Author Topic: Crushing student debt and lack of job mobility  (Read 6980 times)

rob waters

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Crushing student debt and lack of job mobility
« on: October 18, 2012, 08:39:51 PM »
I know this will sound like an entry into the 'wall of shame,' but I don't know a better community to seek advice.  Here is my situation:

I'm currently sitting on $170K in student debt.  My income is a meager $38K.

Before everyone asks how I even get myself into this situation, I will simply state that I came from a very poor background and financed the entirety of a BS and dual Masters on my own.  I had to get out of the poverty cycle and originally intended on a career in veterinary medicine.   I changed college paths to jump on the environmental services bandwagon and the economy tanked.  I had unrealistic expectations of future earnings and here I am now. 

I have $7K in credit card debts from school and a period of post-graduate unemployment that I'm currently paying down.  I switched from high interest cards to a credit union and have plans to pay those off within 18 months.  I will then work my way up the chain of student loans.

I am also a government employee and will continue my employment for whatever form of government for 10 years in hopes of receiving the federal Public Service Loan Forgiveness.  This takes care of $110K in federal loans.  I have the remainder in state and private loans (interest from 4% - 5.75%). 

It would seem that paying federal loans down is counterproductive, given the loan forgiveness.  The others I'm paying down by being very frugal and putting extra towards them in the interim.  I'm putting effectively nothing towards retirement at this point, due to the student debt payments.

I have a vehicle paid for, but will likely need replaced in 2 years due to its age.  I have no mortgage and only spend $340/mo on rent/utilities (roommate).  I'm in a position that I may be able to swing a second job, but just recently moved.

Any advice on how to get ahead of this level of debt? 

keith

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Re: Crushing student debt and lack of job mobility
« Reply #1 on: October 18, 2012, 10:44:11 PM »
Wow, that is an incredibly tough spot to be in, I'm sorry.

Some pretty obvious observations:

* Do whatever you can to stay qualified for the federal Public Service Loan Forgiveness program. That should help out a lot. Just focus on paying off the non-federal loans early.
* Maximize your efforts by (1) increasing income with a second job or side hustle if you can, and (2) decrease spending as much as possible.
* Share your small wins along the way (with people you are close to and/or us) to help stay motivated. Possibly in a Journal thread for yourself or in the debt thread.

#2 is what the folks here can help with, but will need more details to be helpful. If you feel comfortable, please post a detailed breakdown of your monthly budget. Where does the money go by each category, where does leftover money go, etc. A list of all debts+interest rates would be helpful as well.

Are you attacking the debt via the snowball method? or highest interest first?
« Last Edit: October 18, 2012, 10:46:02 PM by keith »

Forcus

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Re: Crushing student debt and lack of job mobility
« Reply #2 on: October 19, 2012, 07:16:44 AM »
I'd like to offer some relief - it sounds like if you do it right, you aren't in *that* bad of a spot, especially if you can get the federal loans relieved. You have a very low cost base - no home or family to take care of, and other money and time sinks that life tends to bring along. Also it sounds likely (assuming you are about 25?) that you will have most everything paid off before most people even think of traditional retirement - let alone FI. And if you know how to live cheap now, that will only extend to life later whereas people (like me) who did not live frugally in to their 30's have to play catch up. And to be honest, while of course having a pile of student loans isn't desirable, you did something it seems like so few people have done - as you said "break the cycle of poverty". Not only that, dual Masters? That's awesome!

giggles

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Re: Crushing student debt and lack of job mobility
« Reply #3 on: October 19, 2012, 09:37:18 AM »
Federal or state gov't?

If federal, what is the GS band of your position? I might be able to give you some advice.

grantmeaname

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Re: Crushing student debt and lack of job mobility
« Reply #4 on: October 19, 2012, 10:22:09 AM »
I'm with the others: you're in a tough spot but you're smart, motivated, and well-educated. You've got the tools to work your way out of it!

Keith's got some great advice for you, and if he hadn't posted I'd be saying all of the same things. One more point: we can also help you think of ways to boost your income, if you need help with that. There are e-book authors, cocktail waitresses, and everything in between on this site!

simonsez

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Re: Crushing student debt and lack of job mobility
« Reply #5 on: October 19, 2012, 11:46:35 AM »
Hold the phone!  Make sure you get your facts straight regarding your federal loans.  I thought I was going to do the same thing but now I realize it has no benefit for me because my income is too high.  Make sure you can make 120 QUALIFYING payments.  Extended, graduated, or extended AND graduated payments do NOT count toward your 120 magic number.  You basically need to be on IBR or ICR and STAY there for 10 years (while remaining federally employed).  Yes, standard plans do count but it's sort of a self-fulfilling prophecy by definition as the standard plan pays off your loans in exactly 120 months (meaning your balance would be $0 and thus no benefit).

