Author Topic: Another Student Loan Question  (Read 3911 times)

HappyHoya

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Another Student Loan Question
« on: September 26, 2013, 08:02:17 AM »
My husband and I both have significant (six figures each!) education debt. While I wish this was not the case, I try not to spend too much time regretting it, since there's nothing we can do now except repay it ASAP. Neither of us has ever had any other type of debt. We bonded over a mustachian hate of stuff and, although we are always working to improve, are only spending money on things necessary to live at this point (shelter, food). We are paying down our debt aggressively, including starting repayment before we had to, and paying more than three times the planned payments. More than 50% of our income goes to repay our debt, as well as any windfalls or unexpected money left over after we procure necessities. We are still saving in other areas, although only what has a value that makes it worth saving over repaying (maxing out retirement with employer match) in addition to our emergency fund.

Even with all of our efforts to repay our debt ASAP, we will be in debt for a few years (6 at this rate, I am hopeful that we will shave time off). I am struggling with maintaining a sense of emergency about our debt. I know we need to stay motivated, but I simply cannot imagine that stressing myself out for years could be good in the long term. Even though I know I'll have time to relax once we pay it off, but it seems like 6 years is a long time to wait (usually this advice seems directed at people who will pay off their smaller debt much more quickly).

I understand that our debt is an emergency. I really, really hate it. I am simply doubting the utility of remaining in this state of mind for so long. I find that I am more content with our drastically counter-culture lifestyle and feel like we need less when I am in a relaxed, yogic-like state. Thinking about our debt and even dealing with the balance sheet every day really stresses me out. I am worried that the stress will make me give up on our aggressive repayment plan, since we are truly running a marathon of debt repayment. I also struggle with the idea that we cannot have a family until our debt is paid off, since it means that we may never have that option.

Has anyone else on the forum paid off this large a debt, or a debt over this long a period of time? Did you feel like constantly stressing out over your debt was a good motivational tool? Has anyone had a child while in debt but actively working towards FI?


simonsez

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Re: Another Student Loan Question
« Reply #1 on: September 26, 2013, 08:59:48 AM »
I understand that our debt is an emergency. I really, really hate it. I am simply doubting the utility of remaining in this state of mind for so long. I find that I am more content with our drastically counter-culture lifestyle and feel like we need less when I am in a relaxed, yogic-like state. Thinking about our debt and even dealing with the balance sheet every day really stresses me out. I am worried that the stress will make me give up on our aggressive repayment plan, since we are truly running a marathon of debt repayment.
Are you saying burying your head in the sand makes the debt go away or at least the debt doesn't stress you out when you don't address it?  For someone who has the ability to make 3x higher the monthly payments, I find this odd.  Easier said than done, but I think you should change your whole mindset.  I personally find I'm more likely to be in a yogic-like state when I know I'm doing what I can to address the debt and know I would be stressed and worse off (in multiple ways) if I tried to ignore it.

Everyone's situation is different.  Not everyone has over 200k in student loans and wants children.  You might not set the record for retiring at the earliest age or even of what the actual average is/would be on this forum.  And?  Life goes on.  Adjust accordingly with your values (or re-visit your values) and be happy about what you can control.

Side note: If your public loans have various interest rates, move to the longest payment plan with the cheapest payments now (for me it was the extended + graduated 25 year plan) if you have not done so already.  This will make the minimums the lowest they can be.  Then take all that extra payment money and put it on your loan with the highest interest (choose lowest balance if a tie in order to kill the # of loans with minimum payments the fastest) rate until it is gone and move on down the line until you are left with the lower interest rate loans.  This will save you interest payments ceteris paribus and thus minimize the time you are paying back your loans.  Don't freak out about the idea of 25 years, if you are able to make a 3x the standard payment (which by rough math would mean 10 years/3= 3.33 years of repayment at most if you stayed on standard plan) you will come NOWHERE close to being in repayment that long, it's just there as a placeholder to manipulate the monthly minimum payments.

Breathe easy know you are doing what you can do and get back to your yoga. :)

EDIT: Breath to Breathe, idiot

« Last Edit: September 26, 2013, 09:07:09 AM by simonsez »

HappyHoya

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Re: Another Student Loan Question
« Reply #2 on: September 26, 2013, 09:32:45 AM »
Thank you so much, simonsez, for taking your time to reply. I was a little embarrassed to ask the question, and am glad someone had something to say!

