Student Loan Debt

[jonesbaby]

Ah! Student Loans!

I'm up to my eyeballs in student loan debt and I'm not even through with my undergrad (double major-nursing and sociology). Once I graduate I want to jump in as quick as I can to get my Masters. MORE MONEY to pay for schooling but MORE MONEY in my pocket when all is said and done! I should not need another student loan for my undergrad though, which will save me a bit!

The loans I've accumulated are currently deferred until graduation, which tentatively should be 2012 since I changed majors 3 times . They are accruing interest, just no payments. But because they are private loans through companies like Chase, they have sky high interest rates (10-12%). I also have a few Federal loans with low interest rates.

I believe the loan amounts are 21k, 20k, 20k, 15k, and 5k (81k total), plus a few fed loans of around 1700.00 each.

I want to start tackling this NOW because if I wait until repayment begins and just pay the minimum (4xx.xx/mo. on each loan--I may do a loan consolidation) for x number of years (forgot how long repayment was), a single 20k would turn into almost 100k. Not happening considering I have a few 20k loans.

I've tried researching for the best way to do this but haven't really found a good enough answer. Do I SAVE SAVE SAVE money each month and put it into a high interest savings account and pay off one large(er) chunk at a time or should I begin making monthly payments that I can afford now? Repayment before deferral ends will not hurt me. And I also assume that since I technically don't have to pay until graduation, that it won't hurt me if I had to miss a payment now for some reason because it is not in my budget as of yet (new baby really changed my planning!)

This is currently my only debt besides a 9k car. I will pay my car off before anything because that does have a monthly payment and no deferral, damn ;). We do own a house but I also view that as more of an investment. Dh pays that and it is fully in his name (we split our bills almost evenly, but each pays their own car. We don't have joint accounts and it keeps us in check from overspending.) After looking at Dave Ramsey's site and just calculating my income, I could have my car paid in a year. (I'll be more of a SAHM & F/T Student so my P/T income is measly).

Any suggestions on the best way to tackle this now with what I have? Keep in mind, I doubt I could pay it all off by 2012 but I'd like to do what I can.

And sorry, this post got really long and probably confusing.

[ChrisLeigh]

Like you said, hopefully you won't have any more student loans to finish your undergraduate work. I would really research how much of a difference getting your masters will make for you... maybe work for a while to pay them off... some employers will help you with your masters... so check that out!

I would look at all of your interest rates and start paying the highest interest rate off first.... which are probably the private student loans. Those companies can raise rates at any time... so be careful. Anything that is not a set interest rate would defiantely raise a flag to pay it off sooner rather than later.

Seems like you and your husband keep separate accounts. Can he help? I'm not a proponent of keeping separate accounts... that's up to you... but I would think it would be difficult to decide who pays what bills and what percentage? One might work more out of the home with a higher salary... but if you are (or are going to be ) a SAHM... how do you put a price on that? Plus if you are married you are in things together... so hopefully if he has "extra" money... he will pay off the loans for your schooling because he wants what is best for the family... which is no debt!

I'd work on starting to pay off the debt as quickly as possible!!!! Good luck!

[jonesbaby]

Well, technically we aren't married, I just don't like referring to him as boyfriend. Dh is just easier. We are in it for the long haul but we just aren't legally married. He was laid off and out of work so he is finally getting caught up. He hauls freight so his pay is very dependent on the economy and how much freight is getting moved. Unfortunately he's been there 6 months and hasn't made even close to what they said he should be making. So we've really just been trying hard to pull our ends together with not a lot of extras to spread around.

I hope my post didn't sound like he won't help me. We just aren't in a spot where he can help me as much because of his own young-and-dumb debts.

