difficult to even broach as my wife becomes defensive and comments she'll just pay the loan for the rest of her life whenever I brought it up, so I backed off to avoid conflict. I finally requested her account information and had no idea on the history of the loan, the basis of the principal, etc. We are at a point where we're working together on it and she knows I'm trying to help.

I am planning to take ownership of a $65k loan and attack it myself to give her relief and let her know I'm in this to help. I also like the control I will have on this loan in my name. We use joint and separate checking accounts and I want to connect this loan to mine and punch it in the neck. She will refi $147,500 separately.

I'm not following the logic of why you want to be legally enslaved to your wife's student loan debt.  If she dies, do you realize that YOU will then be responsible for paying for her education on your $75,000 income...minus her six-figure income...and two young kids to still raise and provide childcare for while you work?  If she divorces you, you'll be saddled with half her student loan payments on your $75,000 income.

It's beyond dumb to sign up for her education debt.  You can "take ownership" for the $65k loan by contributing payments from your personal account.  Co-signing to get a slightly better % interest rate isn't worth the gamble.

My husband owes $59,000 in student loans.  I owe nothing.  We tackle his loans together by sending a set amount of the family's combined income to the loans.  It's our household debt, not just his, but we know that if he were to pass away I wouldn't be burdened with the loan payments anymore.  No way in hell would I ever co-sign with him to get a better rate or prove my commitment to him--and no way would he ever ask me to.

[plog]

This subject has been difficult to even broach as my wife becomes defensive and comments she'll just pay the loan for the rest of her life whenever I brought it up, so I backed off to avoid conflict.

Great financial advice has already been given.  I also think you need marital advice--from a professional.  The above situation doesn't describe a healthy lasting relationship.  She's being a child and you are enabling her.  Not to get all Dr. Phil on you, but how has avoiding the problem for the last decade worked out for you?

This is a hair on fire crisis for you, but is it for her?  What happens when you kill that student loan you take on and the other one that she's responsible for is lingering around with only minimum payments being sent to it?  Will that cause this issue to finally come to a head?  Or will it be sooner when you're killing yourself for that loan and she decides her new car isn't so new any more and wants another?

Fry the big fish now. 

[SeaWA]

This subject has been difficult to even broach as my wife becomes defensive and comments she'll just pay the loan for the rest of her life whenever I brought it up, so I backed off to avoid conflict.

This is a hair on fire crisis for you, but is it for her?

+1

This is key. I do not believe that you can accomplish the task of ridding yourself of debt without a partner who is 100% committed. You two should be a team that works together on the challenges of life.

Without a 100% committed partner... I don't see a happy story unfolding.

You've been a great communicator with the internet. However, all of us out here in the ether are not your life partners. Your spouse is your life partner. Getting on the same page as your spouse is the only path forward.

[Ben Kurtz]

Wife's vehicle (plead for her to buy used vehicle, lost that battle): around $4500 annual in payments.
...
cable $2k (she claims she has to have it)
cell phones $1400

This is more to this than your wife sticking her head in the sand regarding her student loan situation. You two are very much not on the same page when it comes to overall philosophy of money. I suspect there is already an unhealthy dynamic on this point between you and your wife which is very concerning to me.

You might be a "lightweight Mustachian," as you put it in your original post. But your household most certainly is not. And it seems quite obvious that your wife is not on board, despite the obvious need and despite your making the point to her.

You have not posted any net worth figures, but given your family's reported spending habits, the presence of this large student loan (over a decade after you both started your working lives!), and the fact that you have a mortgage, I'm going to guess that you'd be lucky to be breaking into the positive six figure net worth. You may have a nice $250,000 retirement portfolio that you've been asset-allocating in excellent Bogleheads fashion, but it doesn't amount to much when you net it off against that student loan. If the two of you hope to have a comfortable "on time" retirement, let alone anything of an early one, there will need to be a real Come to Jesus moment in your household. Which your wife is resisting.

Frankly, as much as you want to help your wife be "in this together," swooping in and refinancing one of the loans into your name is not the right answer. It sends the wrong message. She has enough earnings and resources to tackle this debt entirely on her own, and relatively easily, but she's refused to face facts and hasn't made the necessary sacrifices. And there is no use hiding behind those unspecified medical bills and past issues -- maybe there are good reasons these loans aren't paid off yet, but her reported spending habits prove that she simply refuses to acknowledge or act on her situation so she certainly hasn't figured it out yet. Which makes me suspect that there were times in the past that she could have made progress but refused to. You shouldn't have to beg her to buy a used car and cut back on a ridiculous $150/mo cable TV habit -- and she certainly has no rational reason to say "no" once you do the math for her and show her the necessity of it.

