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New Member
Calibear
Posts: 6
Registered: ‎08-14-2013
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Student Loan Debt is Draining Me

Hello all,

I am new to this forum, but I've been stalking around for a few weeks. Basically I came in search of an answer for this huge problem that I have created for myself. So far I've found some really great, inspiring, and useful advice on this forum. For that, I thank all of you.

My situation: I went to a state college for 6 years. I worked almost the entire time I was in college and I changed my major 3 times, so I had to take the least amount of classes possible per semester. However, I still took enough to get financial aid, including a whole lot of student loans. I had to start repaying these loans about 6 months ago. At that time, I moved in with DBF's parents to help us save some money. That didn't work out.

So now I am paying back all of my private loans which include:

Wells Fargo: Initial amount was $11,000 for two loans and the interest rate is around 11%. I am on a 25-year payment plan, which puts me at paying over $24,000 through the life of the loan. This is the loan I'm most scared of.

Citi: I initially owed them $6,500. The interest rate is 3.8% on one loan and 4.5% on another.

I also owe almost $10,000 to a private lender through the endowment association at my school.

And last but definitely not least, I currently owe almost $60,000 to the Dept. of Education. I am on the IBR payment plan with them and my payments are currently at $0 and I see them staying at $0 for at least another year. However, this scares me because these loans are accumulating a large amount of interest and if I were to ever actually get a good job, I would have to pay back a lot more than I initially expected. Which was only around $54,000 (that number may not be accurate, I am currently on my phone).

According to my credit report, I am $84,000 in debt. I only make $30,000 a year right now.

I also have around $5,000 in credit card debt and my util is around 80%.

Also I am getting braces next month and that is costly as well, it was a decision I had to make because once I turn 26, I will no longer have the option to have them partially covered by insurance.

Since I am naive and now trying to correct my past mistakes, I come to you for advice.

I am trying to get another job, I applied and got an interview for a job to work weekends. I am planning on putting most of that money towards paying off my WF loan because I am in no way interested in paying an extra $14,000 or more on that loan. I am also planning on paying down my credit cards, but I don't know the best way to go about that.

What else can I do? I feel sick to my stomach because of this. It has me depressed and I'm seriously considering getting medical help. My budget is maxed out every month trying to pay all of my bills (until recently I only made around $24,000/year, so I ran up my credit cards to help pay for things I needed). I am also paying back a loan from DBF's parents and from him.

Please help me. I feel really hopeless.
New Member
spano41
Posts: 10
Registered: ‎08-14-2013
0

Re: Student Loan Debt is Draining Me

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!  

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Valued Contributor
SCF
Posts: 1,108
Registered: ‎06-09-2008
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Re: Student Loan Debt is Draining Me

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.

 

Good luck!

Established Member
SyntheticMemories
Posts: 53
Registered: ‎02-27-2012
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Re: Student Loan Debt is Draining Me

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. 

 

 

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New Member
Calibear
Posts: 6
Registered: ‎08-14-2013
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Re: Student Loan Debt is Draining Me

Thanks for the posts so far. I do appreciate any and all advice given.

I have considered holding off on the braces. They are a huge financial commitment and at this point in my life there is no guarantee that I will be able to continue paying for them. Any future insurance I obtain will not be a guarantee of them being partially covered. I actually lucked out with my parents insurance that they cover all ages, whereas most cap the age at 19.

My current job is as a temp employee. I was promised after the first month that I would be hired, with a minimal raise, and they got the process started. However, it's been two months since then and it's in corporate's hands so I'm still not sure if they will even be keeping me on as a temp or possibly hiring me in the next few weeks.

I am going to leave my student loans in IBR for as long as possible. My only concern is that those loans will someday keep me from getting a car loan or a mortgage. This is looking far down the road of course. DBF is also concerned about the impact that those loans will have on our credit scores, etc. if I keep them around for that extended period of time. I don't blame him for being worried. He's considering spending his life with me and I have this ball and chain debt that comes with me.

I have budgeted my money down to the dollar. DBF and I have a joint account that we make weekly deposits into for our joint bills. This made the most sense for us because we were always arguing about who pays for what and this is a way for us to both feel more equal financially in the relationship. Otherwise, my bills are all always paid and paid on time, but it leaves me with very little money (if any) afterwards.

My smallest student loan is 2,500, which has increased to around 3,100 with interest. It also has the lowest interest and it's one of my oldest student loans. I'm wondering if it would be better to pay this loan off first or to focus on the WF loan, which has an interest rate of 11.5%. (Yes I checked on this last night). I tried consolidating my loans, but I was denied because my credit score was too low (it's in the low 600s).

I check my credit report regularly. I am in collections for a debt I owed to my school and I am also paying that back at the moment. I am trying to have it removed from my credit report since it has negatively affected me overall.

I am really trying to take it one day at a time. I was so stupid as a student and would not recommend student loan debt to anyone.

Any and all other advice would be appreciated. I know I don't have many options that I'm not already utilizing.
New Member
Calibear
Posts: 6
Registered: ‎08-14-2013
0

Re: Student Loan Debt is Draining Me

SyntheticMemories, we can definitely relate. Thanks for sharing your story. I also live in a rural area and must commute. My parents are still paying for my car insurance, however. Even if they wanted me to take it over, there's no way I could at this point.

I really like my job, but I'm always looking for a permanent position. Since I've only been here 3 months, I haven't applied for anything in this field yet. But it is giving me the experience I need to move up if I have to move on. Good luck finding a better job. I never knew what I was graduating into.


My entertainment budget is also 0. When we go out, often the pressure is on DBF to pay. I feel so bad that I can't even offer him a night out every now and then. That's another reason I'm looking towards a second job. I hate being so dependent on others. I've basically ostracized myself from my friends because I have no money to do things with them. And when they invite me out its to an expensive concert, bar, or play.

Right now my bills max out about 95% of my budget (this includes paying back what I owe DBF parents, which gets thrown in my face at every family get together). Once that debt is paid off, though, I'll have more money to 'throw' at my other debt.

Thanks again for your reply. :smileyhappy:
New Member
Calibear
Posts: 6
Registered: ‎08-14-2013
0

Re: Student Loan Debt is Draining Me

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!

New Contributor
accidentalpancake
Posts: 63
Registered: ‎02-24-2010
0

Re: Student Loan Debt is Draining Me

Calibear,

 

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.

New Member
Calibear
Posts: 6
Registered: ‎08-14-2013
0

Re: Student Loan Debt is Draining Me

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. :smileyhappy: 

Community Leader<br> Valued Contributor</br>
Community Leader
Valued Contributor
SCF
Posts: 1,108
Registered: ‎06-09-2008
0

Re: Student Loan Debt is Draining Me

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.


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