Student loans on the horizon -Help Wanted-

[Kev]

Hi everybody,

When I graduated from college, I consolidated some of my loans with Affinity FCU and got a lower interest rate, from 6% to 2.5%. I couldn't include some of my loans(DOE Sallie Mae) and it's a variable rate but it's been working out very well for me so far.

In 6 months my girlfriend will have to start making her loan payments which comes out to around $900/month (over $100k total). With her current income, she's going to have a hard time paying that $900/m so I was wondering what options she has to: extend the total years of payments for now until she gets a higher income, consolidate for a lower interest rate, both, or anything! I have to find out what type of loans she has and their interest rates but any advice? suggestions? things to avoid? I would tell her to consolidate with Affinity like I did but they cause more trouble for me than they're worth.

Quick edit: With her 30k salary she CAN support her loans but with her other living expenses (gas, insurance, cell, etc.) it's going to be rough saving as much as she'd like to put towards her high interest loans. I'm looking for a way to get lower interest rates to reduce the total cost over time and possibly extend the years(I know extending will end up as a greater cost in the end but it may be necessary for now to knock out the highest interest rate loans sooner).

[nawhite]

One bit of advice, for loans taken out after 2006, consolidating through a federal program will not lower your interest rate and is thus usually a bad idea. For loans since 2006, they figure out what your weighted average interest rate is and just make the interest rate on your consolidated loan that number.

So if you have 2 loans, one for 20k at 6% and one for 10k at 3%, when you consolidate through a federal program, the interest rate would be 5% (not 4.5% and not some nebulous number based on "today's low interest rates").

As for other information, I love AES's website for information about payment plans: http://www.aessuccess.org/manage/repaying_your_loan/repayment_plans.shtml
and forgiveness programs: http://www.aessuccess.org/manage/repaying_your_loan/loan_forgiveness_and_discharge/index.shtml

[mbl]

In addition to her current teaching job, she should consider a second job.

Kevin......$900/month that she can't even afford to pay on her own salary?
What about her other living expenses?  Gas, insurance, cell, etc?

If you were to marry her you'd have to cover all the expenses....all of them!

I would strongly urge you to
#1 Lay out the full financial picture and live with your individual parents and address this debt. 
#2 Delay ANY wedding talk for another 2-4 years.      You have no business getting married at this juncture.  If you both busted your rear ends...you could get out of debt in about 4 years.  Then you could start thinking about marriage/houses/etc.
#3 The very last thing that you are in a position to do is buy a house.   I find it amazing that you were talking about buying a house?  You can't afford to rent right now, no less buy.  Leverage the fact that you can live at home.   Use that opportunity to pay off all of your debt.   You could then help your GF address her debt. 

I think between the 2 of your there's what...about $130k of school loan debt? 
Until that is paid, you'll be a slave to it.   Together that must be about $1200/month?

This is what was saying in your other thread.....slow it down.
Your top priority right now should be to contribute to your 401(k) at work and make your debt go away.
It's harsh but if you give this advice a lot of though and hopefully take it......you'll save yourself a lot of heartache down the road.



You can't afford it and she's not ready to get married as she can't even support her school loans?

[Quark]

If she calls Sallie Mae they may defer it to "interest only" for 2 years.

[nawhite]

In 6 months my girlfriend will have to start making her loan payments which comes out to around $900/month (over $100k total). With her current income, she's going to have a hard time paying that $900/m

I'd also recommend a test run for the next 6 months if she is employed. See if she can put $900/month into a Roth IRA every month between now and when the student loans come due. Treat it like a non-negotiable expense (because it will be). If the only way she makes it work is by using her emergency fund, then you'll at least have a better idea of how much she can pay. Then when you switch to a different payment plan, you'll know what's reasonable the first time you switch.

[quilter]

After reading others peoples comments I read your other posts.

I don't see how you can justify even thinking About paying for a wedding with your kind of debt.

