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$202k in student loans - sell my house?
alondonbridget:
--- Quote from: remizidae on October 09, 2018, 09:54:29 PM ---Why do you fear it would not be possible? Yes, it's a lot of debt, but you're young and saving $50k a year. Do you think you can sustain that pace of saving for a few more years?
>I spend less than $100/year on clothing, etc.
What is "etc"? Do you think this is a sustainable level of spending?
As far as refinancing goes, I would run the numbers. Estimate the interest rate you would get from refinancing vs. your current 7.25% (this is high for student loans) and calculate how much per year the higher interest is costing you. Is that worth the security of deferment/forbearance/IBR?
--- End quote ---
I guess I believe that FIRE is possible, it's just a matter of how "early" retirement will actually be for me.
My current savings/debt repayment rate is sustainable and can likely be slightly improved (I think I can tighten my food budget up a bit)
"etc" includes things like shoes, bath towels, kitchen appliances, books, and anything "extra" outside of my fixed needs like housing, utilities, and food
I'll be calling a few credit unions tomorrow to see what kind of interest rate I'd be looking at for refinancing - thank you!
alondonbridget:
--- Quote from: MrUpwardlyMobile on October 09, 2018, 09:49:50 PM ---
--- Quote from: alondonbridget on October 09, 2018, 09:33:02 PM ---
--- Quote from: Paul der Krake on October 09, 2018, 09:00:19 PM ---#1: yes. You have the income to make the debt disappear. Do it.
#2: probably not. Need more numbers than this.
You're in your late twenties which is where people's white collar careers take off (for some). You will likely earn more in the next 5 years.
Have you looked into consolidating/optimizing your debt load already? What are the terms on your debt? What does the rest of your budget look like?
Also what's up
with your list
it keeps going to
the right? It
is confusing.
--- End quote ---
Thanks for your feedback. I've fixed the formatting and added more detail around the potential house sale and current mortgage. Is there any other information I could provide to help readers have a clearer picture?
I've looked into refinancing my Fed Loans through a credit union for a lower interest rate but need to get my credit score up a bit first. I'm also hesitant because of the income-based payment plans Fed Loan offers should I lose my job. My company is known for mass layoffs, and while I have no expectations of that any time soon, with $202k and the amount of time it will take me to pay off, it does make me nervous to give up the income-based payment options... Not opposed, just thinking out loud...
--- End quote ---
You’re basically deciding to pay thousands more for the sense of comfort you get from the possibility of doing IBR if you lose your job and can’t find a new job for a year? I was doing the same thing with $150k student loan debt until I did math and realized that was objectively a bad idea.
--- End quote ---
It's so simple when you put it like that - seriously, thank you. I'll be calling around tomorrow to see what kind of interest rate I can get and refinance it asap.
remizidae:
--- Quote from: alondonbridget on October 09, 2018, 10:45:17 PM ---
--- Quote from: remizidae on October 09, 2018, 09:54:29 PM ---Why do you fear it would not be possible? Yes, it's a lot of debt, but you're young and saving $50k a year. Do you think you can sustain that pace of saving for a few more years?
>I spend less than $100/year on clothing, etc.
What is "etc"? Do you think this is a sustainable level of spending?
As far as refinancing goes, I would run the numbers. Estimate the interest rate you would get from refinancing vs. your current 7.25% (this is high for student loans) and calculate how much per year the higher interest is costing you. Is that worth the security of deferment/forbearance/IBR?
--- End quote ---
I guess I believe that FIRE is possible, it's just a matter of how "early" retirement will actually be for me.
My current savings/debt repayment rate is sustainable and can likely be slightly improved (I think I can tighten my food budget up a bit)
"etc" includes things like shoes, bath towels, kitchen appliances, books, and anything "extra" outside of my fixed needs like housing, utilities, and food
I'll be calling a few credit unions tomorrow to see what kind of interest rate I'd be looking at for refinancing - thank you!
--- End quote ---
Great! Check out the online refinancing places too--credit unions are great for customer service, but IME don't offer the best interest rates.
Linea_Norway:
You could do the math of comparing the total cost of home ownership versus renting a place in the area where you live. That math should include not paying that high interest on your mortgage. And after you have paid off your house, you can start investing in the stock market.
Of course there is always the concern of people for not being in the house market when housing prices are on their way upwards. Do you really expect expect prices to go up forever where you live? From what I have heard in a podcast, in general, house prices don't go up more than inflation if you smear out the price difference over the years you lived there.
freya:
Subject to the limited info in your post, here are my best answers to #1 and #2:
#1: ABSOLUTELY YOU CAN!!! I started with a student loan debt of $160K in 2002, so I know the feeling. With some determination, you'll make progress - never fear.
#2: If there is no other reason to move, NO DO NOT SELL YOUR HOUSE!!! Here's why:
- You don't have a lot of equity in it. Chances are that after closing costs you'll net only about $20-$30K, and then you'll be paying the equivalent of your mortgage interest in rent. Hardly worth it after you factor in moving costs, etc.
- You say you don't own a car, which means your house is well situated to let you run errands and get to work without one.
- Given enough time (usually 5-7 years) owning is far more cost-effective than renting.
- It will take an enormous amount of time and energy. You may get a better per-hour profit by investing that time & energy into a side gig.
If you continue as you are, you'll dispose of that debt in about 5 years. That's not too awful, but here are a few ideas to help speed things up.
1. Look for opportunities for advancement at work, or perhaps move on to another job if needed to increase your income. This is far and away the most important item on the list. In fact, it's sufficiently important that your $100/year on clothing budget needs to be increased, as your appearance (especially if you're a woman) is a big factor in how people view you in the workplace.
2. Definitely refinance that 7% student loan if you can. If you can't, look for ways to borrow at a lower interest rate and sink the money into the student loan, thus paying it down in chunks while managing multiple lines of debt. Some ideas: Look into a HELOC, to unlock whatever equity you can get from your house. See if you can qualify for credit cards with a 0% introductory balance and a reasonable fee for cash withdrawals. Just be careful to pay those off before the full interest rate kicks in. Finally, is it possible to borrow from family members? Work out a deal where you pay them something like 3% interest.
3. If you have spare time that won't interfere with your pursuit of #1, get a side gig going for extra income. There are several useful threads on that. Find stuff in your house to sell, too.
4. Rethink that one year emergency fund. At your age and in your location, it shouldn't be that difficult to get a new job that at the very least pays your half of the mortgage and weekly spending budget. Also, consider if you have family who could help you out in a pinch. That $25K is costing you 7% interest per year to hang onto, or about $1800/year. Until your student loan is down to something reasonable, you might reduce that fund to 3 months expenses (current costs + COBRA).
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