Originally Posted by ChrisLeigh Like you said, hopefully you won't have any more student loans to finish your undergraduate work. I would really research how much of a difference getting your masters will make for you... maybe work for a while to pay them off... some employers will help you with your masters... so check that out! I would look at all of your interest rates and start paying the highest interest rate off first.... which are probably the private student loans. Those companies can raise rates at any time... so be careful. Anything that is not a set interest rate would defiantely raise a flag to pay it off sooner rather than later. Seems like you and your husband keep separate accounts. Can he help? I'm not a proponent of keeping separate accounts... that's up to you... but I would think it would be difficult to decide who pays what bills and what percentage? One might work more out of the home with a higher salary... but if you are (or are going to be ) a SAHM... how do you put a price on that? Plus if you are married you are in things together... so hopefully if he has "extra" money... he will pay off the loans for your schooling because he wants what is best for the family... which is no debt! I'd work on starting to pay off the debt as quickly as possible!!!! Good luck!

[ChrisLeigh]

Hang in there! You can pay it off! Dave Ramsey is a great resource for helping to pay down debt! He says you need to get mad about it... then you'll work on paying it off! I think you thinking about paying off the loans before they are due shows a lot of great foresight! You can do it... sit down and put yourself on a strict budget! It will help!

[austingirl]

Whatever you do, DO NOT consolidate your federal loans together with your private loans!!!!

This is very important! My SIL did this, and it really messed her up because you can only consolidate private loans through a private consolidation loan. Those terms are not going to be as favorable as a federal consolidation loan. Now all her loans are considered private and are at a high interest rate. You need to do two separate consolidation loans - one private, one federal.

If you are looking at getting married in the future, consolidate before your wedding if his credit score is damaged because of his "young and dumb" debts (unless, of course, yours is worse) - you will get a lower rate if your credit score is good, and they will in all likelihood look at both of your rates if you are married.

(sidenote: for his protection, don't let him cosign your federal loans or consolidation loans - federal loan debt is cancelled if you die or become disabled. It's not pleasant to think about, but...)

In the meantime, it's always best to pay debt with daily compounding interest the absolute soonest that you have the money to do it - because interest compounds daily, every day matters. Find out what the minimum payments they will accept is, and make it. Also make sure that making payments will not automatically put your loan into a status where you have to continue to make payments even though you are in school. It's not common but some loans are written that way to discourage early pre-paying the principal.

Good luck!! We are busy crawling out from a mountain of student loan debt (courtesy of DH and his "professional student" years...) ourselves. After 6 years, and applying all our spare change to it, we are halfway there!

One last bit of info: There are loan forgiveness programs for nurses who work in critical shortage facilities. There is a federal program, and some states have their own. This might be an option for you.

[StephanieZ]

Originally Posted by jonesbaby Ah! Student Loans! I'm up to my eyeballs in student loan debt and I'm not even through with my undergrad (double major-nursing and sociology). Once I graduate I want to jump in as quick as I can to get my Masters. MORE MONEY to pay for schooling but MORE MONEY in my pocket when all is said and done! I should not need another student loan for my undergrad though, which will save me a bit! The loans I've accumulated are currently deferred until graduation, which tentatively should be 2012 since I changed majors 3 times . They are accruing interest, just no payments. But because they are private loans through companies like Chase, they have sky high interest rates (10-12%). I also have a few Federal loans with low interest rates. I believe the loan amounts are 21k, 20k, 20k, 15k, and 5k (81k total), plus a few fed loans of around 1700.00 each. I want to start tackling this NOW because if I wait until repayment begins and just pay the minimum (4xx.xx/mo. on each loan--I may do a loan consolidation) for x number of years (forgot how long repayment was), a single 20k would turn into almost 100k. Not happening considering I have a few 20k loans. I've tried researching for the best way to do this but haven't really found a good enough answer. Do I SAVE SAVE SAVE money each month and put it into a high interest savings account and pay off one large(er) chunk at a time or should I begin making monthly payments that I can afford now? Repayment before deferral ends will not hurt me. And I also assume that since I technically don't have to pay until graduation, that it won't hurt me if I had to miss a payment now for some reason because it is not in my budget as of yet (new baby really changed my planning!) This is currently my only debt besides a 9k car. I will pay my car off before anything because that does have a monthly payment and no deferral, damn ;). We do own a house but I also view that as more of an investment. Dh pays that and it is fully in his name (we split our bills almost evenly, but each pays their own car. We don't have joint accounts and it keeps us in check from overspending.) After looking at Dave Ramsey's site and just calculating my income, I could have my car paid in a year. (I'll be more of a SAHM & F/T Student so my P/T income is measly). Any suggestions on the best way to tackle this now with what I have? Keep in mind, I doubt I could pay it all off by 2012 but I'd like to do what I can. And sorry, this post got really long and probably confusing.

