08-14-2013 01:59 PM
08-14-2013 03:05 PM
As far as the federal student loans go, they will be forgiven after 25 years if you stay on IBR. If you work at a non-profit or for the government, they can be forgiven after 10 years. So that's some good news. As far as the other debts go, obviously you want to pay off the ones with they highest interest rates first. 11% is a really high interest rate are you sure that's right? You might look into taking out a new loan where you could get a lower interest rate or consolidating your private loans to decrease the total interest rate. You could also ask for deferment of some of your lower interest rate loans so you can pay off your credit card/high interest debt first. Right now you just need to try to live within your means and take it one day at a time. Sit down and write out a budget of where all of your money is going. Try to figure out what bills you may be able to reduce spending. For example, shop around for cheaper car insurance, call the cable company and try to get a better deal or cut it and netflix, go on a family plan for your cell phone. Once you have done all of that and you still don't have enough to make all of the loan payments call the companies and negotiate a lower payment instead of racking up credit card debt. Do everything you can to avoid credit card debt!! It can be really overwhelming thinking about 25 years down the road when you are only 26 but that time will fly by and before you know it you will be out of debt as long as you don't dig the hole deeper!
08-14-2013 08:54 PM
I think your biggest issue here is that you have $X that HAS to go out every month to cover your debt, and that means you're going to HAVE to bring in $X + living expenses every month to get yourself back on track, and obviously, any amount you can pay over the minimum will be a big help. Even small extra payments can make a difference over the course of the years, saving you a good chunk of interest. You're on the right track, but you should always keep a sharp eye out for opportunities to maximize your income and decrease your expenses.
Financially, paying off the highest interest rate loan makes sense. Pyschologically, paying off the smallest loan (allowing you to "snowball" the debt) may work better for you. Even though highest interest first is fastest and saves more money, the "win" you get from starting with smaller debts that are paid off quickly and really help you stick to your plan in the long-term. That's a choice only you can make.
The nice thing about IBR and federal loans is that you will only pay what you can afford based on their formula, and you do have an end in sight due to forgiveness. I wouldn't worry about these. Keep them on auto-pay and make sure you file your IBR paperwork timely each year and that it is applied properly and just let them click away until you've dealt with your other debts.
Finally, I know it's appealing to have the braces partially covered by your parents insurance, but given your debt situation, is it still the best decision? This is likely not the last time in your life you will have insurance, and you might be better off saving up for the procedure slowly over a few years rather than adding to your current debt. Of course, it's a medical procedure, and again, only you and your doctor/dentist know how important it is for you to proceed now or if you can wait.
08-15-2013 07:19 AM
I'm 26 y/o. With my masters and am currently making $28,000 per year. With ~75,000 in student loan debt. I feel like I can relate. I started out paying my loans back at a salary of 18,000 a year, and within 6 months found a job for 26,000 and within three months got a 2,000 raise. I am always looking for a better paying job, because I am worth more and I need more to get this paid off quickly. I don't want to be stuck with them forever.
I have my federal loans, ~$30,000 on the IBR payment plan and am currently making zero dollar payments (this is my second year), since I work for a College I am shooting for the Public Service Loan Forgivness Program (PSLF) which is a 10 year forgivness program. I have about 8 years left. I went ahead and signed up for the auto pay option to reduce my intrest rate by .25% even though my payments are zero. So that's help with the building intrest. But, I am just not worrying about this at all at this point. I can't afford to stress over this debt, yet.
I started with 6 private student loans, and am down to 5, and will be paying another one off in November. I signed up for auto debit on all of my private loans to get the intrest rate reduction, then looked at my budget, and cut everything out but essentials (gas, car insurance (I live in a rural area and HAVE to drive to work, no public transportation), groceries, etc.) Then I had a sizeable chunk of money to throw at my debt with the largest intrest rate.
I assume the credit card is the highest rate, pay that off first, then the wells fargo one, then the 4.5% citi, etc. That $10,000 loan from the school, what's the intrest rate on it?
Look for a higher paying job, look for weekend job. My entertaiment budget is nil every month, and it sucks. BUT, it is wonderful feeling when I got that first "you're loan is paid" letter. Just keep trucking.
08-15-2013 07:32 AM
08-15-2013 07:43 AM
08-16-2013 04:45 AM
I have a couple of questions about IBR. After 25 years my loans will be forgiven, but during that time, they will continue to grow. Are these high numbers hurting my score? Once I get married, will they hurt my (future) husband's score? Will they keep us from getting a car loan or a mortgage? What effect will these loans have on my life? Is it worth it to keep them around (risks vs. benefits)? They forgiveness on these loans is very appealing, but not if it means I won't be able to buy a house for most of my adult life.
Also, I'm wondering how you find out AAoA. Due to my student loans, I have around 35 open accounts at the moment. I was considering trying to consolidate my Dept. of Ed. loans, but I think that would bring my score way down. Any thoughts?
Thanks again for all of the advice!
08-16-2013 06:20 AM
As long as you continue to make the payments, the amounts should not hurt your scores. The monthly payments will certainly figure into your total debt load and DTI ratio, so that's something to be aware of, but your scores are safe. They will have an impact on the amount you can borrow for your home/car, but not because of the overall amount.
For reference, I've got more student loan debt than you, and my scores are rising due to careful remanagement of my overall credit/financial life. My wife and I are building our second home, and it's one we don't anticipate ever having to 'move up' from. Be responsible, make the payments, and try not to overextend in other areas and you'll be fine.
For the AAoA, personally, I would consolidate at first opportunity. It makes it easier to manage, and my monthly payments went down when I did so. Instead of 20 loans to manage, I have 2. No real effect on scores when I did it, either.
08-16-2013 12:29 PM
Thank you for the reply, accidentalpancake. It seems that you have some of the same CCs as me with similar limits as well.
My question with regards to getting a mortgage someday (this is a few years away), is whether my DTI will be a problem with my student loans. It's really, really high.
I actually just got an e-mail today stating that my Dept. of Ed. loans were transferred to FedLoan Servicing, but I can continue with the IBR (I did a lot of researching after I almost lost my breakfast over this little tidbit). I actually made less than my state's federal poverty line last year, so I know I'm good for another year at least. They aren't even showing up yet on their website and they are gone from the Dept. of Ed. website. But I am going to look into consolidation. How will consolidation affect the IBR plan?
Well, off to start "gardening" as you refer to it here.
08-16-2013 05:01 PM
Consolidated federal loans are still eligible for IBR, you'll probably have to re-apply though, since it will be a new loan. Just keep in contact with your lender through the whole process and be diligent about submitting paperwork and following up to make sure everything is processed timely.