Author Topic: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?  (Read 31146 times)

mandy_2002

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #100 on: November 15, 2015, 12:22:22 AM »

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


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

You mention there are fees in the 0.5% range. Are any of these things that you would invest in? Most people believe in total stock market funds / ETF's or S&P 500 indexing. Do a bit of research on these lowest fee funds and see what you are working with.

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #101 on: November 15, 2015, 05:39:43 AM »
Attached is a version of the CSS with specific calculations for NC state income tax in cell G30.  That might be of specific interest to you and any other North Carolinians.

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

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

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


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

Well mandy I will definitely be taking a look at the investments with lower expense ratios. Ideally I would like to have every investment in my portfolio at less than 1% so we'll see how it goes. Once I get a thousand saved up I can move my IRA to Vanguard at least.

TheDudeReturns

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #102 on: November 15, 2015, 06:23:45 AM »
Lots of charts and jibber-jabber. Looks like you have a chunk of federal loans and are a recent graduate. Just go on a PAYE (or if you're not eligible, REPAYE) plan and pay off the minimum on your loans. Based on your situation, you would probably pay $0-$100 monthly for eligible loans and then capitalization of interest is limited to 10% of original loan amount. After 20 years of PAYE, you will have the loans discharged and, if things haven't changed by then, pay tax on the "forgiven amount" as income. Take a look here: http://askheatherjarvis.com/

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

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

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

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

TL; DR: OP enjoy life, go on PAYE/REPAYE, don't make all these charts and crap and tracking about this stuff

MDM

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #103 on: November 15, 2015, 09:38:03 AM »
...You would be in a far better position having those $60k in loans plus $60k in cash versus $0 in loans and $0 in cash.
In some cases (e.g., dire emergency) yes - due to having the cash on hand.  In other cases (e.g., life goes on normally) no - due to the cost of the very high interest rates on those loans.

Quote
TL; DR: OP enjoy life, go on PAYE/REPAYE, don't make all these charts and crap and tracking about this stuff
That is one perspective.  Nice thing about the MMM forum is the variation in perspectives.  We can also give OP kudos for getting a better understanding of her situation and having the responsibility to repay the loans she took to get her accounting degree.

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #104 on: November 15, 2015, 10:35:03 AM »
It's always good to get multiple perspectives on a situation. I would like to pay the loans back as I did borrow that money in good faith. I will try to relax though in regards to the Nelnet loans. I almost felt like they were breathing down my neck and I absolutely had to get them refinanced by May or something. I think I'll give myself a little breathing room instead of inducing a heart attack. I still want to get them refinanced, but the world won't end if I don't do it in May. Really I have until July or so before I need to re-apply for the IBR. So that'll give me a few extra months to pay down the other high-interest loans.

TheDudeReturns

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #105 on: November 15, 2015, 10:49:29 AM »
It's always good to get multiple perspectives on a situation. I would like to pay the loans back as I did borrow that money in good faith. I will try to relax though in regards to the Nelnet loans. I almost felt like they were breathing down my neck and I absolutely had to get them refinanced by May or something. I think I'll give myself a little breathing room instead of inducing a heart attack. I still want to get them refinanced, but the world won't end if I don't do it in May. Really I have until July or so before I need to re-apply for the IBR. So that'll give me a few extra months to pay down the other high-interest loans.

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

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

I don't know how a federal refinance works (I don't have loans), but really all of your loans should be at one servicer. Whatever you do, DON'T go from federal to private (via So-Fi or something like that). It is beyond foolish to get a 2% reduction in interest and lose all the benefits federal loans provides (like PAYE and loan discharge). So-Fi makes sense for big wage earners who are at the 10 year standard payment plan anyway, but even then, you are talking about a few thousand or tens of thousands in difference over 10 years, so really not worth the hassle IMO.

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #106 on: November 16, 2015, 06:06:49 AM »
I might look into the PAYE thing when it comes time to reapply for the IBR. I might have to weigh the benefits of consolidation vs refinancing in more depth.

oneday

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #107 on: November 17, 2015, 07:34:18 PM »
Also, taking the argument further, your professors did not act in "good faith" as they (like most business professors) probably led their students to believe they'd be making $50k-$100k plus.

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

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


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

Would you mind laying this out for me?  I'm not sure I understand what the good faith argument is, but I'd like to.

Kaikou

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #108 on: November 18, 2015, 03:47:03 AM »
Also, taking the argument further, your professors did not act in "good faith" as they (like most business professors) probably led their students to believe they'd be making $50k-$100k plus.

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

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


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

Would you mind laying this out for me?  I'm not sure I understand what the good faith argument is, but I'd like to.
From wikipedia:
"Good faith (Latin: bona fides) is fair and open dealing in human interactions. This is often thought to require sincere, honest intentions or belief, regardless of the outcome of an action."

AmandaS1989

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #109 on: November 19, 2015, 06:56:46 AM »
Well it looks like I'll only have around $50-100 left at the end of this month to put as extra towards next month's PLUS loan payment. I had forgotten about my half of the property taxes for the land we inherited from my grandmother. That works out to about $87. Then I have to put back another $60 to pay for my filling next month. Grrr I really wanted to be able to put that extra money on it in December. But maybe during December I can put aside an extra $150-200 towards it.

I'm trying not to stress myself out about it. Stressing about something doesn't help and it sure doesn't pay it down any faster either. I'll just try to relax and think about the fact that I have five days off for Thanksgiving. Even if on one of those days I have to see the oral surgeon about my wisdom teeth. After all the wisdom teeth are out I might cancel the dental insurance. That'd save me around $480/year.

marynikum

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Re: CASE STUDY: Overwhelming Student Loan Debt. How would you get started?
« Reply #110 on: September 26, 2016, 03:01:12 PM »
Hey Amanda,

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

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