If you really are thinking about spending the rest of your life with this person, you need to seriously think and talk about money with her. Make a plan. Like you pay off all your debt and start saving for a house. For her, aggressively start to pay down the highest interest loans. Get a second job, live at home, do whatever you can do. If you make a plan, commit to it and both follow it, that will enable you to show each other that you are ready to make the kind of commitment marriage is.  The wedding is one day. A marriage is forever. Your debt will be forever weighing you down and will cause a huge amount of stress in your life if you don't address and deal up front.

[Kev]

In addition to her current teaching job, she should consider a second job.

Kevin......$900/month that she can't even afford to pay on her own salary?
What about her other living expenses?  Gas, insurance, cell, etc?

If you were to marry her you'd have to cover all the expenses....all of them!

I would strongly urge you to
#1 Lay out the full financial picture and live with your individual parents and address this debt. 
#2 Delay ANY wedding talk for another 2-4 years.      You have no business getting married at this juncture.  If you both busted your rear ends...you could get out of debt in about 4 years.  Then you could start thinking about marriage/houses/etc.
#3 The very last thing that you are in a position to do is buy a house.   I find it amazing that you were talking about buying a house?  You can't afford to rent right now, no less buy.  Leverage the fact that you can live at home.   Use that opportunity to pay off all of your debt.   You could then help your GF address her debt. 

I think between the 2 of your there's what...about $130k of school loan debt? 
Until that is paid, you'll be a slave to it.   Together that must be about $1200/month?

This is what was saying in your other thread.....slow it down.
Your top priority right now should be to contribute to your 401(k) at work and make your debt go away.
It's harsh but if you give this advice a lot of though and hopefully take it......you'll save yourself a lot of heartache down the road.



You can't afford it and she's not ready to get married as she can't even support her school loans?

Ok guys here's a quick edit. With her 30k salary she CAN support her loans but with her other living expenses (gas, insurance, cell, etc.) it's going to be rough saving as much as she'd like to put towards her high interest loans. I'm looking for a way to get lower interest rates to reduce the total cost over time and possibly extend the years(I know extending will end up as a greater cost in the end but it may be necessary for now to knock out the highest interest rate loans sooner).

[Kev]

After reading others peoples comments I read your other posts.

I don't see how you can justify even thinking About paying for a wedding with your kind of debt.

If you really are thinking about spending the rest of your life with this person, you need to seriously think and talk about money with her. Make a plan. Like you pay off all your debt and start saving for a house. For her, aggressively start to pay down the highest interest loans. Get a second job, live at home, do whatever you can do. If you make a plan, commit to it and both follow it, that will enable you to show each other that you are ready to make the kind of commitment marriage is.  The wedding is one day. A marriage is forever. Your debt will be forever weighing you down and will cause a huge amount of stress in your life if you don't address and deal up front.

Very good points here quilter. Right now I'm trying to find the most efficient ways to get her high interest loans paid off which is the main reason I made this topic. Of course all advice is welcome but my task right now is looking into the best way to pay off those high interest loans.

[Thegoblinchief]

Put the student loans on either IBR or the graduated payments instead of the standard until the worst debt is eliminated.

[MrsPete]

Someone said she's a teacher?  I'm qualified to comment on this topic:

- Is she teaching in a Title One school?  Could she teach in a Title One school?  I'm not sure whether that can eliminate her loan or reduce it, but she should investigate this.

- Teachers can often pick up small extra work tutoring, working ball games, administering standardized tests, or teaching online.  She should investigate these possibilities; however, the first three years teaching are tough enough without adding extra responsibilities. 

- She can "up" her salary with a masters' degree or a National Board certification.  It'd be smart to do this while she's young so she'll have more years to take advantage of the higher salary. 

