Author Topic: Paying Off $67k Student Loan Debt  (Read 15843 times)

rjk86

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Paying Off $67k Student Loan Debt
« on: May 20, 2012, 06:34:27 PM »
Alright, so here is my situation:

I went to college for four years and took out ~$65k in student loans.  That was a really bad decision, I know.  I didn't know what I was doing.  They are broken up into 13 different loans ranging from $2.6k to $9.5k.  Unfortunately, the largest loan has an interest rate of 9.25%.  I've been out of college for 3 years now, am 25 years old and I owe $67k.

I've extended the payment plan, and right now my monthly bill for the loans is $560/mo.  My rent is $825/mo, my car is paid off (worth ~$15k), I have no credit card debt and I make $65k/year (When I graduated, I made $45k/year).  I am putting 5% into a 401k plan and my employer matches 4%.

My plan is to pay off the $9.5k @ 9.25% loan (now ~$12k, it's from unsubsidized 2005), by putting an extra $1k/mo towards that loan on top of my $560/mo minimum payment.  If I stay consistent, I think it will be paid off in about 10 months.  Considering that two of the months I will be getting 3 pay checks instead of just 2 and I will also get about $1k back on tax returns.  An annual bonus of $1-3k is also a possibility in late December.

When it is paid off, my minimum payment will be $410/mo.  Then I plan on attacking the smaller loans one at a time, putting an extra $1.15k/mo towards it and so on.

Does this sound like a good plan?  Any suggestions?  I'm pretty much maxed out on how much I can put towards the loan on a monthly basis.  I put $175/week towards "flex cash" which goes towards food, gas, and $50-60 of "fun"/misc.

I am debating whether or not to sell my '11 Corolla with 15k miles on it, buying a beater and getting rid of the $9.5k loan right away.  It's a hard decision.  I commute 40 miles every day to work and need something reliable.  Plus, it's a solid car that should last at least 200k miles.  But that loan is a PITA.

If I keep the car, any suggestions on how to stay motivated for the next 10 months?

2handband

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Re: Paying Off $67k Student Loan Debt
« Reply #1 on: May 20, 2012, 06:39:32 PM »
Have you heard of income based repayment? It assigns you a payment rate based on how much you make, and after 25 years any unpaid balance is simply written off. My wife and I are sufficiently low-income that ours is $0, and we aim to keep it that way. So long as we continue to faithfully mail in that $0 a month payment, we're good to go.

rjk86

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Re: Paying Off $67k Student Loan Debt
« Reply #2 on: May 20, 2012, 07:06:09 PM »
I have, but I would rather pay everything off in the next 3 years, be debt free, all whilst increasing my income.  It's hard staying consistent and motivated.  I want to go for the smaller loans each at a time, to feel the "win" more frequently, but the 9.25% makes me cringe.

velocistar237

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Re: Paying Off $67k Student Loan Debt
« Reply #3 on: May 20, 2012, 07:14:06 PM »
Yeah, you need to kill that 9.25% loan. Could you find a cheaper place closer to work, maybe with a roommate? Your commute distance merits a lower mileage car, but if you get rid of that need, you can downgrade your car.

How bad are your other loan rates?

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Re: Paying Off $67k Student Loan Debt
« Reply #4 on: May 20, 2012, 07:17:13 PM »
First, you should get a grasp on how much you actually owe today (not how much you took out) at each interest rate. Create a Google doc from a template (like the Avalanche template or the Debt Reduction Calculator template), so you can understand the logical order to pay off your debts. Otherwise, it should be easy at your income, with your rent, and no other debt, to knock out that 9.25% loan. That interest rate should be a huge motivator for you to pay it off as fast as possible. But if you need more motivation, try making a game out of paying off your loans. Try to see if you can make each payment larger than the last, or try to see how many months you can knock off your estimated timeline (this would obviously come from making cuts in spending elsewhere). 

When your lease is up, could you move closer to your job and get rid of your car and bike? Or at least use your car infrequently?

Are all of your loans federal loans with fixed interest rates?

rjk86

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Re: Paying Off $67k Student Loan Debt
« Reply #5 on: May 20, 2012, 08:00:35 PM »
I was somewhat unclear of the distance to my work, it's 40 miles total a day, so 20 miles one way.

Could you find a cheaper place closer to work, maybe with a roommate?
I could.  I've been keeping an eye on craigslist, and the cheapest thing I could get would be $650-700/mo with a roommate.  Right now, I'm not living with anyone.  I would probably save $300/mo if I did move.  I enjoy having my own place and not feeling like a guest, but I am considering this.

How bad are your other loan rates?
They range from 5.25%-7.75%.  Most are 6.0% or 6.8%, and the smallest loan has the smallest interest at 2.36% (Go figure).  They are so high because I didn't have a cosigner or credit history.

First, you should get a grasp on how much you actually owe today (not how much you took out) at each interest rate. Create a Google doc from a template (like the Avalanche template or the Debt Reduction Calculator template), so you can understand the logical order to pay off your debts.
I've made an excel spreadsheet, but I like the Google doc idea!  I didn't know they had templates and stuff.  I took out $64,453.00 and currently owe $66,917.96.  I owed a lot more when I first graduated.