The best way to frame this, in my view, is to be clear that it her problem: "Dear, you need to clean up your own situation. Which means refinancing those loans to cut the rate and paying off the $212,000 debt on an aggressive schedule, so the whole family can all live free of this burden quickly. I will provide for our family to the best of my ability, paying for food, shelter, utilities and transportation out of my own paycheck, to the standards I can afford. You need to devote your entire paycheck to paying your debts. Once we are free of the past we can pool our incomes to upgrade our standard of living and invest more for the future. But we can't live under this burden for decades to come, and you need to come to terms with what you owe."

You are the responsible, decent guy who perhaps earns a little less than she does, but is thoughtful about spending, prudent about debt and good with investments. You have the financial strength and capacity to support a family. You are the kind of guy who grows rich slowly and dies an unassuming millionaire. She, despite her larger income, shows every sign of refusing on an emotional level to understand money, and frankly isn't in a position to support a family or devise a good financial plan. Harsh as it is, your approach need to acknowledge this reality. Otherwise you are setting yourself up for some serious frustration and, frankly, possible marital troubles down the road.

[Snowman99]

I heard about this on the radio, and it is not just limited to Massachusetts residents:

https://www.mefa.org/products/education-refinancing-loans/

At least you can get the rate below 5%.  I would try to refinance to the lowest rate possible and pay it off as quickly as possible.  Look into other programs if available.

DO NOT entangle your own assets or your joint assets with this loan (e.g. don't borrow against your house to pay off the loan, don't cosign anything).  Keep the loan in your wife's name only.  I would also consider keeping your nest egg in accounts with just your name on it.

Unfortunately, you will not be able to discharge the debt in bankruptcy (you likely wouldn't qualify for bankruptcy anyway).

 Navient will not negotiate down and it sounds like Navient didn't do anything illegal so don't waste your time and money on lawyers.

Hope this helps.  I made the mistake of forbearing once, and I although it did not go anywhere near your crisis, I'm still kicking myself for it.  It totally sucks and the only way to do it is to pay that sucker down.

[formerlydivorcedmom]

I'm going to pile on with the recommendations that you
a) get marital counseling to work on the communication issues and to make sure you have a PLAN that you both agree on.  Marital counseling does not necessarily mean you're on the brink of serious problems - it can mean that you just want a neutral mediator to help you find common ground on difficult subjects.

b) possibly get personal counseling...so that you can

c) have a very clear-eyed look at what her debt means for your future, as an individual, as a father, and as a spouse.

My dad annulled a 2-year marriage after he found out that his wife brought significant debt into the marriage that he didn't know about.  He didn't want to put his financial future in jeopardy to pay off her debt.  You have kids and are posting here for advice about this, so that's obviously not the path that you are going to take.

However, if you pay a significant amount of her debt....
1) What happens if one of you wants a divorce when the debt is mostly paid off?  Don't dismiss this out of hand - I was a divorced mom not of my own choice, but I can tell you that when you do the divorce paperwork, no one cares....I put my ex through grad school, but in divorce realm, that meant nothing.

2) What happens if, as other posters have questioned, she isn't as serious about it as you and uses her money for play while you are using all your extras to pay off the debt?  In most of the population, that would lead to a whole hell of a lot of resentment, which could lead right back to 1).

3) How does this debt, and its repayment, affect your financial future and goals?  Are you working on joint financial goals for retirement, for college funding, etc?  If you are....then your communication and planning needs MAJOR work to ensure you never get surprised again.  If you aren't working together on joint financial goals.....then maybe this debt isn't your problem.  And I reiterate the recommendation to hie thee to marriage counseling to avoid 1).

You're in a really tough spot.  On the one hand, you are a team working on a joint future.  On the other, you have separate finances, you have very little control over hers, it seems, and she isn't convinced this is a hair-on-fire emergency. 

I honestly don't know what I'd do in a similar situation.

