Author Topic: Reader Case Study- Back to school to un$&%* student debt?  (Read 4606 times)

EMon78

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Reader Case Study- Back to school to un$&%* student debt?
« on: June 04, 2014, 12:56:51 PM »
I've been obsessively reading this blog over the last few weeks and really appreciate all the time everyone has put in to creating this community, its amazing.

My question has many tangents and "what ifs", But to simplify it, the root question is should I go back to school or find more creative ways to pay off my enormous student loans???? I went through a masters program in an alternative medicine medical field and before I realized it was too late and I got out in to the reality of the "job market" after 4 years of school tuition and living expenses, I had a $90,000 bill with 6.8% interest waiting for me. In the last few years with accrued interest that number is at $126k. I've been on the IBR program which basically entails sticking your fingers in your ears and not dealing with it in hopes that it will disappear somehow....I've in that time also learned that yes, you do get your loan forgiven in 25 years but that you will then owe interest in the total amount and the IRS expects that to be paid immediately as well. It seems to be anyone's guess what this will look like when the first batch of loans start coming around the 25 year mark, but running on the bet that the whole system will collapse first doesn't seem like the best coarse of action. So IBR really isn't a break from any debt, it just shoves it in the closet for a while. You'll see my financial break down below, but basically the field I'm in doesn't seem to allow me to have any real shot at paying the loan off outright, even with living below my means which I do. I also don't qualify for the public loan forgiveness which will take your debt away in 10 years interest free(although yes I've seen that capping that is getting some air play right now anyway, and again anyone's guess what will actually happen). I've thought very seriously about returning to school to become a nurse and the end goal being to become a nurse practitioner. Between the decent pay, eventual job flexibility, encounters I've had with nurses, and making a positive impact on people's lives, it seems the best course if I was to go the western medical route. I really have an interest in Physical Therapy as well but with the cost of those programs and enormous debt it doesn't make sense for me at this point....I'm not sure I would even have enough loans available(they cap at $129k) even if I wanted too. Nursing would also provide the potential of PSLF. I'm a big fan of alternative medicine and love what I do but something's got to give in one way or another. I have always lived on less than my means and figure with the amount I could save on nurses wages, I could probably pay this thing off in 5-7 years. The other option is to not go back to school at all and find a way to bring in more income in another way, but that seems trickier. Another "maybe possible" scenario that I need to investigate more is actually starting a 501c 3 which would qualify me for PSLF, although I'm not sure of the details if its possible to start a non-profit as well as utilize PSLF.

 I very much appreciate any input you all might have on the situation. I'm interested in going in any direction, as reading this blog has got my brain ticking with other ways I could possibly pay this debt off with out school....but i love medicine and that is where my heart is, the idea of stability and flexibility that the nursing profession gives is also very appealing. Being financially independent is appealing, although I think at this stage my first goal needs to be getting this monster debt DOWN!!!

 

Income: I made $25k gross last year, $32,000 right now after 2 years I've salaried myself at this level in my practice. Its typical in my field and practice model that within 4-5 years I could realistically make about $40,000. But that's about it. Its next to impossible to make more than that because I as a practitioner have to be there seeing patients and can only see so many in a day. I also can't be away from the clinic otherwise patients disappear as well. Not as easy as a shop where the owner after getting things stable can hire other people to run the show while I do other things, there's the relationship piece that keeps things a float. I have time away from work to do other things, but its a pretty involved gig and would be easy to spread myself to thin if I'm not careful. There's also a certain fragility to the whole thing, if my clinic closes for whatever reason, there aren't other jobs out there waiting or if I was to move somewhere new I would be starting from scratch.


34 years old, single.

Current expenses:
rent/utilities- $750/month
car insurance-$30
cell-$30
health insurance- $70
3 credit cards, no credit debt on those or any other debts.
child support, travel, gas, gym, entertainment, $900
IBR- $117
grocieries-$300

Total: $2197/month in expenses

Assets: I have $17k sitting in a regular old savings/checking account waiting for a rainy day. I've through about putting it in to a vanguard fund, but am holding off until I decide if I'm going back to school, this would be what pays for it. That's everything, I did rough math in my head and probably saved about $3000 total last year to get to that number.