Are all of your loans federal loans with fixed interest rates?
About half are federal loans with fixed interested rates, and half are private loans with variable interest rates.  None of the rates have changed in the past 3 years.  The 9.25% is a private loan with variable rate.

gooki

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Re: Paying Off $67k Student Loan Debt
« Reply #6 on: May 20, 2012, 08:13:11 PM »
With interest rates that high I'd be paying them down with a vengeance. Any voluntary repayments should go to the one with the highest interest rate (as you are well aware).

jawisco

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Re: Paying Off $67k Student Loan Debt
« Reply #7 on: May 20, 2012, 08:47:34 PM »
I think you are doing great and commend you for paying off the debts that you incurred.

Can you get those loans re-financed at lower rates?  Maybe play the credit card balance transfer game for a few years to low/no interest on that money owed and lower your actual rate.  You seem organized and motivated enough to keep that up.

I think the corolla is a fine vehicle at this point - will last you a while and doesn't sound like you are making payments.

Consider putting more money in your 401K - that money will not be taxed on the way in (saving you probably 20% in taxes), will compound over time, and is protected from bankruptcy...

I would put my effort toward finding a way to have lower interest rates on debts - this will save you real money, give you more options with your 401K, and make it easier to justify keeping the newer car...

elysianfields

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Re: Paying Off $67k Student Loan Debt
« Reply #8 on: May 21, 2012, 02:48:38 AM »
You can definitely do better than 9.25%.  Would using P2P lending, such as Lending Club, be an option for you?

Just remember that if you refinance with another lender, you lose the student loan interest deduction.  Since you don't have a mortgage and are probably in the 25% bracket, that might be a consideration.

You could also reduce taxes and improve your retirement outlook by increasing your 401(k) contributions, but that also depends on the costs and availability of worthwhile investment options within your 401(k).  I also suggest opening a Roth IRA, because every year is a time-limited option to contribute.  Once the contribution period has expired, you can never again contribute for that tax year.

Speaking of taxes, you need to adjust your withholding so that you owe taxes, rather than receive a refund.  Having too much withheld from your paycheck is granting the USG a 0% loan.  Have less withheld so you have more to pay toward your loans.  For more info, check IRS Publication 505 - http://www.irs.gov/publications/p505/index.html.

Consider putting more money in your 401K - that money will not be taxed on the way in (saving you probably 20% in taxes), will compound over time, and is protected from bankruptcy...

Actually, again assuming you're in the 25% bracket, you'd save the 25% federal plus whatever percentage your state imposes, on every $1 you save in the 401(k).

Once you've saved a good amount of money in your retirement accounts, I'd snowball on the loan with the highest interest rate.

I concur with the suggestion of moving closer to your job and finding (a) roommate(s).  I wouldn't sweat the car situation too much - you're unlikely to have to pay much in the way of maintenance with such a new and reliable vehicle.  I'd hold onto it now and drive it until it dies.

simonsez

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Re: Paying Off $67k Student Loan Debt
« Reply #9 on: May 21, 2012, 10:22:31 AM »
IBR and ICR will not work in your situation.  Your income is already too high for IBR to be viable.  ICR will also not work out as your salary is approaching the amount you owe.  Since the amount you owe is going down and your salary has been increasing, the ICR payments would also increase.  After a few years, you could be on the ICR plan and it wouldn't be that much different from the original standard 120 equal payments plan (ignoring your extra payments).  Your best bet is to continue as you plan on doing and zap that highest interest private one.  Or, you could switch to a different lower paying job and try to take advantage of IBR until you are nearly 50..........

2handband

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Re: Paying Off $67k Student Loan Debt
« Reply #10 on: May 21, 2012, 11:25:50 AM »
IBR and ICR will not work in your situation.  Your income is already too high for IBR to be viable.  ICR will also not work out as your salary is approaching the amount you owe.  Since the amount you owe is going down and your salary has been increasing, the ICR payments would also increase.  After a few years, you could be on the ICR plan and it wouldn't be that much different from the original standard 120 equal payments plan (ignoring your extra payments).  Your best bet is to continue as you plan on doing and zap that highest interest private one. Or, you could switch to a different lower paying job and try to take advantage of IBR until you are nearly 50..........

I was going to suggest that, but I had a feeling somebody might jump my shit over it...

grantmeaname

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Re: Paying Off $67k Student Loan Debt
« Reply #11 on: May 21, 2012, 11:34:46 AM »
Income-based repayment won't help any with the largest, highest interest rate because it's private. It is perhaps worth looking into paying off your low-balance, low-interest rates that way, but that seems kinda useless if you're still left with the high-interest loan.

2handband

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Re: Paying Off $67k Student Loan Debt
« Reply #12 on: May 21, 2012, 11:47:17 AM »
Income-based repayment won't help any with the largest, highest interest rate because it's private. It is perhaps worth looking into paying off your low-balance, low-interest rates that way, but that seems kinda useless if you're still left with the high-interest loan.

