Student loan suggestions needed!

[Frugalmommy :)]

I need help with student loan debt. I have 66,000 worth of student loans from graduate school and undergrad. They are federally consolidated with good interest rates. I just don't feel like we will ever be able to pay them off. My payment is so high that it's impossible to pay in full each month. I have done deferment for a while when I was in school, and have done the income based payment too. But the payment is always so high, even with the income based- and the interest just keeps accruing, I was able to have them frozen since January- so that we haven't had to make a payment since then- but they are accruing interest everyday. We needed to stop paying for a while- as I was on maternity leave and out of work. Since I am the primary income in our house it was necessary. They are going to go back into repayment soon, every month it's $1100. .... I have one loan that I have a little forgiven every year bc of what I do for work, but that loans is one of the much much smaller ones. Any suggestions?

[TheKayla]

Unfortunately there's not a lot you can do, especially if income-based repayment isn't working for you. Can you focus on increasing your income in anyway? Take on a part time job, or ask for a raise? Do anything extra on the side?

I had originally borrowed $70k, which interest brought up to $85k, but my payments are still only at $700, which I pay extra on now, but it sure helped to have it lower right after graduation, and it still nice to have the wiggle room now. I am on the graduated plan. Is that available for your loans?

If you really can't get by, I suggest getting help from friends and family to help pay at least a portion off, and pay those people back. It may be the only option with interest being tacked on so quickly. It has helped me beat the curve between the point where I couldn't afford them/interest increasing the principle too fast. That's what I had to do, and each little bit helps. I'm borrowing a few thousand here and there from my parent's at this point, and keeping track of totals to pay them back after the loans are paid off.

Do you have any other debts you can focus on paying off, sell things, reduce your cost of living to free up more cash for payments?

[Jerry91]

There is hardly anything that can be done in this situation. If you have any friends or relatives who can gift you money, then you can use it to pay off the student loan. Or else, you can check out the option of student loan consolidation in order to get rid of the student loan debts.

[QuarterMillionMan]

Major life style changes may need to be implemented to downsize or reduce spending in all other aspects of your life. If not doing so already these are some suggestions;

1) Vehicles (sell or trade down)
2) Dwelling (can you downsize from say a 2 bedroom to a 1 bedroom)
3) Utilities (downgrade/cancel services)
4) Gym memberships (cancel and go jogging around your neighborhood)
5) Manicures/massages/hair stylists/barbers (watch youtube videos and do-it-yourselves)
6) Eating out/entertainment/bars/etc (home cooked meals, movies, etc.)
7) Cut out expenses where ever possible (you know your situation the best so take a good look at your expenses and cut out where ever you can). It takes discipline and some self control but chip away a little at a time until you get a better handle on things.

[TheKayla]

Agreed, can you share the rest of your budget? We'd be happy to help come up with solutions to free up more money to help you pay them off. Aren't student loans ridiculous? You're being punished for basically educating and bettering yourself in the same way someone who has live dfor years far beyond their means is punished. Of course though, we'll do as much as we can to help!

[disneysteve]

Major life style changes may need to be implemented to downsize or reduce spending in all other aspects of your life.

Agreed, can you share the rest of your budget?

I agree. If you can't afford the income-based repayment plan, the problem may be that you are overspending in general. I know that in other threads you mentioned buying organic groceries and antibiotic-free meats. You also mentioned buying cheap cigarettes so I'm assuming at least one of you is a smoker. And you said you like to splurge at coffee shops.

I think if you post your complete budget, we can help point out areas where you could trim spending to free up money for debt repayment.

You already know this but the longer you keep the loans frozen, the worse the problem is getting because interest continues to accrue. I would put them back into repayment mode asap and slash spending everywhere else. No more coffee shops. No more luxury purchases. No more smoking. No more organic produce. You need to go bare bones, rice and beans as Dave Ramsey says.

