Student loan suggestions needed!

[disneysteve]

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."

The "rules" used to be that in order to qualify for a mortgage, the payment couldn't exceed 28% of income and your total debt payments couldn't exceed 36%. All hell broke loose when banks and mortgage companies through those guidelines out the window and started writing loans for anyone with a pulse and handing out loans for 5 or 6 times annual income (rather than the previous limit of 2.5-3 times income).

So there is nothing inherently wrong with having debt when you buy a house as long as the overall debt load is appropriate to your income.

[J.Apple902]

I think 15-year only mortgage is not necessarily best, and in most situations a bad idea. Why would you leave out options for yourself, at the expense of some savings? You can always pay double payments on a 30 year and have nearly the same savings.

[dczech09]

I think 15-year only mortgage is not necessarily best, and in most situations a bad idea. Why would you leave out options for yourself, at the expense of some savings? You can always pay double payments on a 30 year and have nearly the same savings.

Why would you want to pay a higher interest rate and run the risk of being in debt for 30 years? The payment on a 15 year mortgage is usually only 30% higher than the payment on a 30 year mortgage.

And "some" savings? The savings in interest on a 15 year vs a 30 year is quite substantial!

[hamchan]

I don't know if I am missing anything, but if you are making double payments on a 30 year wouldn't you actually be paying it off faster? But at least you are not locking yourself into a higher payment, so if your financial situation changes you stand a higher chance of not falling behind on payments.

[dczech09]

I don't know if I am missing anything, but if you are making double payments on a 30 year wouldn't you actually be paying it off faster? But at least you are not locking yourself into a higher payment, so if your financial situation changes you stand a higher chance of not falling behind on payments.

I understand that you can pay of a 30 year faster with double payments. However, you are paying the price of a higher interest rate and exposing yourself to some moral hazard. If most people have the "option" to make a lower payment, they will make the lower payment. So it is all the more likely that they will be paying on the mortgage for a longer period of time (like 20+ years). It would be interesting to see statistics on how many 30 years year mortgages are actually paid off in 15 years.

At least with a 15 year mortgage, you will be done in 15 years or less.

[QuarterMillionMan]

Getting back to the student loans question, is there a government program that forgives student loans? This may be more along the lines of what the OP had wished to obtain more information about. A quick Google search results in numerous hits;

[Frugalmommy :)]

Yes, I'm looking for info on different ways to pay back loans. I think my problem is that I have some loans that can't be- or I was told so by the consolidation companies. We could do the graduated payment plan if all the student loans would qualify to be consolidated together. I have three that can't and that adds over 500 a month on the other loan payment. Do you know of a consolidation company that will take all loans?

In our area, renting was not that much cheaper than owning. We qualified for first time home owners program and rural housing program. We bought our house from a person that had bought it as a foreclosure, and then he flipped it. So everything in our house is brand new- so we have very little expense in upkeep.

[disneysteve]

Do you know of a consolidation company that will take all loans?

Can you do a home equity loan to get rid of some of the student loans?

[Frugalmommy :)]

I don't think we own enough of our house to qualify for something like that. Would we need to own the total amount of the loans in our house to cover it? I also think that then I wouldn't qualify for the student loan pay off after 25 years of repayment option- which I hope are paid off well before that, but good to keep as a safety net?

[disneysteve]

I don't think we own enough of our house to qualify for something like that. Would we need to own the total amount of the loans in our house to cover it? I also think that then I wouldn't qualify for the student loan pay off after 25 years of repayment option- which I hope are paid off well before that, but good to keep as a safety net?

It's hard to answer without any details. If you have one big loan, a home equity loan wouldn't help, but if you have several smaller loans (and some equity), you might be able to at least help with one or two of them.

I would not be planning based on a loan forgiveness program that doesn't kick in for 25 years.

[hamchan]

Are you doing the income contingent repayment plan? Are some of your loans private?

[Frugalmommy :)]

I have done that plan in the past, but with the other loans added to it, the payment is high. The other loans - one is a Perkins loan from the college and the other are federal subsidized but I consolidated them in 2003. They tell me that these aren't able to be consolidated. If they were able to get lumped together, we could afford the payment.

[LivingAlmostLarge]

Why don't you just post your budget frugalmommy and let the eyes see. Another pair of eyes can give you a reality check. Perhaps the home is in check, perhaps not. And you think you are frugal but maybe there are places to cut. How short are you? And as you get older the more kids you may have and more money you spend. Do you really want to be graduating in payments too?