Not really, because the federal ones come out to about half of his debt-load, which is one hell of a lot of money. As for the private debt... well, if I was carrying that much I'd seriously consider bankruptcy. Anything, anything at all, to get free.

grantmeaname

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Re: Paying Off $67k Student Loan Debt
« Reply #13 on: May 21, 2012, 11:53:58 AM »
You're right, I missed that part, fully half of his loans are public.
Still, that would mean he would have to be walking a tightrope between keeping his income low enough to have IBR actually do him any good and keeping it high enough to support his lifestyle and meaningfully sized payments on the public loans.

2handband

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Re: Paying Off $67k Student Loan Debt
« Reply #14 on: May 21, 2012, 12:04:35 PM »
You're right, I missed that part, fully half of his loans are public.
Still, that would mean he would have to be walking a tightrope between keeping his income low enough to have IBR actually do him any good and keeping it high enough to support his lifestyle and meaningfully sized payments on the public loans.

You'd be surprised how much rope they give you. My wife and I did the math, and we'd have to make $20,000 a year before our IBR payments rose above $0 a month, and even then the payments would be very small. i doubt will ever pull down $20,000.

arebelspy

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Re: Paying Off $67k Student Loan Debt
« Reply #15 on: May 21, 2012, 12:08:57 PM »
You're right, I missed that part, fully half of his loans are public.
Still, that would mean he would have to be walking a tightrope between keeping his income low enough to have IBR actually do him any good and keeping it high enough to support his lifestyle and meaningfully sized payments on the public loans.

You'd be surprised how much rope they give you. My wife and I did the math, and we'd have to make $20,000 a year before our IBR payments rose above $0 a month, and even then the payments would be very small. i doubt will ever pull down $20,000.

Different strokes.  I'd rather make 50-80/yr and repay my debts.  Much quicker route to FI for me.  But I don't mind if someone wants to earn < 20 and take advantage of that program.  It's not a bad idea for someone who can't, or won't, earn much.
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grantmeaname

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Re: Paying Off $67k Student Loan Debt
« Reply #16 on: May 21, 2012, 12:09:59 PM »
With minimum payments of $765 a month on the private loans (as a guess, if we take $560 plus half of $410), and $650 for rent (which the OP said was the minimum), we're at $17,000 a year already with just two expenses. And that's before food, insurance, expenses, spending money, utilities...

2handband

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Re: Paying Off $67k Student Loan Debt
« Reply #17 on: May 21, 2012, 12:32:41 PM »
With minimum payments of $765 a month on the private loans (as a guess, if we take $560 plus half of $410), and $650 for rent (which the OP said was the minimum), we're at $17,000 a year already with just two expenses. And that's before food, insurance, expenses, spending money, utilities...

That's where you're down to a hard choice. Either you liquidate the debt in some way or you resign yourself to working for a long, long time.

One thought on the "ethics" involved in student loans. Most of us who have them are victims of a setup carefully designed to shove us out into the working world with crippling levels of debt that can't be written off in bankruptcy. We were lied to about the benefit of what we were buying with the debt, and about how easy it would be to repay later. This took place when we lacked the maturity and experience to recognize the lie for what it was, and were under tremendous societal pressure to accept the lie... it was presented to us by parents, teachers, guidance counselors, and the media as the one and only true ticket to the good life. The only entities who really benefit from this system in any tangible way are banks that underwrite the loans at zero risk to themselves, and colleges which using the easy financial aid as a form of price support are able to price-gouge mercilessly. But you didn't know that when you were 18. Bottom line: you were lied to. Don't feel bad about throwing off the chains that the acceptance of the lie has looped around your neck, any way you can think to do it.

velocistar237

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Re: Paying Off $67k Student Loan Debt
« Reply #18 on: May 21, 2012, 12:37:11 PM »
They designed IBR as a safety net. There's a linear relationship between what you make and how much you keep, and the slope is 0.85, meaning you keep 85 cents out of every dollar earned over $20K/year (for a single person). Most people will benefit more from a higher salary than from IBR. The exception is if you don't want or need to earn much, as in, you're already FI, or you plan to always live cheaply and earn very little, or you can't find a better paying job.

By aggressively cutting expenses, rjk86 can probably pay off the student loans in 3-4 years, as opposed to waiting 10 years (PSLF) or 25 years (and then paying taxes on the forgiven amount, which counts as income, unless you do PSLF). After that, a higher salary means a higher savings rate, which wouldn't happen under IBR, where you would have to keep your salary down until you repay the loans.

arebelspy

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Re: Paying Off $67k Student Loan Debt
« Reply #19 on: May 21, 2012, 12:51:19 PM »
That's where you're down to a hard choice. Either you liquidate the debt in some way or you resign yourself to working for a long, long time.

What do you mean by liquidating?

