topic Re: Scared to Death of my Student Loans in Rebuilding Your Credit

Scared to Death of my Student Loans

Anonymous — Fri, 18 Sep 2009 17:49:26 GMT

Hi all,

I recently earned a Master's Degree and landed a new job. The job is entry level and the pay range is 35k - 40k annually. I had almost no loans for undergraduate school <10k but grad school took me 50% longer to complete (thanks to procrastination and needing to work). This, in addition to the fact that I paid for the entire stint with Student Loans has gotten me in debt >100k, <110k.

I really have no other debt. I have no expenses other than my $893 rent + food + utilities. My mother passed away 2 months ago and left a large sum of money. I have paid off her car, put aside some for investment and now I would really like to pay off her house <50k and purchase one for myself. The problem is that I am rebuilding my credit and the score is 651.

Am I even eligible for a decent loan and if so, can I afford one?

Any guidance would be appreciated!

TDO

Re: Scared to Death of my Student Loans

Tons_of_Debt — Fri, 18 Sep 2009 19:02:58 GMT

How much money did your mom leave you? How much is the house worth? How much was the original loan?

1. Pay off her house.

2. Pay off your student loans.

3. Buy a new house

Re: Scared to Death of my Student Loans

Anonymous — Fri, 18 Sep 2009 20:06:06 GMT

My mom left (in total) 270k. With only 240k being liquid. I had to cover funeral expenses and take care of other family business. At this point I have 120k liquid and am expecting 30k but I plan on rolling this over into an IRA so that it is not taxed. Her home is definitely worth at least 100k with the original loan being 70k.

I do have enough to pay off her home and my student loans in full but then will have nothing left. I don't think it's a good idea to distribute all of my money like this.

Knowing these facts what would you suggest?

Re: Scared to Death of my Student Loans

BungalowMo — Fri, 18 Sep 2009 21:11:11 GMT

I would pay off her home first. Can you LIVE there?? That will save you the rent you're paying & toss $500/mo at your student loans, put a nice chunk of the liquid into an IRA.

Buy yourself a nice dinner.... all work & no play makes us all a little *bitchy*. Ya have to relax sometimes too.

Re: Scared to Death of my Student Loans

Anonymous — Fri, 18 Sep 2009 21:38:12 GMT

Hey there!

Wish I could live in her place it is beautiful and would cost me (almost) nothing. Guess I forgot to mention her home is in Mississippi and I live in Chicago - NO chance of me going back there.

What now?

Re: Scared to Death of my Student Loans

BungalowMo — Fri, 18 Sep 2009 21:42:33 GMT

Well....do you have any family or friends down there?? Renting a home out when you live so far away could be very bad. With no one to oversee the place, it could be a nightmare.

Is it in a nice enough neighborhood? Maybe you can get with a realtor, have the place appraised so you know the real value and then try & sell it.

Re: Scared to Death of my Student Loans

Anonymous — Fri, 18 Sep 2009 21:50:31 GMT

Oh, I could NEVER sell it. The neighborhood is vert nice. Most of my family is there and my aunt lives a block away. My grandparents are moving in (April) and I know they will take care of it so I have no option (and I really want to) but to keep the house.

My main concern here, because the house is not optional, is dealing with these scary students loans that I never thought I would really have to deal with and purchashing a place of my own. Just wondering if you guys think I can afford it - or even get one for that matter? Or might I be better off continuing to rent until my credit score reaches my goal and I can get a grip on these sutdent loans???

Thanks for taking the time to respond!

Re: Scared to Death of my Student Loans

BungalowMo — Fri, 18 Sep 2009 22:10:35 GMT

With over 100k in loans I wouldn't think about purchasing a home yet. I'd find something fairly small, cheap & close to the train station & start paying those down. You can take the train to work, right? That way you won't need to deal with a vehicle & those costs either.

What are the total monthly student loan payments? Who is the lender?

Re: Scared to Death of my Student Loans

Anonymous — Fri, 18 Sep 2009 23:15:56 GMT

I OWN two vehichles already (each fairly new) but I never drive them as I take public transit to work everyday. So there are really no gas or maitenance expenses and if I do incur them they are very minimal. As for the school payments, I just graduated in May so I have until next May (7 months or so) to begin those payments. They are with Sallie Mae and I have spoken to a Financial Advisor about getting those refinanced at a lower interest rate. Not sure what the payments will be but I am guessing no less than 500 and no more than 700/month.

Re: Scared to Death of my Student Loans

durak — Fri, 18 Sep 2009 23:21:39 GMT

If you are going to have debt you have the best kind, so I wouldn't be in a hurry to pay either of these things off. Also, the housing market is still in decline in most areas so no need to rush out and buy a house. You should talk to an investment advisor. Find some dividend paying stocks, buy some gold and just wait this economy and housing market out for a couple years.

It all depends on whether you can survive month to month with 100k student loan debt. What are your payments?