Thanks so much.


« Last Edit: June 04, 2014, 01:17:47 PM by EMon78 »

MidwestGal

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #1 on: June 04, 2014, 01:28:08 PM »
I don't feel comfortable enough commenting on your financial situation, but it seems as though you're really into what you do right now.

Think long and hard about what you really want to do with your life.  Don't feel like you have to 'sell out' in order to pay off your loans.  Many programs can and will put you in worse debt and suck your time away for years.  I'm also in my early 30s and carving a medical path, so what I was told by someone else in the medical field I'll pass on to you now, and substitute it for whichever field you are considering:

"If you can see yourself doing anything, ANYTHING other than being a (blank), then don't do it."

PT/OT/SLT are extremely hot fields right now, and the GPAs and resumes of incoming classes reflect that.  If you're concerned about autonomy, to my knowledge they don't have nearly as much as a Chiro (especially with certain therapy techniques and which field focus) or Physiatrists.  Being an NP generally involves going the RN/BSN route, then getting a Master's or DNP after that...MORE debt.


TheSimpleLife

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #2 on: June 04, 2014, 01:34:34 PM »
EMon78,

Here are some questions for you:

1.  Can you explain the relationship between you and the clinic you own/work for?  That paragraph didn't make any sense to me even after reading a few times.

2.  IMHO, I would not go back to school for any of the career paths mentioned.  Physical therapy and nursing (even nurse practitioner) are not guarantees to success.  B/C you are already at $126K and rising of student loans, it seems too risky to return at this point in the journey.

3.  As far as your expenses, switch to Republic Wireless for your cell phone.  Can you reduce the $900 a month for all that other stuff?  IMHO, gym should be out until you're on better financial ground.  You don't need to pay anyone to exercise.  I'm also sure you could get the groceries down to $200 or less if it is just you.  All in, that should be a $200/month total savings and probably more if you want.

4.  The biggest obstacle is obviously income.  Hard to provide suggestions without knowing more about your current work situation which I asked about in #1.

Hang in there.

Cpa Cat

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #3 on: June 04, 2014, 02:02:10 PM »
Quote
IRS expects that to be paid immediately as well

Just FYI - this isn't always true. You can normally arrange a payment plan with the IRS at a very reasonable interest rate.

MayDay

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #4 on: June 04, 2014, 05:36:15 PM »
I have two friends who are chiropractors and jointly run their own clinic. They are married so between them they have a lot of debt. They were in the first year if the IBR program, and feel like total guinea pigs. They also hate how if they increase their income from year to year they can have a huge payment jump.

Long story short they are committed to staying in the profession, and are trying to come up with a strategy. Should they pay themselves more and pay down the loans, or just stockpile money for an eventual tax bill? Should they keep the money in the business? How can they save for kids college (their three kids will be hitting college right when they are at the 25 year mark).

Basically it sounds like a nightmare, and you are not alone in worrying about it.

Argyle

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #5 on: June 04, 2014, 06:29:20 PM »
There are a ton of higher-paying jobs you can get without another degree and more debt.  If you're not going to continue being in the field you're in now, do NOT go into debt training for another field.  That's the path that got you into this situation.  Get one of the thousands and thousands of jobs that you do not need a degree for.  Work your way up.   Plus going back to school would mean a dip in income for a while, which would also put you further back than you are.  Your motto above all should be: NO MORE TAKING ON DEBT.

EMon78

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #6 on: June 06, 2014, 02:57:47 PM »
Thanks all for the input, really appreciate it. I guess the main reason I considered nursing is that the cost of schooling isn't actually that high. From what I can tell, one could expect to pay between $10-15k for the whole program...the income jump that would provide me makes me think this could actually be viable. I have the money to pay for it outright as well, maybe still need some very small student loan help but nothing substantial. Not as insane as going to a physical therapy program and tacking another $100k of debt on. Nursing and medicine in general really interests me and the pay/freedom of movement this job provides also is appealing. That being said, this blog has really opened up the idea of finding side gigs or some other way to increase my income with out having to leave a field I do love.