One thought on the "ethics" involved in student loans. Most of us who have them are victims of a setup carefully designed to shove us out into the working world with crippling levels of debt that can't be written off in bankruptcy. We were lied to about the benefit of what we were buying with the debt, and about how easy it would be to repay later. This took place when we lacked the maturity and experience to recognize the lie for what it was, and were under tremendous societal pressure to accept the lie... it was presented to us by parents, teachers, guidance counselors, and the media as the one and only true ticket to the good life. The only entities who really benefit from this system in any tangible way are banks that underwrite the loans at zero risk to themselves, and colleges which using the easy financial aid as a form of price support are able to price-gouge mercilessly. But you didn't know that when you were 18. Bottom line: you were lied to. Don't feel bad about throwing off the chains that the acceptance of the lie has looped around your neck, any way you can think to do it.

I am not a victim.
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grantmeaname

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Re: Paying Off $67k Student Loan Debt
« Reply #20 on: May 21, 2012, 12:59:44 PM »
That's where you're down to a hard choice. Either you liquidate the debt in some way or you resign yourself to working for a long, long time.
Or you just don't intentionally structure your finances so that you make less than $20,000 a year.

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But you didn't know that when you were 18. Bottom line: you were lied to. Don't feel bad about throwing off the chains that the acceptance of the lie has looped around your neck, any way you can think to do it.

I don't know any anthropology majors who honestly believe they'll be making good money after they graduate. Part of participating successfully in any marketplace is making sure that you are an informed consumer and that what you are doing is to your own benefit, instead of assuming that what's best for other parties is also what's best for you. Yes, I agree, our higher education system has systemic problems that badly need addressed, but that doesn't excuse your responsibility and liability for your actions, financial or otherwise. You don't have to eat a shit sandwich just because it's a sandwich, and you don't have to take out $100,000 in loans to get a communications degree.

I think you're dramatically overstating the problem, too. Just out of those students that borrowed, the average indebtedness was $23.3k; since over a third of students don't borrow at all to go to school (same source), that means the average student graduates with something like $15k in debt. That's relatively significant, but it's certainly not that crushing even to somebody who waits tables for a living.

2handband

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Re: Paying Off $67k Student Loan Debt
« Reply #21 on: May 21, 2012, 01:27:56 PM »
No sense getting into an argument over personal philosophy... that's just a good way to get into a flame war. For myself, I'm so fed up with this insane death-cult of a culture of ours that I really don't give a rats ass what it thinks of me, and the fact that large financial institutions dominate such a large portion of our lives makes me sick to the point that I'll take every opportunity to shove the bat up their asses. If I thought they had a hope in hell of accomplishing anything tangible, I'd be right out with the OWS crowd. I do disagree with you on the division of responsibility bit. Should the couple in their early 20s who bought way more house than they could afford back in '05 have realized they were making a bad choice? Sure... but I promise you the sharks that wrote the loan DID know it, but wrote the thing anyway because they stood to make an enormous pile of money no matter how it unfolded (if you think they didn't know, even then, that the .gov had their backs you're kidding yourself), and that naive young couple was being besieged on all sides by a propaganda machine that was telling them it would be all right; their income and the value of their house could only go up over the long term. Most people are highly susceptible to propaganda and social pressure... we of all people should know that, and the large financial institutions that are running this show certainly know it and know damn well how to use it. When we were young enough to be getting our student loans, none of us had the experience or knowledge to evaluate the ramifications of what we were doing. And the people that shoved them on us knew it.

That's all I'm going to say on the subject... no sense in starting the flame war. I understand your position, you understand mine... neither of us will change the other's minds.

Nancy

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Re: Paying Off $67k Student Loan Debt
« Reply #22 on: May 21, 2012, 01:39:50 PM »
You could look into consolidating your private loans with another lender. If you consolidate, make sure you only consolidate the private loans-not the federal ones- into another private loan, so you don't lose your borrower protections that the federal loans provide. FinAid has information on private consolidation loans. Also remember that you can only consolidate loans once, so make sure that if you do it, you have pretty strong credit.

With your income and situation, you can totally kill the high-interest rate loans, and I would guess that you can put more toward them monthly than you think. You're doing a great job keeping track of your situation. I bet if you made the $1561 loan payment a line item in your budget, you could easily make that happen and probably beat it because of your extra paychecks. I think you should pay off your debts based on interest rates, but in the end, you should do whatever keeps yourself motivated.

Additionally, you should consider opening a Roth IRA and maxing that out annually.

grantmeaname

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Re: Paying Off $67k Student Loan Debt
« Reply #23 on: May 21, 2012, 01:50:05 PM »
When we were young enough to be getting our student loans, none of us had the experience or knowledge to evaluate the ramifications of what we were doing. And the people that shoved them on us knew it.

<- I'm young enough to be getting loans now, and choose not to. Me aside, there's that whole third of all college students who graduate without any loans to their names at all. A third of people my age choose not to take on debt in order to graduate from college. Moreover, of the two thirds who do, the typical level of debt, 23k, is not even that significant. It's certainly low enough that it's no trouble to pay it back with a job that doesn't require a degree; it's the kind of money that any gas station assistant manager can afford.

arebelspy

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Re: Paying Off $67k Student Loan Debt
« Reply #24 on: May 21, 2012, 01:54:25 PM »
When we were young enough to be getting our student loans, none of us had the experience or knowledge to evaluate the ramifications of what we were doing. And the people that shoved them on us knew it.