[fuzzy math]

Your DWs loan terms at 6.375% with the 1250 minimum payment due will take 36 yrs 8 months to pay off
Your DWs loan terms with 1500 a month payment will take 22 years

At 2000 a month it will take 12 years
2500 a month is 9.5 years
3000 a month is 7.5 years
3500 a month is 6 yrs 2 months
4000 a month is 5 yrs 3 months

Use www.bankrate.com 's credit card calculator. Perhaps the sobering idea of 36 yrs 8 months will allow her to be willing to change.

On a personal note, I had a private loan for my medical program (non FAFSA eligible) and it was variable with the prime rate. At one point it hit 16.75%. I paid that debt first every month and every other expense came second.

[patchyfacialhair]

A 10 year payment plan on the $212500 at 6.375% is $2400 a month.

That should be super doable on $200k per year. I'm ballparking $125k take home assuming 10% total (so 20K) goes into retirement. I also assume $5k for dependent care account and $5k for all other payroll deductions.

125000 take home
28800 student loan payment

leaves $96,200 per year!!!!! for all other living expenses. If you can't live on that, even in HCOL, you have no sympathy.

[Cpa Cat]

I disagree with the advice to reduce 401(k) and other HSA.

Giving up upwards of 30% tax savings + annual compounding growth on the 401(k) in order to pay down a 6% loan doesn't make mathematical sense.

Giving up the tax break for an HSA when you have current ongoing medical bills that you're spending money on anyway makes even less sense.

Reduce expenses and pay off the loan as soon as possible, but don't trade a faster payoff for a bigger tax bill.

[Lady SA]

My DH and I started our married life 3.5 years ago with a combined salary of $110k total between the both of us and over $150k in student loans and ~$1k in assets. It was really discouraging and scary.
From the very get-go, we threw ~$3200 per month --almost $2k more per month than the minimums-- at our loans (and refinanced to any lower rate we could, settling for 5.3% for our biggest one), while also maxing out our 401ks and IRAs. During all of this, we could have really buckled down and scaled back saving in favor for debt repayment and it would be gone entirely by now, but in our specific case, slightly favoring savings instead was mathematically optimal. Now, 3.5 years later, we are down to only $40k in loans and $200k in investments, and the loans scheduled to be completely gone in exactly 1 year. Yes, we are putting ~$40k per YEAR towards our loans, but we are savings buckets on interest by paying these off early.

You guys are only putting a tidge over the minimum towards your loans and then wondering why you aren't making any progress? On a $200k income, you can and should be putting at least $3k or $4k per month towards these. We make less than you now, but are paying more than double toward our loans. If you only have $20k to put toward loans per year out of, lets say $120k after taxes, I am positive you can make some substantial adjustments to your spending to free up extra cash.

Do what you can to cut the fat from your budget. Posting a full case study and tracking your spending can help in this regard. Prioritize putting as much as you can towards this debt, not just the minimums.

On a $200k salary, I think that just by optimizing your existing spending, you can free up enough money so you likely wont have to significantly change your own savings plan. Like I said, we maxed all our 401ks and IRAs while simultaneously paying off $40k per year, on top of saving over $500 per month toward a EF. It is possible, you just need a clearer picture of the economics of your household, all the inflows and outflows and what can be optimized.

Good luck! There is light at the end of the tunnel, the numbers you are talking about are not insurmountable. It sucks and isn't fun, but not devastating. I think you guys can be debt free within 5 or 6 years if you really buckle down, which in the grand scheme of things, is just a little blip in life.

[eddieryan]

A big thank you, again, to all for your responses. Thank you to those who specifically outlined how dumb and unnecessary it is that I transfer one of the loans to my name. We can easily do her refinancing the full amount and both make payments through a joint checking account and that's the direction we're going now. Different lenders told me I don't even have an option to "transfer ownership" of a student loan anyway. I had looked into a HELOC loan and those rates are higher than refinancing with most of the well known companies. Had we looked into this 1-2 years ago, that might no be the case. Ugh. 

This is a process. We're in the middle underwriting with multiple lenders. Nothing will be signed until we exhaust every effort to get the absolute lowest rate. We are interested in a 7 year term and by my math, a reasonable goal is to pay it off in 6 or less years with aggressive payments. Thanks to those who put up the whitecoatinvestor website--I checked it out and it might be something my wife would be interested in given the medical field.

This whole mess has actually been bringing us together for the past 10 days. We have an open dialogue about this and so far, so good.  I really think once we look at the final numbers on a spreadsheet, before inking any paperwork, and seeing how massive a difference a few tenths of a percentage on the rate can impact things, she will jump for the 7 year term.