If you are already on IBR or ICR and intend to stay there for 10 years, more power to you I guess.  Just know that will limit your ability to pay off other liabilities as your income will have to remain somewhat low for a good amount of time.  Good luck!

rob waters

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Re: Crushing student debt and lack of job mobility
« Reply #6 on: October 20, 2012, 05:01:06 PM »
Thanks everyone for the unexpectedly kind words.   The few friends Iíve let in on my debt secret were either too shocked to have a good response or told me I was an idiot for taking this level of debt.  Thanks Forcus for the encouragement.  It does help to have a low income background.  I am able to budget much better than my counterparts (late 20ís early 30ís).  Giggles, I am actually working at the state level, but hope to make the career advancement to a related environmental/transportation fed agency.  I believe I am qualified for GS9, once I get to that point.  Simonsez, I do understand the program.  I actually know the program so well that Iíve been counseling friends and recent grads on how to sign up for ICR, IBR, PSLF.  I actually read about the program in 2007 right after it passed.  It worked out well with this slow economy that I got a government job.

Keith, my debts are fairly complex but Iíve had a tight budget throughout my adult life (thank goodness for excel).  I have 3 student loan payments, 3 credit card payments, insurance (vehicle), cell phone, net, groceries, fuel, and old taxes (my first job out of college was contract).

My 3 student loan payments; one for the feds (6.8%, right now 3.4%) paid under IBR so that I pay $265/mo, one state loan (fixed 5.25%) paid as a modified income contingent $250, and the last private (mix of variable around 8%) paying $130.  This doesn't include one loan I recently paid off that was originally $1600 @ 7-8% and I had been paying double the $25 payment.  Iím currently enrolled in IBR with the Dept of Ed, so that I pay the 15% of income after an adjusted AGI.

My credit cards stand at 3400 @ 29% and 1000 @ 26%, with the remainder (2900) transferred to a 11% card.  I make payments on these at $200/mo, $100/mo and $100/mo.  My priority is to pay of the 29% card first, thus the $200/mo.  I will then pay down the 26% card and lastly the low interest Credit Union card.
My other expenses are very low.  I live with my S.O. and pay her $240/mo for the mortgage and $100/mo for utilities.  I also pay $72/mo in vehicle insurance, $200/mo in fuel and $400/mo on all grocery/household items.  (We eat organic meats, hormone free dairy, etc. that raises the food budget some.  I also started a garden this year that will provide a good third of our produce.  One word, canning.)  I also have about $900 of outstanding fed income tax to be paid, which Iíll be rolling into my 2013 returns (it seems the late payment interest is less than the CCs, so Iím attempting the extension to pay down the 26% card first).   

The $30/mo I spend on Netflix and Hulu are basically unnecessary, but provide the lionís share of our entertainment budget.  The most unnecessarily draining cost is the $90/mo I spend on my cell phone.  Like Mr. Moustache, my contract position had been paying a portion of my iPhone service.  My contract is up this Nov and I hope to make the same switch.

I spent all of college waiting tables and have considered pulling that old skill out of the closet to make some secondary income.  I also spend a fair amount of my free time outdoors.  I like to photograph native landscapes and plants.  I hope to compile a photo book of native plants that grow along lakes and streams (where I spend most of my time), so that I can monetize my hobby.  Iíd love to hear any other suggestions, such as holiday jobs, etc.

A440

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Re: Crushing student debt and lack of job mobility
« Reply #7 on: October 20, 2012, 07:29:32 PM »
29%!!  I know that is a small portion of your debt, but still....

Can you find some way to bring in somewhat more cash?  Selling things you don't need via craigslist or the part-time jobs already mentioned?  If you are interested in animals, pet sitting might be good and is fairly flexible usually.

At the same time, is your credit good enough to get any balance transfer offers or transfer more to the credit union card?  Would you be able to get a better rate in Lending Club or etc.?

Have you compared insurance rates lately.  My husband and I pay about the same as you, and there are two cars.