<- I'm young enough to be getting loans now, and choose not to. Me aside, there's that whole third of all college students who graduate without any loans to their names at all. A third of people my age choose not to take on debt in order to graduate from college. Moreover, of the two thirds who do, the typical level of debt, 23k, is not even that significant. It's certainly low enough that it's no trouble to pay it back with a job that doesn't require a degree; it's the kind of money that any gas station assistant manager can afford.

Not worth it grant.  It's hard to convince someone whose life is built on fundamental premises you disagree with (others are out to get me, I am a victim, etc.).  It's easier to lay blame than take responsibility.
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Re: Paying Off $67k Student Loan Debt
« Reply #25 on: May 21, 2012, 02:12:11 PM »
When we were young enough to be getting our student loans, none of us had the experience or knowledge to evaluate the ramifications of what we were doing. And the people that shoved them on us knew it.

<- I'm young enough to be getting loans now, and choose not to. Me aside, there's that whole third of all college students who graduate without any loans to their names at all. A third of people my age choose not to take on debt in order to graduate from college. Moreover, of the two thirds who do, the typical level of debt, 23k, is not even that significant. It's certainly low enough that it's no trouble to pay it back with a job that doesn't require a degree; it's the kind of money that any gas station assistant manager can afford.

Then you're smarter than I was at your age... my congratulations. I bought into the scam hook, line, and sinker. So do most others. As I recall from my own college days, most folks who weren't getting financial aid didn't "choose" that route... their parents made too much money for them to qualify. And their parents footed a huge percentage of the bill. As for the payback, I dunno. If my wife and I were paying on our loans (which aren't really that much, comparatively speaking) we'd be in about $400 a month. That is, to my way of thinking, a crippling amount. Maybe the gas station AM could afford it, but could the part-timer working the night-shift?

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Not worth it grant.  It's hard to convince someone whose life is built on fundamental premises you disagree with (others are out to get me, I am a victim, etc.).  It's easier to lay blame than take responsibility.

You know, sometimes it really is that way. There's an enormous and tremendously powerful industry out there that derives fantastic amounts of wealth and power from pushing people into taking on completely unsupportable levels of debt. This industry exerts enormous influence over the channels of communication, and more or less controls the government via back-door bribes in the form of campaign contributions. It's too big and too powerful to fight directly (hence the futility of OWS), leaving starving it out as our only viable strategy.

As for me, I don't really see myself as a victim. I've taken control of my destiny insofar as I am able, and a huge part of that involves saying fuck you to the holders of our student loans. They even provided the out, although of course it was to serve their own ends. They either instituted something like IBR or you'd have even more people out on the streets making noise. Last I checked, something like 60% of all student loans were either in deferment or default. That was about a year ago. When it came down to a choice of slave to the grind or stop paying, there was only one choice to make. To keep paying meant remaining a victim, leaving my destiny in the hands of somebody else. Not to mention continuing to have my labor extracted in the service of capital, which was no longer palatable to me.

arebelspy

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Re: Paying Off $67k Student Loan Debt
« Reply #26 on: May 21, 2012, 02:23:35 PM »
Fair enough.

Best of luck to you in that decision.
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rjk86

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Re: Paying Off $67k Student Loan Debt
« Reply #27 on: May 21, 2012, 07:37:18 PM »
Different strokes.  I'd rather make 50-80/yr and repay my debts.  Much quicker route to FI for me.  But I don't mind if someone wants to earn < 20 and take advantage of that program.  It's not a bad idea for someone who can't, or won't, earn much.
I'm on the same page.

I've taken control of my destiny insofar as I am able, and a huge part of that involves saying fuck you to the holders of our student loans.
This is probably why my interest rates are so high.  To make up for people that do this ;)

I truly appreciate your feedback as I know you're just trying to help, however, I am not one to borrow money and then not pay it back.  I got myself into this mess, and I'm going to get myself out.  I hope others in similar situations will find this thread, and have it give them hope.  If I can do it, anyone can. 

If I can pay this off completely in 3 years, move up to ~75-90k/year, and stay out of all other debt... Ugh, life will be good.  I could easily max out IRAs and my 401k.  And then have another extra $1.5-2k/mo laying around to invest in mutual funds, ETFs, stocks, or whatever.  Knowing this motivates me beyond anything.  But first things first... that 9.25% loan.

You could look into consolidating your private loans with another lender. If you consolidate, make sure you only consolidate the private loans-not the federal ones- into another private loan, so you don't lose your borrower protections that the federal loans provide. FinAid has information on private consolidation loans. Also remember that you can only consolidate loans once, so make sure that if you do it, you have pretty strong credit.
I've considered consolidating, but I think I prefer to have them separated.  I think paying off one at a time will feel rewarding.  I've also tried negotiating with Sallie Mae to lower my interest rate on the big one.  No luck.  I think once I have a few large payments on it, I'll try again and tell them that I'm going to pay it all off if they don't lower the rate.