- Teachers don't tend to get a "match" with 401Ks, so that may not be her top priority right now; however, she should start SOME retirement savings.  She will never again be this young and have this many years ahead of her to let compound interest work its magic -- yes, this is a balancing act between the loans and the need to begin saving for retirement savings, but she's already made the choice to take out the loans, so she's obligated to make this work now -- and that will probably mean doing without some things she wants. 

- She should investigate the details of her state's retirement plan.  LOTS of people don't bother to do this until they're close to retirement, but making good choices along the way can make a difference at retirement time.  I'll give an example from my own state:  In high school we teach two semesters, and teachers who have a baby tend to "take off" one semester.  The school holds the job, and it seems like an easy choice . . . however, young teachers who don't pay attention don't realize that to get a year of credit towards the pension, they must work MORE than half a year.  So working a semester + 1 extra day = a year towards the pension, whereas working exactly one semester = no credit towards the pension.  See how a few minutes of research can make a real difference in a teacher's life?  Need another example?  It's important to realize that teacher pensions are based upon staying IN THE STATE.  If she moves to another state, it will have serious ramifications to her pension. 

- Having said that, she should pay close attention to what's happening in schools.  The likelihood of her working 30 years in a traditional classroom like we all attended is . . . roughly zero.  She needs to know what's happening in your area.  In my state, the legislature seems to be trying to phase out traditional public school in favor of charter schools and online education, which is MUCH cheaper in the long run.  She should pay attention to what will happen to her retirement if she changes her job within the school system.   

[NV Teacher]

Someone said she's a teacher?  I'm qualified to comment on this topic:

- Is she teaching in a Title One school?  Could she teach in a Title One school?  I'm not sure whether that can eliminate her loan or reduce it, but she should investigate this.

I took advantage of the Teacher Loan Forgiveness program several years ago.  After working five years at a Title 1 school I filled out a simple one page application, got it signed by my principal, mailed it to my lender, and had $5000 forgiven off my loan.  If she is a Special Ed. teacher she can get up to $17,500 forgiven.  It's worth a try. 

[nawhite]

Ok guys here's a quick edit. With her 30k salary she CAN support her loans but with her other living expenses (gas, insurance, cell, etc.) it's going to be rough saving as much as she'd like to put towards her high interest loans. I'm looking for a way to get lower interest rates to reduce the total cost over time and possibly extend the years(I know extending will end up as a greater cost in the end but it may be necessary for now to knock out the highest interest rate loans sooner).

Thanks for clarifying. I really like the idea of changing payment plans on the low interest student loans in order to pay the high interest ones first.

The best payment plan for this specific case will either be the new "Pay as You Earn" Plan (PAYE) or the "Graduated payment plan."

With PAYE, she'll pay no more than 10% of her income greater than 150% of the poverty line. With graduated, she'll start just paying the interest and slowly ramp up the amount of the payment. I found an even better site for information: https://studentaid.ed.gov/repay-loans/understand/plans

Other ideas for paying student loans faster:
Use the Upromise program to pay credit card rewards towards your loans
refinance to a lower rate with Sofi: https://www.sofi.com/rates/
Cut expenses farther: cell phones cost $10/month, she could get a roommate (you perhaps? :-)
Get/create a second job

[quilter]

After reading others peoples comments I read your other posts.

I don't see how you can justify even thinking About paying for a wedding with your kind of debt.

If you really are thinking about spending the rest of your life with this person, you need to seriously think and talk about money with her. Make a plan. Like you pay off all your debt and start saving for a house. For her, aggressively start to pay down the highest interest loans. Get a second job, live at home, do whatever you can do. If you make a plan, commit to it and both follow it, that will enable you to show each other that you are ready to make the kind of commitment marriage is.  The wedding is one day. A marriage is forever. Your debt will be forever weighing you down and will cause a huge amount of stress in your life if you don't address and deal up front.

Very good points here quilter. Right now I'm trying to find the most efficient ways to get her high interest loans paid off which is the main reason I made this topic. Of course all advice is welcome but my task right now is looking into the best way to pay off those high interest loans.