A lot of it still comes back to.....well I don't need to freak out right this second or run to some high paying career, but really, what the f&** am I going to do about all this debt I already have!? I haven't seemed to find anyone on IBR who actually doesn't make a lot of money with any real solution for dealing with this other than closing their eyes and plugging their ears for now.

A side question for anyone who cares to comment- Reading my situation, what would you do with the pot of $17k I have sitting in a savings account? I would probably keep about $5k in there for emergency on-hand money, so $12k realistically. Invest in Vanguard fund seems to keep coming up for me. Also, would it be better to put savings in to a Vanguard fund as opposed to a Roth IRA for tax and income level purposes with the IBR when the 25 year tax payment mark roles around?

@thesimplelife Re: the clinic- I meant to say that I'm the owner, but being that it is a client relationship type of set up, I have to be there for it to make money. Even after a few more years of stability and regular clientele, if I take off for too long(even a few weeks at a time) my clientele levels can drop dramatically adn its a high volume/low cost situation with a pretty tight profit margin as it is. Different than an industry like say a coffee shop where it doesn't necessarily matter as much who is at the counter serving coffee on a given day and that you can hire people to do that end freeing yourself up for other projects/jobs/etc. As far as phone bill....I'll probably switch to Republic whenever my android breaks down. I'm on page plus right now and it only comes to $30/month. So I'll wait to buy the Republic phone and make the switch until its necessary.


Thanks again ya'll, you're the best.
« Last Edit: June 06, 2014, 03:22:04 PM by EMon78 »

Argyle

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #7 on: June 06, 2014, 03:32:21 PM »
If you pay even $10,000 for a nursing program, that is $10,000 extra in debt, even aside from the money you wouldn't be making because you'd be in school.  Because even if you pay for it out of pocket, that's $10,000 of your $126,000 debt that you're not paying.  At 6.8%.  You have a hair-on-fire debt emergency.  Adding $10,000 to it should only be in life-or-death emergencies. 

The same with investing!  You shouldn't be playing with investments with your $17,000.  You have a guaranteed 6.8% return on your investment by paying off debt.  To get a 6.8% return (after taxes!) you'd have to do well in the stock market, and if there were a guaranteed way to get it, everyone would be piling in.  And what would be your plan?  Let's say you invest for five years -- then do you take a pile of money out of the stock market (I hope the market's not down) and pay off the debt?  After five more years, the debt will be $168,840.  That part, at least, is guaranteed.

To my mind the only sensible thing to do is to use $12,000 of your savings to pay off debt.  Then start looking for ways to increase your income without going into even more debt.  You cannot afford any more debt.

TheSimpleLife

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #8 on: June 06, 2014, 08:19:13 PM »
@thesimplelife Re: the clinic- I meant to say that I'm the owner, but being that it is a client relationship type of set up, I have to be there for it to make money. Even after a few more years of stability and regular clientele, if I take off for too long(even a few weeks at a time) my clientele levels can drop dramatically adn its a high volume/low cost situation with a pretty tight profit margin as it is. Different than an industry like say a coffee shop where it doesn't necessarily matter as much who is at the counter serving coffee on a given day and that you can hire people to do that end freeing yourself up for other projects/jobs/etc. As far as phone bill....I'll probably switch to Republic whenever my android breaks down. I'm on page plus right now and it only comes to $30/month. So I'll wait to buy the Republic phone and make the switch until its necessary.

EMon78,

Maybe I'm still missing the point and apologize if this sounds harsh, but if you own the clinic why are you struggling so much to bring in additional income?  Lack of demand from potential customers?  Is there some kind of restrictions on what you can charge?  Why not raise prices?

If the business is viable, it would seem you are in the best position possible.  Once you get to a certain break even with the biz, everything you make on top of what's already coming in goes in your pocket (less variable expenses and taxes of course).

If you can't make a go of this business (i.e. no matter how hard you try, people just aren't willing to pay for it), it is best to get out now and move on.  I know that sounds harsh, but better to find something you're able to do for more money than to continue toiling away on a biz/passion/desire that isn't going anyway.