With your income and situation, you can totally kill the high-interest rate loans, and I would guess that you can put more toward them monthly than you think. You're doing a great job keeping track of your situation. I bet if you made the $1561 loan payment a line item in your budget, you could easily make that happen and probably beat it because of your extra paychecks. I think you should pay off your debts based on interest rates, but in the end, you should do whatever keeps yourself motivated.
Thank you, I definitely hope I can too!!  Time and pressure.

Jaketucson

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Re: Paying Off $67k Student Loan Debt
« Reply #28 on: June 12, 2012, 09:35:46 AM »
I won't get into the numbers nitty-gritty but hopefully this can help you stay motivated:  While you're working on killing your loan debt, be gentle on yourself.  There are people in worse situations and there are people in better situations.  It sounds like given your plan and your income you will have this tackled in 5 years or less.  And if I read correctly, this will put you around 30 years old.  This is awesome!  I've always been responsible with money, but not really wise if that makes any sense (until the MMM face-punching started for me last year).  Maybe "reckless" is more accurate--never been reckless with money.  I'm 35 and just now realizing I can do a lot more to improve my financial lot in life.  Even if you don't change anything else about your situation, you'll be doing really well for yourself.  Any changes you make will all be bonus!  Patience and consistency...if this is at the root of your action, you'll be doing great.

twinge

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Re: Paying Off $67k Student Loan Debt
« Reply #29 on: June 12, 2012, 10:06:25 AM »
Is there anyone in your social network/family who might want to loan you the cash to pay off the 9.5K loan at a lower rate--say 5%.  If they know and trust you, it could work out as a good situation for you both.  I know everyone always cautions against this, but if you've got a <1 year payout plan, can tell them you will automate payments to them through your bank account etc. it's fairly low risk for them.

rjk86

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Re: Paying Off $67k Student Loan Debt
« Reply #30 on: August 29, 2012, 05:15:54 PM »
I won't get into the numbers nitty-gritty but hopefully this can help you stay motivated:  While you're working on killing your loan debt, be gentle on yourself.  There are people in worse situations and there are people in better situations.  It sounds like given your plan and your income you will have this tackled in 5 years or less.  And if I read correctly, this will put you around 30 years old.  This is awesome!  I've always been responsible with money, but not really wise if that makes any sense (until the MMM face-punching started for me last year).  Maybe "reckless" is more accurate--never been reckless with money.  I'm 35 and just now realizing I can do a lot more to improve my financial lot in life.  Even if you don't change anything else about your situation, you'll be doing really well for yourself.  Any changes you make will all be bonus!  Patience and consistency...if this is at the root of your action, you'll be doing great.
Thanks, this does help.  Sometimes I find that I'm too obsessive about it and am not enjoying everything as much as I could.  So your optimism is very appreciated!

Just to update, to keep myself and others in similar situations hopeful:  I knocked the 9.5k loan, which was at $12k during my first post, down to $9.1k.  I have a $1k "emergency fund" that I plan on putting towards it during my final payment, so I am really looking at it as $8.1k left.  If things go as planned, this will be paid off by the end of February 2013. 

And the total amount is down from ~67k to ~$63.5k.

AJ

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Re: Paying Off $67k Student Loan Debt
« Reply #31 on: August 29, 2012, 06:29:16 PM »
And the total amount is down from ~67k to ~$63.5k.

That's great! Major progress in a short period of time. I must have missed this thread when it was first posted. I know this is months later, but if I were in your position, I would sell the fancy car and buy a reliable older one. 20 miles each way really isn't that far of a commute, and there are loads of different models that would be reliable and cheaper. Its awesome that you don't have a payment, but if you could sell it for $15k and buy one for $5k you'd be able to knock out that horrible 9% loan. Just one man's opinion.. :)

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Re: Paying Off $67k Student Loan Debt
« Reply #32 on: August 29, 2012, 08:34:29 PM »
I suggest selling the corolla if you are serious about paying the debt as soon as possible.  BOOM, you get that biggest and baddest of debt out of the way.  You are a huge step toward your goal, and the benefits to that compound as you avoid the interest that would have accumulated, not just on this loan, but on other loans that get paid back earlier because you can move on to them right away.  Get the cheapest car you feel safe in, and you will be really happy in a couple years when you are finished with the loans.


Having said that, at the very least pull that money out with a car loan, you should be able to get most of the value of that car from a credit union or other local bank at substantially less than 9%.  So if you get a $14,000 loan at 4% for the car and apply that to your highest interest student loans you will avoid a lot of interest.  Just shop around for the best rate possible.  But I still recommend selling and getting something cheap as the only badass route.  And you did sound like you wanted to go badass didn't you?

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Re: Paying Off $67k Student Loan Debt
« Reply #33 on: August 30, 2012, 07:17:13 AM »
Great work! Keep it up!