Point taken. On discussion boards it is difficult to isolate one topic, especially on this one, because getting to where a lot of people are, either saddled with debt, journeying towards financial freedom or totally free of having to work, is so multifaceted.

curious about one thing.  Is she actively trying to figure this all out herself?  I would think that while at school there must be some kind of financial office. Other grads must also be facing this prospect as well as they approach graduation.  What solutions has she come up with?   I am really not trying to be a pain.  Just with these huge loans you really have to be committed if you want to get them paid off and be able to move on to things like having children, owning a house or even travel etc. which most young women want.

Have you ever heard of snowballing debt?  Google it. You either throw everything at the highest interest debt, or sometimes the lowest balance. One number one is paid off you throw everything at the next in line. Continue on.

[Kev]

After reading others peoples comments I read your other posts.

I don't see how you can justify even thinking About paying for a wedding with your kind of debt.

If you really are thinking about spending the rest of your life with this person, you need to seriously think and talk about money with her. Make a plan. Like you pay off all your debt and start saving for a house. For her, aggressively start to pay down the highest interest loans. Get a second job, live at home, do whatever you can do. If you make a plan, commit to it and both follow it, that will enable you to show each other that you are ready to make the kind of commitment marriage is.  The wedding is one day. A marriage is forever. Your debt will be forever weighing you down and will cause a huge amount of stress in your life if you don't address and deal up front.

Very good points here quilter. Right now I'm trying to find the most efficient ways to get her high interest loans paid off which is the main reason I made this topic. Of course all advice is welcome but my task right now is looking into the best way to pay off those high interest loans.

Point taken. On discussion boards it is difficult to isolate one topic, especially on this one, because getting to where a lot of people are, either saddled with debt, journeying towards financial freedom or totally free of having to work, is so multifaceted.

curious about one thing.  Is she actively trying to figure this all out herself?  I would think that while at school there must be some kind of financial office. Other grads must also be facing this prospect as well as they approach graduation.  What solutions has she come up with?   I am really not trying to be a pain.  Just with these huge loans you really have to be committed if you want to get them paid off and be able to move on to things like having children, owning a house or even travel etc. which most young women want.

Have you ever heard of snowballing debt?  Google it. You either throw everything at the highest interest debt, or sometimes the lowest balance. One number one is paid off you throw everything at the next in line. Continue on.

Her school wasn't any help which caused her to feel overwhelmed which is why I created this thread. Her parent's can't offer any assistance either so she doesn't really know what to do, I have some experiance because I've consolidated and paid off a few of my high interest loans already. I haven't heard of snowballing debt but it looks like I have been practicing it! I paid off my loans that had the highest interest rates and I'm working my way to the low interest loans. One day I'm going to sit down with her and map out all of her loans and put them in order. There's a great feeling of accomplishment after paying off a loan!

[nawhite]

Her school wasn't any help which caused her to feel overwhelmed which is why I created this thread. Her parent's can't offer any assistance either so she doesn't really know what to do, I have some experiance because I've consolidated and paid off a few of my high interest loans already. I haven't heard of snowballing debt but it looks like I have been practicing it! I paid off my loans that had the highest interest rates and I'm working my way to the low interest loans. One day I'm going to sit down with her and map out all of her loans and put them in order. There's a great feeling of accomplishment after paying off a loan!

Interestingly enough, you described a debt avalanche as opposed to a snowball.

With the snowball, you pick your smallest debt dollar-value-wise and pay that one off first regardless of interest rate. This method is mathematically inferior from a total money spend on interest standpoint, but can be emotionally better at getting people on board with getting rid of debt because they kill small debts fast. It is also good from a cashflow perspective. By killing small debts fast, you free up cashflow which can help in case you are hit with an emergency.

An avalanche, on the other hand is where you pay off the highest interest rate debt first because that is the best way to do it mathematically. The problem here is that if you aren't 100% on board with killing debt, it can be disheartening to watch a giant debt (with a high interest rate) not change much and see your overall payments stay the same while you pay it off.