As to the $17K, I agree with Argyle.  With student loans at 6.8%, no reason to even consider "investing for a higher return."  Take the guaranteed return and move on.

Janie

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #9 on: June 06, 2014, 08:46:31 PM »
There are a ton of higher-paying jobs you can get without another degree and more debt.  If you're not going to continue being in the field you're in now, do NOT go into debt training for another field.  That's the path that got you into this situation.  Get one of the thousands and thousands of jobs that you do not need a degree for.  Work your way up.   Plus going back to school would mean a dip in income for a while, which would also put you further back than you are.  Your motto above all should be: NO MORE TAKING ON DEBT.

If you pay even $10,000 for a nursing program, that is $10,000 extra in debt, even aside from the money you wouldn't be making because you'd be in school.  Because even if you pay for it out of pocket, that's $10,000 of your $126,000 debt that you're not paying.  At 6.8%.  You have a hair-on-fire debt emergency.  Adding $10,000 to it should only be in life-or-death emergencies. 

The same with investing!  You shouldn't be playing with investments with your $17,000.  You have a guaranteed 6.8% return on your investment by paying off debt.  To get a 6.8% return (after taxes!) you'd have to do well in the stock market, and if there were a guaranteed way to get it, everyone would be piling in.  And what would be your plan?  Let's say you invest for five years -- then do you take a pile of money out of the stock market (I hope the market's not down) and pay off the debt?  After five more years, the debt will be $168,840.  That part, at least, is guaranteed.

To my mind the only sensible thing to do is to use $12,000 of your savings to pay off debt.  Then start looking for ways to increase your income without going into even more debt.  You cannot afford any more debt.

Please listen to this advice!

Also, your budget lists "child support, travel, gas, gym, entertainment, $900." How much is child support and how much goes to optional expenses?

EMon78

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #10 on: June 07, 2014, 01:29:43 PM »
@Argyle- Thanks, I totally hear what you're saying, my debt is crazy enough as it is. I needed to hear that. There's definitely a "more education will save me" fear response that comes up for me with this stuff and that's not good to run with. I could get more creative in figuring out other ways to bring income in rather than going back to school. Especially if I can get my income with my job now up to $40k/year with in the next 2-3 years. I don't know that amount of income in itself is enough to actively pay down the debt, but I can definitely live on a good chunk less than that, That would HAVE to happen though, even living on 30k/year with 10k for savings would take 15 years, maybe more???(ugh). My question with throwing my current savings at the debt though seems to leverage on whether or not I have, or will sooner than later have, an income level that will actually pay the debt down otherwise I'm just throwing money away on an out of control interest rate and debt that just keeps climbing. With IBR its weird, because you want to keep your income as low as possible really so that your monthly payments are as low as possible since its all about waiting the 25 year clock out. So to go that route and not paying more than I have to towards the debt, and then just hope in 25 years that I'll somehow have a way to deal with the tax bill or that there will be total economic collapse. This is one option....or come up with a plan now that will allow me to throw enough money at the debt to pay it off sooner than 25 years and at a lower cost in the long run. Rough math looks like either way I'm paying $100k + which makes me wonder the worth in busting my ass and throwing ALL my savings at it for the next 15 years unless its a big savings and I can do it in a quicker time frame. In that case I would put the 17k towards the debt in a heart beat. 40k/year seems to be a kind of tipping point where its better to either stay below that income level(and the lower the better) so that in 25 years you've paid the lowest total amount possible, or making as much more money than 40k as you possibly can and paying this thing off like the hair on fire emergency it is.

Short answer I guess is I need to figure out how to get my income up up up, especially if its over the table income. This would be preferable to me. Otherwise being poor pays the most. I stay on top of the interest payments so they don't capitalize to minimize the tax hit, and then just sit out the clock....