I know I already suggested consolidating your pivate loans, and you thought that keeping them separate would be more motivating, but I would encourage you to at least shop around at a different lender. Paying 6%-9% to Sallie Mae is criminal. I was in a similar situation with variable rate private loans from Sallie Mae, and I applied for a private consolidation loan at Wells Fargo and got a 4% variable rate (I've had a great experience with Wells Fargo, but you should do your own research). If you don't get a significantly lower rate, then you can just stick to your plan. If you need a mind trick, you can celebrate each time you pay off $5K. If you go this route, remember not to consolidate your federal loans- just the private ones!

rjk86

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Re: Paying Off $67k Student Loan Debt
« Reply #34 on: October 04, 2013, 05:34:01 PM »
Just to update on this; I didn't pay off that debt in February 2013 like I had hoped, but I did pay it off in August 2013.  So it's now gone!  What a beast that loan was at 9.5% APR.

So it looks like in June 2012, I owed ~$63.5k.  That number is now ~$48.5.  So I've paid off $15k since the last time I've posted, all while combating interest rates.  That's averaging ~1k/mo.

But there's more good news.  I've switched jobs a couple months ago and am now only 5 miles from work.  My salary went from $65.5k to $78k, and now I am throwing ~$2.5k/mo at my student loans.  Combating interest, I'll probably knock ~2k off the total per month.

BTW - I still haven't sold the Corolla.  I'm still not sure if I will, considering it gets good gas milage and will last forever considering I'm only 5 miles from work.

Nancy - If you see this, why not consolidate federal loans and only private ones?

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Re: Paying Off $67k Student Loan Debt
« Reply #35 on: October 04, 2013, 05:37:34 PM »
Congrats! I would still urge you to get rid of the Corolla - you're now spending much less time in it, and you're less dependent on it, and there are many cars that get decent gas mileage. Even with the 9.5k loan paid off, you're still locking up nearly five figures of your capital to depreciate on your driveway instead of using $3,000 on the car and having the other $7,000 employees working for you.

Mazzinator

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Re: Paying Off $67k Student Loan Debt
« Reply #36 on: October 04, 2013, 07:44:17 PM »
I have, but I would rather pay everything off in the next 3 years, be debt free, all whilst increasing my income.

Badass!!!

Great job payin that shit off..keep up the good work, and thanks for the update.

Also wanted to say, we have a ton of SLs and we do the whole 0% CC thing, on a small portion, and we just treat it as a loan, not use it like a CC...just something to consider as that interest every month has to be a killer..

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Re: Paying Off $67k Student Loan Debt
« Reply #37 on: October 05, 2013, 09:06:08 AM »
Congrats! I would still urge you to get rid of the Corolla - you're now spending much less time in it, and you're less dependent on it, and there are many cars that get decent gas mileage. Even with the 9.5k loan paid off, you're still locking up nearly five figures of your capital to depreciate on your driveway instead of using $3,000 on the car and having the other $7,000 employees working for you.

And don't forget registration and insurance, which you still pay even if you never drive it.
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EMP

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Re: Paying Off $67k Student Loan Debt
« Reply #38 on: October 05, 2013, 09:20:30 AM »
Congrats! I would still urge you to get rid of the Corolla - you're now spending much less time in it, and you're less dependent on it, and there are many cars that get decent gas mileage. Even with the 9.5k loan paid off, you're still locking up nearly five figures of your capital to depreciate on your driveway instead of using $3,000 on the car and having the other $7,000 employees working for you.

And don't forget registration and insurance, which you still pay even if you never drive it.

I'll pile on and agree with this.

Also have you considered putting your lowest interest loans in forbearance for a little while so you can tackle the higher interest rate loans?

NinetyFour

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Re: Paying Off $67k Student Loan Debt
« Reply #39 on: October 05, 2013, 09:16:15 PM »
And why are you DRIVING 5 miles to work?

MrsPete

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Re: Paying Off $67k Student Loan Debt
« Reply #40 on: October 06, 2013, 03:19:20 PM »
Disagree.  I teach high school, and I hear the information that's shared with seniors year after year.  It is balanced and informative:  Offering loans as an option, but also cautioning about repayment.  Where I do agree with you is that 18 year olds lack the maturity to make these decisions totally on their own.  That's where parents should step in and provide guidance.  The kids I see who are most accepting of loans are the ones who are anxious to attend "a four year party" and who aren't really listening to the whole lecture. They hear, "This is a possibility, and they quit listening. ".
With minimum payments of $765 a month on the private loans (as a guess, if we take $560 plus half of $410), and $650 for rent (which the OP said was the minimum), we're at $17,000 a year already with just two expenses. And that's before food, insurance, expenses, spending money, utilities...

That's where you're down to a hard choice. Either you liquidate the debt in some way or you resign yourself to working for a long, long time.