Different methods work better for different folks. Maybe starting with a small-debt-first snowball can help everyone get on board with how great it feels to pay off debt?

[Kev]

Her school wasn't any help which caused her to feel overwhelmed which is why I created this thread. Her parent's can't offer any assistance either so she doesn't really know what to do, I have some experiance because I've consolidated and paid off a few of my high interest loans already. I haven't heard of snowballing debt but it looks like I have been practicing it! I paid off my loans that had the highest interest rates and I'm working my way to the low interest loans. One day I'm going to sit down with her and map out all of her loans and put them in order. There's a great feeling of accomplishment after paying off a loan!

Interestingly enough, you described a debt avalanche as opposed to a snowball.

With the snowball, you pick your smallest debt dollar-value-wise and pay that one off first regardless of interest rate. This method is mathematically inferior from a total money spend on interest standpoint, but can be emotionally better at getting people on board with getting rid of debt because they kill small debts fast. It is also good from a cashflow perspective. By killing small debts fast, you free up cashflow which can help in case you are hit with an emergency.

An avalanche, on the other hand is where you pay off the highest interest rate debt first because that is the best way to do it mathematically. The problem here is that if you aren't 100% on board with killing debt, it can be disheartening to watch a giant debt (with a high interest rate) not change much and see your overall payments stay the same while you pay it off.

Different methods work better for different folks. Maybe starting with a small-debt-first snowball can help everyone get on board with how great it feels to pay off debt?

That's true. I was lucky enough to have my highest interest loans also be some of my smallest dollar-value loans so I could pay those first. Snowball method is the best choice for her for sure!

[mbl]

In addition to her current teaching job, she should consider a second job.

Kevin......$900/month that she can't even afford to pay on her own salary?
What about her other living expenses?  Gas, insurance, cell, etc?

If you were to marry her you'd have to cover all the expenses....all of them!

I would strongly urge you to
#1 Lay out the full financial picture and live with your individual parents and address this debt. 
#2 Delay ANY wedding talk for another 2-4 years.      You have no business getting married at this juncture.  If you both busted your rear ends...you could get out of debt in about 4 years.  Then you could start thinking about marriage/houses/etc.
#3 The very last thing that you are in a position to do is buy a house.   I find it amazing that you were talking about buying a house?  You can't afford to rent right now, no less buy.  Leverage the fact that you can live at home.   Use that opportunity to pay off all of your debt.   You could then help your GF address her debt. 

I think between the 2 of your there's what...about $130k of school loan debt? 
Until that is paid, you'll be a slave to it.   Together that must be about $1200/month?

This is what was saying in your other thread.....slow it down.
Your top priority right now should be to contribute to your 401(k) at work and make your debt go away.
It's harsh but if you give this advice a lot of though and hopefully take it......you'll save yourself a lot of heartache down the road.



You can't afford it and she's not ready to get married as she can't even support her school loans?

Ok guys here's a quick edit. With her 30k salary she CAN support her loans but with her other living expenses (gas, insurance, cell, etc.) it's going to be rough saving as much as she'd like to put towards her high interest loans. I'm looking for a way to get lower interest rates to reduce the total cost over time and possibly extend the years(I know extending will end up as a greater cost in the end but it may be necessary for now to knock out the highest interest rate loans sooner).

I would suggest that you put together a few plans to pay off the debt.
First, see exactly what the current payments look like at the agreed to interest rates.

What I was suggesting is a very challenging and aggressive payback effort.  Like taking 4-5 years to service ALL of the debt.
This would mean making the student loan debt your top priority.
Reduce all other expenses to the bare minimum(cell, cars, insurance, etc.) and attach those loans.

Will it be difficult?  Yes it will.   But I can assure you that if you don't, you'll be mortgaging the next 25 years of your life to debt.