[Frugalmommy :)]

I will look into the graduated repayment plans to see if that would work better. I hadn't really considered that option before. We are on our own completely. We do not have the option of family lending money or helping us out. My husband and I bring home a good income at our jobs. Getting another job for either one of us is not an option as we already have a very full schedule. We have a pretty strict budget- I have it set up on an excel spreadsheet. We don't smoke- I quit a while back. Really, the only extra spending we have is the organic produce- for my daughters baby food, coffee, out to eat once every two weeks and my husband is on a bowling league once a week. I bought the keurig, so I'm now only spending about $6 a week on coffee out of the house during work meetings. Stopping those few things wouldn't really save us much money. We live in the northeast, and own an average home. We got a really good deal on our house and a low interest rate. But, being where we are, home prices are really expensive. So, we have a high mortgage. We own good reliable cars, nothing flashy. We have no other debt besides mortgage and student loans and a small amount left on a car payment. My husband and I are both really good with money. We don't have memberships to things, we don't have cable or a house phone, we almost never pay full price for anything that we buy, we buy used, we don't spend money on salons or stuff. We have savings in the bank that we almost never touch, only for emergencies.

The student loans were necessary for me to get the masters degree for me to practice in my line of work and following graduation I was able to get a big promotion and a lot more money. During graduate school I worked full time the first year and then the next two years I had to work less to be able to do a 20 hour a week non paid internship for two years. So, I had to take out bigger loans to be able to survive. Now I feel like these loans are hanging over our heads and we are stuck.

[disneysteve]

Stopping those few things wouldn't really save us much money.

To some extent, I think this is more about mindset than dollars. If you keep thinking, "Oh, this doesn't cost much. It won't make much difference if we cut it out." you're ignoring the problem to an extent. $6/week on coffee is over $300/year. That's $300 extra that could go toward the student loans. My wife loves her Keurig but it isn't a cheap way to make your own coffee. Whatever your husband spends to bowl is more money out the door not going to loans. If you really want to attack the debt, you need to slash spending everywhere you possibly can. All of those little things do add up to significant money, maybe hundreds, maybe a couple thousand per year.

We got a really good deal on our house and a low interest rate. But, being where we are, home prices are really expensive. So, we have a high mortgage.

Sounds like this may be the real problem. It was NOT a good deal if you couldn't afford it. Is your mortgage (PITI) more than 28% of your income?

Again, posting your budget would be very helpful if you're looking for specific advice.

[TheKayla]

And one more thing to chime in, if you do get graduated loans and they work for you to keep your head above water, that is fantastic. However, keep in mind that you WILL pay more interest over the life of the loans, and they will go up in price over the years (when that happens depends on your payment plan.)

For example, if I would have stuck with a flat rate, they would have been around $900, or so I think it was, for the entire life of the loans. With the graduated plan, I started off at $600-some and every couple years the minimum payments will go up. By the end of the loan term, my minimums payments should be around $1200. I plan to counteract this by paying off a few of the smaller loans entirely, but because yours are consolidated unfortunately you don't have this option. So, your loans will be higher than what you currently can't afford in 10-15 years, but the idea is that people will gradually make more income over time. I started out at entry level and have some good security in place for when mine go up. Just make sure you have that same sort of confidence that your income can and will more than likely increase over the life of the loan if you choose to go this route.

I agree with Steve too, it'd be great to see your budget. Many times we think we're doing everything we can but it just takes some outside perspective to come up with some creative or needed ideas to fix some underlying issues.

[Frugalmommy :)]

I have most consolidated and a few that we're not able to be, which why the income based didn't work for me, because the ones consolidated were at an ok rate, and then the other ones add a lot on top of that. That makes sense, paying off the smaller ones first. And the graduated repayment for the larger one. That seems to be our best option at this point. Thanks for that suggestion.

I don't feel that stopping getting coffee out a couple times a week and asking my husband to not be on his bowling league is the solution. Realistically that would save us like 1000 a year, so what- we can do that for the next 50 years and then finally have the student loans paid off? Quality of life.