One thought on the "ethics" involved in student loans. Most of us who have them are victims of a setup carefully designed to shove us out into the working world with crippling levels of debt that can't be written off in bankruptcy. We were lied to about the benefit of what we were buying with the debt, and about how easy it would be to repay later. This took place when we lacked the maturity and experience to recognize the lie for what it was, and were under tremendous societal pressure to accept the lie... it was presented to us by parents, teachers, guidance counselors, and the media as the one and only true ticket to the good life. The only entities who really benefit from this system in any tangible way are banks that underwrite the loans at zero risk to themselves, and colleges which using the easy financial aid as a form of price support are able to price-gouge mercilessly. But you didn't know that when you were 18. Bottom line: you were lied to. Don't feel bad about throwing off the chains that the acceptance of the lie has looped around your neck, any way you can think to do it.

RobertBirnie

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Re: Paying Off $67k Student Loan Debt
« Reply #41 on: October 07, 2013, 09:01:35 AM »
BTW - I still haven't sold the Corolla.  I'm still not sure if I will, considering it gets good gas milage and will last forever considering I'm only 5 miles from work.

Keep the Corolla, you've already paid the piper with the crazy initial value loss of a newer car. No use wasting all that value the car has lost so keep it for twenty years now, since it'll probably last that long at 5 miles a day.

Congrats on the job!

Bank

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Re: Paying Off $67k Student Loan Debt
« Reply #42 on: October 07, 2013, 09:44:08 AM »
BTW - I still haven't sold the Corolla.  I'm still not sure if I will, considering it gets good gas milage and will last forever considering I'm only 5 miles from work.

Keep the Corolla, you've already paid the piper with the crazy initial value loss of a newer car. No use wasting all that value the car has lost so keep it for twenty years now, since it'll probably last that long at 5 miles a day.

Congrats on the job!

OP is STILL paying the piper every day, in the form of loan interest he could be avoiding if he sold the car and applied most/all of the proceeds to his remaining loans.  Not to mention the insurance, registration, and taxes.  This is a debt emergency (although OP has done a great job so far mitigating it in other ways).  The correct financial decision is to sell the car.  Whether it's the "right" decision is up to him, but his sunk costs should not figure into that equation.

Mazzinator

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Re: Paying Off $67k Student Loan Debt
« Reply #43 on: October 07, 2013, 12:49:24 PM »
Quote
Then you're smarter than I was at your age... my congratulations. I bought into the scam hook, line, and sinker.

I think that's one of the ideas on here...most of us, the turds in debt, "bought into" well, everything. Big house, fancy car, Axe deodorant (you know, the one that gets you laid) and all the other consumeristic bullshit (including SL for that big fancy high paying job) We bought into it all and now realize it doesn't equate happiness.

I say stop buying shit, even SL, because i know plenty of people who come to a crossroad in their career, don't like what their doing, and instead of taking the FI route, they "back to school" in search of a job they like...so they can be happy...

Anyways, just my two cents...

gimp

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Re: Paying Off $67k Student Loan Debt
« Reply #44 on: October 07, 2013, 01:02:52 PM »
What is the utility of your car?

Write down everything that you use it for in a three-month period. Sort by days used for that purpose. Throw away anything under, say, two days. You will most likely end up with: driving to work, groceries, maybe friends' houses, and 'sitting in the driveway'.

Then consider: How easily can you do all of those things without a car?

Costs to keep:
- Normal gas costs, maintenance, insurance, registration, and so on.

Costs to sell:
- The amount of money you "lose" from the sale is a weird sort of loss. You lose money in the sense that you get less than you put in, but you also gain money back.
- For any special purposes, consider the cost of renting.
- Chance you will really need a car in the next year, two years, five years; and the cost of buying another [used] car, including taxes, registration, and so on.


In other words, in your PLUS column, you will have the sale price less whatever fees you must pay, plus a monthly/annual "what I used to spend" value. In your MINUS column, you will have the cost of occasional rental + gas + fees, and the cost of buying another used car multiplied by the chance that you will have to buy another used car. In the EMOTIONAL MINUS column, you have the money you feel that you lost on the purchase and resale.

I suspect you will find that your biggest loss will be emotional, not financial.

Don't fall into the SUNK COST fallacy. Just because you already spent X doesn't mean you should continue to spend Y. If you spent X, it really means you should re-evaluate whether it was the right choice, and whether spending more is the right choice, or whether you should cut your losses and get out while you can. Also known as: don't throw the baby out with the bath water.

snuggler

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Re: Paying Off $67k Student Loan Debt
« Reply #45 on: October 07, 2013, 01:20:52 PM »
One option you may want to consider, if you really want to keep the car, is to refinance it to a very low interest loan. My current car loan is at 1.99% (PenFed), and refinancing my car to tap into its equity enabled me to pay off a higher interest student loan off.

I also wanted to tell you to keep plugging away! Student loan repayment was so difficult for me (I struggled to stay motivated, since so much of my $ was going Sallie Mae's way each month), but the feeling of having them gone (or in my case, only keeping the very low interest rate loans) is like nothing else.

Also, since you now live closer to work, any chances of doing a side hustle? That could speed up repayment as well.