Just to clarify, I am not suggesting burying my/our heads in the sand. I simply don't get that worked up about it, especially since I know we are doing a lot to get ourselves out of our current situation. We do have our loans on the maximum repayment schedule so we can put the most money towards the highest interest loans first, as you've pointed out. The whole process is largely automated, except for the small extra amounts of money we put at our loans if we have it left over from our food budget, which is pretty simple to handle online and with a phone call. I'm fairly confident in our repayment plan (obviously open to suggestions for improvement!), which is why I don't feel the need to stress out about it as much as my husband, who sees my lack of panic as complacency. I agree that debt is an emergency, but I don't see what I have to gain for thinking about our debt all of the time, and I worry that it would actually have a negative impact. Most days, I am not doing any type of consumerish activity (I walk to work, walk home, our dog is entertainment, and we cook at home), so I don't really need to scare myself out of accidentally spending money. I am curious if anyone has ever been successful with this attitude or if I need to get more serious and aggressive about loan repayment (and how would I even do this?).

cynthia1848

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Re: Another Student Loan Question
« Reply #3 on: September 26, 2013, 09:47:56 AM »
As far as I can tell, you are doing all you can to repay your SL debt.  Don't stress about it, just keep doing what you're doing.  It would be one thing if "relaxing" about the debt meant going out and buying a bunch of stuff, which you are not doing.

Living in a constant state of stress is no good for anyone.  Is your husband panicked all the time?  Then it might be a good idea for him to go to therapy for the stress; it won't be good for him in the long run either.

simonsez

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Re: Another Student Loan Question
« Reply #4 on: September 26, 2013, 10:00:27 AM »
It seems you are doing great already, then.  I always think of the "debt is an emergency!", complete with sirens and flashing lights and someone yelling about hair being on fire, chaotic imagery is meant for the clueless.  After awhile, I like to think it changes to "debt is serious but you already know this and are doing good"^ in the form of an eloquent calm voice that accompanies the automatic payment emails and is mainly in the background now since things are trending in the right direction. YMM definitely V.

^ - If you aren't doing all that you can to pay down debt within reason and you know this and it bothers you, the calm voice will start to get a bit more frenetic until you take measures to a point where you are no longer bothered by your methods.

That being said, I do have a spreadsheet for my debt (which are my student loans at this point) to both keep track of what is going on but also to serve as a positive reminder.  I list all the payments and note whether they were automatic or an extra payment as well as the principle and remaining balance.  The interest is implied but I like to focus on the positive, i.e. the principle being zapped.  I also have an amortization table set up for various numbers of months and I always get a kick out of updating the individual loan balances and watching the total amortization monthly payment (both for the individual loan and overall balance) for a given # of months go down.  I also have a goals table for where I should be by December of each year both in terms of total as well as by loan group* %.  I try to make my December goals reachable but not too easy either. 

*I group my loans according to interest rates.  I have numerous loans but only 3 different interest rates.

Lastly, I record the weighted interest rate of all my loans every time a payment is made.  As aforementioned with the strategy of paying down the higher interest loans first, it is great to chart the weighted interest rate decrease with time.

After initial setup, I now view my spreadsheet once or twice a month and spend about 10 minutes in total updating/viewing it.  Maybe that is overkill for you but it serves its purposes for me while also not being a negative reminder about my debt.

ontheupandup

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Re: Another Student Loan Question
« Reply #5 on: September 26, 2013, 10:05:47 AM »
What a timely question! My husband are in a similar spot (hundreds of thousands in student loan debt), and have spent hours and hours and hours making spreadsheets and running numbers for dozens of different scenarios--and it began to completely take over our waking hours. We've finally arrived at a repayment plan we both feel comfortable with, and yet are finding it hard to not feel stressed out by the sheer amount of debt on daily basis. It seems like our peers (those who graduated with my husband and are working in his profession--presumably with a similar amount of debt) are buying houses and starting families and taking vacations, and we can hardly go an afternoon without talking about how to further cut expenses and throw more at the debt. I have to keep reminding him (and myself!) that we've run the numbers, and if we can just keep at it at this rate WE WILL BE FINE. And we need to keep living our lives otherwise we will make ourselves crazy.

I think the huge dark debt cloud hanging over our heads casts enough of a shadow that we will know it is there without standing around all day staring up at it. There is a difference between behaving like debt is an emergency (good and helpful) and living in a mental state of emergency (not as good, nor helpful). Stress is not good for our bodies, brains, or relationships, and I think the point of behaving as if the debt is serious emergency is to prevent and reduce the actual felt stress of being in a hopeless financial situation indefinitely. It is just not sustainable to feel stressed out about the debt the entire time it is being repaid.

I must say, I am happy to hear of at least another person in this situation! It can get awfully lonely out here...