When I posted I should have asked for suggestions of what others have done with their student loans specifically- to get some ideas, vs having Disney Steve tell me that I'm living the wrong way by referencing other things that I have posted about saving money on products. I thought that this forum was to help each other, not judge and impose your values on others....

[kv968]

When I posted I should have asked for suggestions of what others have done with their student loans specifically- to get some ideas, vs having Disney Steve tell me that I'm living the wrong way by referencing other things that I have posted about saving money on products. I thought that this forum was to help each other, not judge and impose your values on others....

There are very few, if any, here who will judge or impose their values on others since most of us have been in someone elses' shoes one way or another. DisneySteve is definitely not one to do that.

I understand that you asked about what you could do about the student loans but unfortunately, as others have stated, there isn't much more to do than what you already have (i.e. consolidated, income-based, etc...). Kayla gave the suggestion of graduated payments so maybe that'll work for you.

However the real issue is...the payments are due (at probably the lowest you can get them) and you're still having trouble paying them. That leaves that side of the equation pretty much complete and now you have to start to focus on the other side...other debts and income. That's where all the questions about your budget are coming from.

I also understand that you didn't come here to have your budget to picked apart and "judged" by strangers on the internet, but sometimes having a different set of eyes looking at things may give you a different perspective on things. With that, I have to agree with DisneySteve in thinking that the house may be the biggest problem in all of this no matter what kind of deal you got on it. I don't know you, I don't know your entire situation but that's something I would look at.

Again, not judging nor condemning, just trying to bring different factors to your attention.

[disneysteve]

However the real issue is...the payments are due (at probably the lowest you can get them) and you're still having trouble paying them. That leaves that side of the equation pretty much complete and now you have to start to focus on the other side...other debts and income. That's where all the questions about your budget are coming from.

I also understand that you didn't come here to have your budget to picked apart and "judged" by strangers on the internet, but sometimes having a different set of eyes looking at things may give you a different perspective on things. With that, I have to agree with DisneySteve in thinking that the house may be the biggest problem in all of this no matter what kind of deal you got on it.

Again, not judging nor condemning, just trying to bring different factors to your attention.

Thank you kv. OP, I'm sorry if you took my advice as judging you. That certainly isn't the intent. The intent is to help. You asked what you could do about the loans. What you can do is look for ways to either boost income or decrease spending to free up money to apply to those loans. That's where I was going with my posts and why several of us have suggested posting your budget. The loans are what they are. Unfortunately you can't change that, so you need to focus on the other side of the equation, as kv said above.

These discussions are always rather difficult when the person asking the question doesn't give any details. We don't know how much you earn. We don't know how much these loan payments are. We don't know what you mortgage payment is. We don't know how short you are finding yourself each month. So giving worthwhile advice is a challenge. We can make general suggestions but they may or may not apply to you. We need to see actual numbers to give specific advice for your situation. That's why posting the numbers is so important. You wouldn't walk into a financial planner's office and ask him to design an investment plan for you without showing him your income and expense information but that's essentially what many people do when they come to this forum. So please don't get upset or offended if I or others make suggestions or ask questions. The goal is to help people get in a better situation, not judge their decisions. You can spend your money however you'd like but sometimes it is helpful for impartial strangers to point out the affect those spending decisions are having on the big picture.

[dczech09]

I agree with the others- your house may be the real problem here. Honestly, you probably should not have got a house while having those student loans around your neck. It just exacerbates a problem.

Whenever someone asks me whether or not they are financially ready for a house, I always point out 5 criteria:
1. No other debt whatsoever
2. 3 to 6 month emergency fund set aside
3. At least a 20% equity position in the house (good deal and/or down payment)
4. 15 year CONVENTIONAL fixed rate mortgage only
5. Payment (PITI) does not exceed 28% of income

If you do not meet all of these criteria, then home ownership should wait. Since you have these student loans, you should not have pursued the house. The reason why these criteria exist is to prevent a house from eating you alive, and that appears to be what is happening here. You cannot afford your house and student loans with your "good" income.

