Author Topic: 250K student debt  (Read 29380 times)

JustGettingStarted1980

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Re: 250K student debt
« Reply #100 on: March 15, 2016, 05:56:01 PM »
All very tough choices, good for you for analyzing this as systematically as possible.

I vote option 1

Option 1:  Stay on IBR
   Pay minimum amount
   Save each year for tax liability  $9,000/yr. or $750/mo. ----> consider placing this in an investment account, over a 20 year timeline [kind of like a 529 plan, just grow more conservative with investments with about 5-7 years prior to the tax bill coming due]

PROS:  1. Lowish monthly payments ---> Flexibility is so important in life, especially with 5 kids!
            2. More cash flow to save for retirement/invest ---> I agree
       3. Be able to enjoy life a little more ----> lots of ways to enjoy life without spending more, but to each his own

CONS:  1.Tax Liability at end  ---> Yup, unless a jubilee occurs, or laws change on this overtime, maybe 50/50 chance?
   2. Stress of debt for 20 more years.  Longer stay on the plan, more stuck on plan   ---> yes this sucks
   3. Rapidly increasing principal = Never really pay it off and likely balance somewhere close to $500K at end.  ----> I kind of see this like prison in your case... once you've done your 20 years and paid the Tax man at the end, I think you've fulfilled your obligation

*quick question to the forum -> if AMG considers her 401k or 403b to be her "loan payoff account", and decides to pay off the loan forgiveness tax balance in 20 years, would AMG pay a penalty for that? If not, the tax benefits of maxing out that 401k yearly are pretty high.

teen persuasion

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Re: 250K student debt
« Reply #101 on: March 16, 2016, 07:06:19 AM »

ok, a number of people have suggested a case study.  How do I do this?  what's all the information you need.   Thought I think in a thorough case study I'm going to get completely mutilated!  We'll see.

Here are the instructions for the case study:
http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/

Good luck! :)

OP, do a case study.  You need to look at the whole picture of your finances, including other debt like mortgage and car loans.

You can do this, even with 5 kids.  We have nowhere near your numbers ( income or student loans ), but we do have 5 kids.  On a small income (singular, I was also a SAHM for nearly 20 years) we paid off our student loans (8%) and paid off our mortgage (9.75%) 15 years early, as our oldest started college.  Somewhere in there DH spent a year unemployed when his employer went out of business; DH opted to get a grad degree at that time and change careers, so more student loans, of course.

 So the size of your family is a red herring, here.  Your budget is more influential.  Your total budget, not just one piece.

AMG

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Re: 250K student debt
« Reply #102 on: March 18, 2016, 09:59:01 PM »
I know I should do a case study.  I'm working on it.  I know a lot of small changes I can do but I need a BIG change, and the only option for that is selling house/cars.   I guess I'm trying to decide the best route to take in terms of the student loans because that determines how drastic of a life change I need to make. 

If we go with option 1 and stay on IBR (pay the minimum amount and save for the tax bill), we wouldn't need to sell the house like we would if we went with option 2 for example.  (I know MMM's - I have learned I need to be living on a lot less regardless and selling the house would help with that...it's just really hard to swallow all that that would mean right now.  But I'm seriously considering it...)

I will tell you between property taxes and mortgage we pay $1750 for housing.  Our 2 car payments total $500 (but I'm really intending to pay one of those off in the next month, to bring it down to $330).  Those are the two major liabilities.  No cc debt.  I've cut our food budget to $500 (which I think is pretty good for a family of 7, no?)  Just cut our internet down to $33.  Canceled netflix and sirius xm.  No cable.  Already did shop at Goodwill and consignment stores for kids.  I'm cutting out any unnecessary shopping for household things.   We do pay for smart phones.  Any advice on how to cut that bill? Currently pay about $75 for that.  We rarely go out to eat together - almost never now.  Husband has $35 budget for lunches.   Anyway, that's the short of it.

Also, recently heard of someone taking out a home equity loan to use to pay off student loans.  Seems very risky and a bad idea.  Any thoughts?

LeRainDrop

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Re: 250K student debt
« Reply #103 on: March 18, 2016, 10:38:19 PM »
I've cut our food budget to $500 (which I think is pretty good for a family of 7, no?)  Just cut our internet down to $33.  Canceled netflix and sirius xm.  No cable.  Already did shop at Goodwill and consignment stores for kids.  I'm cutting out any unnecessary shopping for household things.   We do pay for smart phones.  Any advice on how to cut that bill? Currently pay about $75 for that.  We rarely go out to eat together - almost never now.  Husband has $35 budget for lunches.   Anyway, that's the short of it.

Great job on all of the above.

Quote
Also, recently heard of someone taking out a home equity loan to use to pay off student loans.  Seems very risky and a bad idea.  Any thoughts?

I agree that is very risky and a bad idea.  It's an especially bad idea when you are considering selling your home.  The Consumer Financial Protection Bureau (a federal government agency) pretty much agrees and offers this guidance on the subject:  http://www.consumerfinance.gov/blog/should-i-use-a-home-equity-loan-to-refinance-my-student-loans/

AMG

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Re: 250K student debt
« Reply #104 on: March 21, 2016, 01:57:25 PM »

Quote
Also, recently heard of someone taking out a home equity loan to use to pay off student loans.  Seems very risky and a bad idea.  Any thoughts?

I agree that is very risky and a bad idea.  It's an especially bad idea when you are considering selling your home.  The Consumer Financial Protection Bureau (a federal government agency) pretty much agrees and offers this guidance on the subject:  http://www.consumerfinance.gov/blog/should-i-use-a-home-equity-loan-to-refinance-my-student-loans/
[/quote]

Thank you for the article.  I think I will NOT go that route.

Kwill

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Re: 250K student debt
« Reply #105 on: March 21, 2016, 03:39:26 PM »
We do pay for smart phones.  Any advice on how to cut that bill? Currently pay about $75 for that.

There's a ton of advice here on phones. You can do a search for it, but basically there are just lots of discount companies that work in various ways--either off a normal cell network or off wi-fi or some combination. Some you can use your old phone with, and others you need a specific phone for. One thing to think about as you're looking is whether you need data on your smartphone. If you're on wi-fi a lot, you might be happy with just talk and text. If the only thing you really need your cell phone data for is GPS, you could come out ahead buying a GPS and dropping the data.

Here are some phone ideas:
http://uk.pcmag.com/cell-phone-service-providers-products/11763/feature/the-best-cheap-prepaid-phone-plans-youve-never-hea