Are your total utilities $200?  Can that be improved?  What about the gas expenses?

Consider that Hulu and Netflix are probably not going anywhere, and you could always sign up when the ridiculously high-interest rate loans have been repaid.








sheepstache

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Re: Crushing student debt and lack of job mobility
« Reply #8 on: October 20, 2012, 10:36:44 PM »

The $30/mo I spend on Netflix and Hulu are basically unnecessary, but provide the lionís share of our entertainment budget.

http://watchseries.eu/

http://www1.zmovie.tv/

I'm not sayin', I'm just sayin'.

grantmeaname

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Re: Crushing student debt and lack of job mobility
« Reply #9 on: October 21, 2012, 07:39:04 AM »
What do you even get out of Hulu plus that you don't get out of regular Hulu?

rob waters

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Re: Crushing student debt and lack of job mobility
« Reply #10 on: October 21, 2012, 03:51:59 PM »
29%!!  I know that is a small portion of your debt, but still....

Yes, I know.  I have been in this situation since I lapsed on a payment after grad school.  I did transfer, but the credit union only approved $3500.  The 26% and 29% cards are with Ch@se which has no scruples and I'm not in a position anymore to use them wisely.  I'll be reducing both big bank cards to a $400 limit and cutting them up after paying them off.  As I get them down to a reasonable limit, I'll be transferring over to the credit union card.

I'm working on reducing the utility costs, but much of that is out of my control (roommate).  I have reduced the gas down to about $100 a month, including commuting fuel and trips to kayak and hike (my sanity).  I do actually intend to compare insurance (along with new cell contract).  I don't live in the greatest part of town and thus the higher insurance rates. 


rob waters

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Re: Crushing student debt and lack of job mobility
« Reply #11 on: October 21, 2012, 04:08:08 PM »
What do you even get out of Hulu plus that you don't get out of regular Hulu?

We got a Roku to watch it on the TV.  The Roku was a gift and we love to watch 4-5 shows from there.  Given the quality of shows on Hulu and Netflix, the only reason we have it is to get us through the winters here. 

simonsez

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Re: Crushing student debt and lack of job mobility
« Reply #12 on: October 22, 2012, 07:27:16 AM »
Wow, GS9 potential pay and still on IBR until your forgiveness benefit kicks in.  Congratulations, that should make paying down your debts much easier.

Regarding your cc's, are you going to close the accounts after you pay them off or was cutting them up just the literal description of how you aren't going to use them anymore?  Unless you have some inner demon that possesses you to tack on to the balance you carry, I'd keep them open if you aren't planning on that already.  Once you pay down the balance, keeping those lines of credit open and wiping out the entire balance every month isn't a bad way to operate, especially if you receive any sort of rewards.  Otherwise, you are likely shortening your average age of your credit accounts and dinging your credit score.  If you plan on ever getting a loan of any type for anything, better credit score=lower interest rate although depending on the lender, it doesn't matter once you get above certain thresholds (this varies, some might offer best rate for 750+ scores while other might require 800+).

twinge

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Re: Crushing student debt and lack of job mobility
« Reply #13 on: October 22, 2012, 11:07:40 AM »
I'm with the idea that you should sell anything, eat cheaper healthy foods (400 month brings healthy food to our family of 4 in a high cost of living area--organic and unprocessed--we just eat minimal meat/dairy), ride your bike everywhere etc. until you pay down the 3400 loan and the 1000 loan at astronomical rates.    Is there someone who could loan you the money from their savings? they could charge you 10x the rate they can make on a savings account and you'd still come out ahead.  300/month is not going to whittle that down nearly fast enough when it's growing at 29/26%%!  That is costing you a fortune.  Is the $300 the amount you pay above the minimum? Otherwise the balance is rising faster than you're paying it off.

In my view, you need to find a way to get 4400 into your life right now by whatever means you have.  Selling things, extra job, borrowing from someone if you can, skipping sanity savers etc.  This isn't for forever--if you get that $4400 out, your overall picture gets much better quicker and you'll be able to lose that other debt.  And you'll appreciate the good life of organic meat and kayak trips more when they are not being purchased by keeping hold on your extraordinarily expensive debt. 