Side note: I am not judging or imposing some value system upon you. I hold myself to a higher standard for homeownership (100% down).

All of us on this forum are here to help and personal finance and is one of those things that is not only technical, but personal too. If I had to guess, you have been focusing more on the personal and not at all on the technical. And I get it- this technical stuff is boring to people who are not nerdy like me

Anyway, you have a few different options. You will likely need to pick out a few of these.

Without knowing your budget, none of us will be able to help you with cutting some expenses. But something is going to have to give before the levy breaks! So cut expenses! Your boat is heading for an ice berg, so change course NOW! Wherever you and your spouse choose to cut, you need to cut!

You also need to get your income up. You stated before that you and your spouse have a good income. However a mortgage AND a $70k student loan debt will crack many "good" incomes. So find time to make more money! You say that you don't have time? I'm sorry, but I don't believe that for a second. I work 60 hours per week, plus I volunteer and speak at schools and homeless shelters about money and personal finance. Yet, I still find time for friends, family, working out, etc. It is about being on a mission and doing what it takes to win in this crazy world. Nobody thinks that they have time for anything because they get so used to their schedule that they cannot see the open time in between activities. For example, this past week, I would go speak at a school in between work appointments. You have free time somewhere, you just need to find it.

Consider changing your tax withholdings. Are you getting a large tax return every spring? If so, then you may have too much taken out of your paychecks.

Go onto a graduated program or consolidate your student loans if possible. An $1,110 payment on a $70k debt is pretty high! Then again, maybe your interest rate is high. Either way, there should be some options.

You will not like this last option, but it may be what you need to do. Sell the house. I know it is tough to think about, but as it stands you are being eaten alive. And I fear for you that if things do not change, bankruptcy may be over the horizon and you would not be keeping your house if you filed. It is okay to rent- the whole "renting is like throwing your money away" thing is so cliché because as you have probably seen, you are throwing money away on interest as it is! Sell the house, clean up this mess, get on solid ground, then go for a house when you are financially ready.

I apologize for the length of this post. But I am fired up right now. I want to help you, but you need to be ready and willing to do what it takes to help yourself. Here are some ideas and I am sure there are plenty more on this forum. We are all here to help!

[disneysteve]

Whenever someone asks me whether or not they are financially ready for a house, I always point out 5 criteria:
1. No other debt whatsoever
2. 3 to 6 month emergency fund set aside
3. At least a 20% equity position in the house (good deal and/or down payment)
4. 15 year CONVENTIONAL fixed rate mortgage only
5. Payment (PITI) does not exceed 28% of income

Just to give another view on this, I don't think you need to be debt-free before buying a house, but you do need to look at your overall debt loan. When we bought our house, I had $100,000 in student loans. However, we bought a house that was well below what we could "afford" according to all of the standard calculations. Our payment was only about 18% of income. Over the next few years, as our income grew, the payment went down to about 13% of income, so we were still able to comfortably afford the house, the loans, and still have plenty left to attack the debt. And yes, we did put down 20%.

[dczech09]

Just to give another view on this, I don't think you need to be debt-free before buying a house, but you do need to look at your overall debt loan. When we bought our house, I had $100,000 in student loans. However, we bought a house that was well below what we could "afford" according to all of the standard calculations. Our payment was only about 18% of income. Over the next few years, as our income grew, the payment went down to about 13% of income, so we were still able to comfortably afford the house, the loans, and still have plenty left to attack the debt. And yes, we did put down 20%.

That is a good point, DS. However it will be different for some people. Most household expenses are regressive so higher income people will have a larger proportion of their money to put towards things like housing and loans. It is all relative.

Realistically, could someone afford a mortgage while having like $10,000 in student loans? More than likely they could. A $10,000 student loan will not break the average person's budget. So while I say someone should have "no other debt," we could probably call this "very little debt."