@thesimplelife- No offense taken, throw everything you got! It is a successful clinic, maybe not in the traditional capitalist sense though...its a model set up specifically to create access and affordability to patients, support communities, and provide stable jobs for practitioners in a field of work with a very high drop out rate. Its getting a little off topic so I'll keep it simple, but its a social business along the lines of the work of Muhammad Yunis. Hard $$$ facts though- Since I can only see so many people in a day, even with a full clinic the clinic's income potential has a ceiling. The only other answer of course would be to raise the prices, but a lot of us similar clinics share all of our data and the clinics who have played with raising the prices have large and part shown that it doesn't actually pan out to more money over all.....Client levels actually drop off a bit, and you end up making about the same amount, but seeing fewer patients which is not part of the goal obviously. This model is great and satisfying in a lot of ways that reach beyond making money. Data for the last few years has shown that 40k/year is about what a successful clinic owner can expect to make. The one snag is of course that the income is completely sustainable for most if you don't also have a 100k+ loan sitting on your head. More and more of us do these days as tuition has skyrocketed out of control. No one in my field has figured out how to deal with this yet...trying to find the balance between holding strong to values, doing what I love, and dealing with my economic realities.... I don't want to leave this field unless I really have to. That's what all this mulling is about I guess. Thanks for your thoughts.


@Janie- I'm pretty frugal, always have been. $500 or so is child support and travel related to that, not optional. Going to look for more ways to bring the other optional spending down more though, thanks for the input.
« Last Edit: June 07, 2014, 02:01:43 PM by EMon78 »

Daleth

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #11 on: June 07, 2014, 02:26:53 PM »
@thesimplelife- No offense taken, throw everything you got! It is a successful clinic, maybe not in the traditional capitalist sense though...its a model set up specifically to create access and affordability to patients, support communities, and provide stable jobs for practitioners in a field of work with a very high drop out rate. Its getting a little off topic so I'll keep it simple, but its a social business along the lines of the work of Muhammad Yunis. Hard $$$ facts though- Since I can only see so many people in a day, even with a full clinic the clinic's income potential has a ceiling. The only other answer of course would be to raise the prices, but a lot of us similar clinics share all of our data and the clinics who have played with raising the prices have large and part shown that it doesn't actually pan out to more money over all.....Client levels actually drop off a bit, and you end up making about the same amount, but seeing fewer patients which is not part of the goal obviously. This model is great and satisfying in a lot of ways that reach beyond making money. Data for the last few years has shown that 40k/year is about what a successful clinic owner can expect to make.

Do you mind saying what your specific field is (acupuncture, naturopathic medicine etc.)? And also clarifying what "the clinic" is--I mean, is it an LLC or something that you own? And where is it based--in a building that you own, an office that you rent, or what?

I'm asking because it would help to brainstorm possible solutions. "The data" showing that $40k is the max income a clinic owner can make is presumably based on a particular model of how a clinic is run. But do you have to run yours that way? What if, for instance, you owned or leased a building and then rented out (or subleased) some offices that you weren't using to complementary practitioners--say, massage therapists or even an organic/holistic beauty spa? Then you would clearly be able to raise your income without changing the number of patients you see.

Also, I ask about your field because acupuncture is one alt health field--and there may be others--where you can see multiple patients at once; I've been to acupuncturists who stagger their one-hour appointments so a new patient arrives every half hour, because part of the acupuncture treatment involves the patient just lying there with needles in them, and the acupuncturist obviously doesn't have to sit around while that's happening--they could see a new patient. Could something like that enable you to see more patients?

rmendpara

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #12 on: June 07, 2014, 07:01:43 PM »
It's probably not what you want to hear, and I applaud you doing what you love, but you made a terrible decision taking on that kind of debt knowing your income ceiling was ~$40k/yr.

As far as the math goes, you are paying $8.6k/yr in just interest. This means that if you pay $8.6k each year, for the next 25 years, your balance will still be $126k (no principal reduction).

I know it sucks, but find a 2nd or 3rd job. If this is really your calling and dream come true, then make it happen. No excuses.

You mention that it's your incentive to keep your income low? False. That doesn't help you pay off your loans. It lowers your payments, which if less than the annual interest, will INCREASE your loan balance.

Be a work-week doctor (or whatever practitioner type) and a weekend plumber/bartender/landscaping or anything to bring your income up.

If you pay ~$15k/yr, you will be debt free in less than 18 years (~8k/yr interest... so $7k/yr payoff... which will be more principal as time goes on.. so probably more like 16-17 years).