ZiziPB

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Re: Another Student Loan Question
« Reply #6 on: September 26, 2013, 10:27:06 AM »
Quote
I understand that our debt is an emergency. I really, really hate it. I am simply doubting the utility of remaining in this state of mind for so long. I find that I am more content with our drastically counter-culture lifestyle and feel like we need less when I am in a relaxed, yogic-like state. Thinking about our debt and even dealing with the balance sheet every day really stresses me out. I am worried that the stress will make me give up on our aggressive repayment plan, since we are truly running a marathon of debt repayment. I also struggle with the idea that we cannot have a family until our debt is paid off, since it means that we may never have that option.

It sounds like you are doing everything right to live frugally and to repay the loans ASAP, but you need to attend to your mental well being as well.  Living in constant stress is not good for you.  And it sounds like you are afraid that it may be counterproductive in the long run.  If I were you, I would set up the loans on autopayment at the highest level you can manage given your current income and spending patterns.  Then, just reasses and adjust the repayments up once or twice a year when you get a raise and/or a bonus.  This way you know your debt is being paid off at the max possible level, but you really just need to think about it and take any action with respect to it once or twice a year.  I am all for "set it and forget it" approach to things.  Once your loans get paid off (and it will happen!), you can then use the same autopay system to invest.
Keep up the good work!

livetogive

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Re: Another Student Loan Question
« Reply #7 on: September 26, 2013, 10:52:13 AM »
What's your interest rate?  My SO has staggering student loan debt as well that we're paying, and although this isn't 100% correct it's how I think about it.

We're at 7.625% for about 28 years:  So every $100 we pay now instantly returns us $782.65 if you assume annual compounding (which I think hers is monthly, so it's even higher).  $100*(1.07625)^28 = $782.65

How this helps:
- Holy crap, my $10 lunch just cost me $78!
- I just saved $40/mo on my cell phone bill!  If that's $480/yr I just saved myself $3400 this year alone.



HappyHoya

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Re: Another Student Loan Question
« Reply #8 on: September 26, 2013, 11:27:59 AM »
What's your interest rate?  My SO has staggering student loan debt as well that we're paying, and although this isn't 100% correct it's how I think about it.

We have an average interest rate of 7.1%, with the loans ranging from 6.55%-7.9%, after considering small rate deductions we get for doing automatic payments and whatnot. We recently paid off my husbands 8.3% debt and are throwing every extra cent at the 7.9% debt (unfortunately, the bulk of our debt, about $165k, is at this rate.

secondcor521

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Re: Another Student Loan Question
« Reply #9 on: September 26, 2013, 12:43:03 PM »
I agree with all the others...once you make the best plan you can make, and have put it into motion, there isn't much to be gained by obsessing or stressing.

If there's a way for you to have a sit down friendly chat with your husband about your perspective and acknowledge that the debt is serious to you but stressing seems counterproductive, I would really suggest you try that.  It sounded like maybe he was reacting with fear that you may not be on the same page about attacking the debt...which you clearly are, but him knowing that in his bones will probably help him relax, which in turn will help you relax.

Nobody's answered your question about debt and kids.  Obviously both topics are highly personal.  I will say that I was married to a non-saver for 15 years and we had three kids together, so we were in debt in the typical American style when we had kids, but we also saved quite a bit too because of my influence.  After being on my own for 7 years and saving a lot more and spending a lot less, I've got enough to fund my kids and my life, their college, and my retirement, and I'm only 44.

Personally, I don't think kids cost as much as those articles say they do.  As long as you love, feed, clothe, educate, and care for their medical needs, they'll turn out fine and you won't really spend much.(*)  You can spend more if you want to.  For me, I figured my kids have set back my retirement date by about 5 years between the three of them.  Since I'm FI at 44 and my kids are great, I consider it to have been a worthwhile tradeoff.

One other thing I will mention is that Dave Ramsey, who is about as anti-debt as you'll get, prioritizes family (marriage and kids) ahead of money.  He'll say that debt isn't a reason to put off getting married or having kids as long as you both are like-minded about getting rid of the debt ASAP, which it sounds like you are.


(*) Although if you have a kid with special medical needs, that can get expensive out the gate.  My three are basically healthy.

HappyHoya

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Re: Another Student Loan Question
« Reply #10 on: September 27, 2013, 07:15:38 AM »
Thank you to everyone who took their time to respond. Although I like to think I wasn't looking for validation, it is appreciated. I also appreciate some of the advice about how to keep tabs on our debt that won't take too much time but may help give my husband a better sense of control. I also suspect it would help if he saw me putting some effort into these systems, and might help him feel more confident that I have no desire to go on a spending spree.