You asked for it, so I am gonna give you some strong advice b/c I see some major red flags.

IMHO & IME, you have *way* too much debt load already. My dh's and my student loans added up to about yours (each, so double -- actually dh has most of it and mine is less), but are for a DVM (vet) degree and my Masters degree and none are high interest like yours are. With family income into six figures and significant influxes of $ over the years from family members, we still struggle with these student loans (here I am learning how to coupon!), and we will for 30 years total (22 to go!).

Anyone who tells you that it will be easy to pay them off when you graduate is full of baloney!! It *can* make sense to borrow for education IMHO, but you should *not* be in such debt with not even a Bachelor's in hand!! What income can you expect with your degree when completed? Will you be working enough hours/years to pay it off and have something left over?

Repayments are mostly after-tax money (the tax deduction is modest to start with and phases out once you are making higher incomes!) If your (family!) income is good, you'll be paying significant taxes and so that "big" income gets really small after taxes. The student loan payments of 10k/yr might translate into 15-18k/yr of pre-tax income. That is *really* painful. It also will decimate your ability to get a mortgage (or small business financing).

I *strongly* urge you to not take any more debt and for goodness sakes, to sell your car and get a junker if you *have* to have one. You should not be driving a nice car while in undergrad unless your rich parents or rich dh are paying for it! (ha! wouldn't that be nice! they should spring for your student loans if that's the case). Use that car $ to pay off the high interest loan while you drive a junker.

Do not take any more loans *and* pay off the private high interest ones ASAP -- as in, work work work. You should be working during breaks and if possible at least 10-15 hours during school as well.

Do NOT go for a Masters unless you have an employer paying for it and/or until you can pay for it without additional debt. Use that undergrad degree and get a paying job and pay your bills, and loans, until you get control. I wouldn't borrow any more money from anyone until the high interst student loans are completely gone (as well as any CC or car debt). Once you get it down to under 50k in subsidized loans that can be deferred (without accruing additional interest), then it may make sense to go back for a Masters, but only if you have a way of paying for it that won't put you in more debt and only if you see that it will sustantially increase your earning power.

If I were you, I'd ask dh to invest in a couple hours with an hourly financial planner to help you both devise a sensible plan for completing your undergrad without acquiring additional debt and to retire/restructure your current loans and to make a game plan for any future additional schooling that wouldn't put you deeper in the hold.

JMHO from someone who has BTDT and sees red flags all over the place!

[derketchup]

I don't know if this applies to you, but just know it is out there: FinAid | Loans | Public Service Loan Forgiveness

[berlinsmommy]

Originally Posted by StephanieZ Do not take any more loans *and* pay off the private high interest ones ASAP

There is one case which would make me disagree with this. My DH had a few (although less and smaller than what you have) private loans with high interest when he got his bachelors. For his program, his tuition for the master's program was not a lot of money (state school, in state tuition), but his ability to get subsidized loans was much more in the master's program, so we took out the max we could on these and "flipped" the money right back at those private loans, so when he graduated almost all the private loans were gone. All we had left was one at 14% (yikes) but the balance was only about $4k, so we paid it off pretty fast.

Everyone is different, but you have to be honest w/ yourself about your debt and whether it is reasonable for the income you will receive with this education. For us, it was TOTALLY worth it. My DH has his masters and graduated with about $40k in loans. All but the $4k one (which is long gone) are at low interest rates and our payment is just a little over $200/month, which is VERY worth it for the education he has and the income he can make.

Also, you mention being a SAHM. Is that going to continue after you graduate? For how long? That would be a MAJOR factor for deciding how to proceed if I were you. No reason to go eyeball deep in debt so you can race through school just to stay home with kiddos. If that is the case, consider finishing your undergrad, then working your tail off (2 jobs if necessary) to get those loans PIF. Then start having kids and as time permits go back to school part-time, paying cash as you go, to finish your masters.