Why would you wait until 25 years? That's almost your ENTIRE CAREER that you'll be making less than $40k. How will you live? How will you retire, if ever? Will you work until you're dead? Is that the life you imagined for yourself?

No more complaining. If you work less than 60 hours per week, stop complaining. I know plenty of people who work more than that for decades and make much, much more. If you make less, there's really no excuse to not be working very hard to pay off your debt.

If you spend the rest of your adult life in debt, you'll NEVER be free to truly live your passions. You'll be a slave to your debt until the day you die.

I know you say you love what you do, but it's time to admit and accept the fact that you made a poor (financial) decision.

Now... it's time to do something about it. To me, spending 25 years making $30k/yr doesn't sound like anyone's dream... just saying.

I hope you figure out what you want and go after it.

I'm rooting for you. Good luck!

bokonon

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #13 on: June 08, 2014, 06:30:37 AM »
Obviously the best scenario is if you could somehow increase your income to $60k+ without any more schooling and pay off your IBR loans ASAP.  As suggested above become a bartender or waiter or something on the weekends.

If that is impossible for some reason, I wonder if you might be able to keep your clinic running (maybe with another practitioner?) and get a nursing license without incurring any additional debt? 

My sister is a nurse and I work with lots of people who want to become nurses and it seems like there are a lot of flexible options.  People I work with often get their associates with primarily night / online classes to become a LPN, get hired as a nurse, and then have the workplace pay for their BSN schooling.

Alternatively my sister did an accelerated nursing program for her BSN.  She already had a bachelors, and if I recall it only took 14 months of full time schooling to earn her BSN.

If there is some economical way for you to get your nursing degree / license (LPN or BSN), it may allow you to have basically 2 full time jobs afterwards.  Some hospitals have weekend incentive nursing positions.  At my sister's employer under this program agreed to work 3/4 or 4/4 weekends per month and got paid a higher hourly rate and full benefits even through they worked less than 40 hours per week. 

If you found one of these positions you could do your clinic during the week (say 10 hour days M-Th, Friday off, and nursing during the weekend), enjoy two full time pay checks, and pay off the loans (relatively) quickly I imagine.  It would take working non-stop for several years but you would have flexibility.

It would be a ton of work but people do it.  You would have to look at numbers: cost of education, lost income during that time, interest on loans during that time, disposable income after becoming a nurse (after taxes) to throw at the loans, etc to really decide.  But I think it would be possible.   For reference, I work with one person who for 26 years has worked a full time job during the week and a second weekend job on both weekend days.  I consider him to be insane, but it is possible :).

This scenario hinges on your access to a low cost nursing school and weekend (day) employment.  If you had to start out on nights I don't think you could do it for any length of time.  You'll have to do some research and some math to decide if this is feasible for you.

Obviously are a lot of "what ifs?" with this scenario.  That means risks.  As I mentioned at the start, it would probably make for a better life to become a weekend bartender or waiter and use that income to pay off your loans instead.

If you don't go back to school but decide you want to pay off your loans instead of trying to ride out IBR, put your 12k toward your loans, ASAP.  12,000*0.068 = 816 / 365 = $2.24 per day that you would be saving right now by putting this money (which is doing nothing) to work on your loans.  I use this calculation all the time to help motivate me to pay off my 134k in student loans. 

Good luck!  No matter what you are in a *much* better position because of your discovery of MMM and awakening financial awareness!  You could have kept your head in the sand and been in this same situation 20 years from now!

Thegoblinchief

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Re: Reader Case Study- Back to school to un$&%* student debt?
« Reply #14 on: June 08, 2014, 07:06:17 AM »
Can you hire additional practitioners? Spreading your overhead can help you net more income from the business.

Do side jobs for extra income. Bonus if it's something you enjoy doing, so it doesn't wear you down.

IBR is a false economy. You need to pay off the debt. it's YOURS. Find the money however you can.

Between my wife and I we currently pay 25% of our take home on the standard repayment schedule. Once a different, worse debt is paid off we will voluntarily increase this to 40ish%.