Aloysius_Poutine

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Re: Crushing student debt and lack of job mobility
« Reply #14 on: October 22, 2012, 11:14:07 AM »
Can you make more money in your field in another market? What about North Dakota's oil fields?

rob waters

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Re: Crushing student debt and lack of job mobility
« Reply #15 on: October 22, 2012, 03:31:00 PM »
Regarding your cc's, are you going to close the accounts after you pay them off or was cutting them up just the literal description of how you aren't going to use them anymore?  Unless you have some inner demon that possesses you to tack on to the balance you carry, I'd keep them open if you aren't planning on that already.  Once you pay down the balance, keeping those lines of credit open and wiping out the entire balance every month isn't a bad way to operate, especially if you receive any sort of rewards.  Otherwise, you are likely shortening your average age of your credit accounts and dinging your credit score.  If you plan on ever getting a loan of any type for anything, better credit score=lower interest rate although depending on the lender, it doesn't matter once you get above certain thresholds (this varies, some might offer best rate for 750+ scores while other might require 800+).

Yes, I'll keep them open and reduce the open credit.  I'll cut up the cards and keep them around to keep the credit history.  I have no plans of using the cards (once paid down), except for the occassional trips home to visit family and such.  I'll then pay them off monthly.

rob waters

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Re: Crushing student debt and lack of job mobility
« Reply #16 on: October 22, 2012, 03:32:54 PM »
In my view, you need to find a way to get 4400 into your life right now by whatever means you have.  Selling things, extra job, borrowing from someone if you can, skipping sanity savers etc.  This isn't for forever--if you get that $4400 out, your overall picture gets much better quicker and you'll be able to lose that other debt.  And you'll appreciate the good life of organic meat and kayak trips more when they are not being purchased by keeping hold on your extraordinarily expensive debt.

The current idea is to take a second job and pay even more on the CCs.  I pay the remainder of my paychecks to the CCs to pay them off as quickly as possible.  Minor repairs to my vehicle are keeping me from paying them off quicker.  I'm hoping the second job will provide the money to get myself out from under the ridiculous interest.

rob waters

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Re: Crushing student debt and lack of job mobility
« Reply #17 on: October 22, 2012, 03:34:26 PM »
Can you make more money in your field in another market? What about North Dakota's oil fields?

I'm originally from Texas and have thought about the move to pay them down.  My significant other would need to find employment in the same region and that's keeping me here.  I have connections with environmental consulting firms working on pipeline projects, so I've been keeping those fresh.  At some point I'll likely make the switch to a new position and pay down my debts even faster. 

rob waters

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Re: Crushing student debt and lack of job mobility
« Reply #18 on: October 22, 2012, 03:51:19 PM »
Wow, GS9 potential pay and still on IBR until your forgiveness benefit kicks in.  Congratulations, that should make paying down your debts much easier. 

I should also clarify that I'm not making GS09 pay, because I haven't landed the federal job.  I work a lower level state job, but am qualified for various GS09 positons.  Out of grad school, I had 3 interviews, but lost out to others.

giggles

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Re: Crushing student debt and lack of job mobility
« Reply #19 on: October 23, 2012, 10:44:44 AM »
Going to be honest, GS9 could be tough to get into.  Apply, apply, apply.  The better you are at gaming the USAJOBS application process, the more sucess you will have.  Apply for anything/everything you think you may qualifty for, you will learn so much about what it takes to get into the fed system. 

Any military?  There is a huge vert push right now. 

I had a year of grad school after a BS, and still only got hired as a GS5.  After a year, I was promoted to a new position with a 7/9/11 ladder.  Sometimes the best thing to get is get your foot in the door a lower grade, then apply for open promotions with time in grade.

rob waters

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Re: Crushing student debt and lack of job mobility
« Reply #20 on: October 23, 2012, 03:18:13 PM »
After a year, I was promoted to a new position with a 7/9/11 ladder.  Sometimes the best thing to get is get your foot in the door a lower grade, then apply for open promotions with time in grade.

This is exactly what I'm shooting for, but my current $38K gross will factor in.  My student debt doesn't allow me to take anything lower.  I've found a few GS7s that pay similar.  I actually applied to 103 jobs after grad school.  I still have the folder backed up on a harddrive, which I reference for any new USAJobs applications.  I know a couple federal employees that have offered to help me get passed the first stage (with the OPM), which seems to be the biggest roadblock.  I lost out on jobs in offices where my reference worked, because I couldn't "tailor" my application properly.  It is a very frustrating process for sure!