Re: Scared to Death of my Student Loans

BungalowMo — Fri, 18 Sep 2009 23:29:48 GMT

Once you begin repayment...BEWARE...Don't ever be late with Sallie....she is NOT a friendly gal. She does not ever forgive a late. NEVER EVER. Type it in the search block here...you'll see what I mean.

TXJohn posted a great comic with a young girl at the door & I think she had a hatchet in her hand or something like that & the caption was something about Sallie visiting you or something like that. SO true!!!! (reminded me of the little girl in the old movie "the bad seed")

Re: Scared to Death of my Student Loans

LIGHTNIN — Sat, 19 Sep 2009 06:08:39 GMT

Sorry to hear about your mom.

It's only been 2mos since your mom passed away

NO time to make important decisions about $$$

Put the money in a safe place for now

earning interest savings,cd's

keep some liquid for emergencies if needed

Take time to grieve for your mom

Enjoy the holidays.....As much as you can

Then in the being of the new year, you have time to consider your options, before grandparents move in the house.

Please Take Time For Yourself,

No need to be in a hurry about money because that's the time mistakes are made, sometimes HUGE one's

Are grandparents buying the house or renting?

BTW, Congrats on the new job!!

And your Master's Degree!!

Message Edited by LIGHTNIN on 09-19-2009 02:08 AM

Re: Scared to Death of my Student Loans

Anonymous — Sun, 20 Sep 2009 07:31:05 GMT

Lightnin-

Thanks so much for those kind words. It really means a lot. The money is in a safe account but I am trying to prepare for what to do with it when I am ready. That money is so precious to me and I just want to make the best decisions possible with it so that it doesn't just slip through my hands.

My grandparents are not buying the house - they will just be occupying it. They will need to pay the mortgage, which is fairly inexpensive, if I opt to not pay it off in full immediately. Otherwise they will just need to pay enough each month to cover insurance and taxes. Not really looking to make a profit off the house as long as they are in it.

Considering my situation as described above - what would you say is my best course of action?

Thanks again!

TDO

Re: Scared to Death of my Student Loans

haulingthescoreup — Sun, 20 Sep 2009 13:45:00 GMT

I'll jump in.

Put at least 6 months' worth (8-9 months would be better) of your basic living expenses, not counting the SL's, in some sort of savings vehicle to serve as an emergency fund. The economic nightmare of the last 12-18 months should have taught everyone about this.
Put 12 months' worth of minimum payments for the SL's in a separate form of savings, not to be touched, unless something happens to where you can't make your payments. As mentioned, you do NOT want to get sideways with Sallie Mae.
Put the rest in an IRA or similar investment.
As to your mother's house, let your grandparents make the payments, if they can, and if that feels right to you.
Unload a car. Or two!

You can "ladder" CD's --divide the money for your year's worth of SL payments by 12, and have it invested in 12 different CD's, one maturing per month. If you lose your job or suffer a similar disaster, you just cash in one CD each month to be able to make your payments. If everything goes fine, and you can pay off your loans from your paychecks, you'll have a nice little stash waiting unused when the loans are done. You can try this with your emergency fund as well, but you'd have to keep rolling over each CD as it matures into a new 6-month (or 8- or 9- month) CD. And you never want to cash in your emergency fund. Keep it going for the rest of your life, and if anything, increase it to 12 months' worth as you have more money available.

Are you currently saving aggressively for the down payment on your own home? That's another potential area where you might want to tuck some money away.

And +1 to the suggestion to get with a financial advisor, at least for the IRA-ish investment. Be sure to get one who is fee-only, or salary-based. (USAA has these, as do many other financial instutions.) Don't get an advisor who works on commission. They're apt to sell you whatever investments give them the highest commission, and that's not in your best interest.

I'm sorry to hear of the loss of your mother.

Re: Scared to Death of my Student Loans

Anonymous — Mon, 21 Sep 2009 16:22:27 GMT

haulingthescoreup,

I am definitely placing money aside to save as an emergency fund but would have never considered doing so for the student loans as well. Great idea/advice!

So, you are suggesting that I let my grandparents pay off the house and not worry about doing that? I really want to get this done and get the house transferred to my name because as it stands now it is in my mother's name along with my aunt who helped her purchase the house; However, I do want to do what is going to be best in the long run. Would this be your suggestion?

Also, with my money, I have not been saving at all. Since I have that cushion of money from my mother I had been paying off all of my other debt with my checks. All of my credit cards are now paid off as are my medical bills and other outstanding debt. At this point I can begin to save agressively.

Thanks for your condolences.

Re: Scared to Death of my Student Loans

Lyythine — Wed, 23 Sep 2009 08:04:52 GMT

Knowing what it is like to lose a parent prematurely, I also am sorry for your loss. I agree with the suggestions above, however, I would suggest the following...

If you are the executor of her estate, the house should be transferred to you automatically. Therefore not causing an issue there.

I would do as described above and make two separate emergency funds (living and student loans)

I would then do as hauling says and take 50% of whats left to ladder CD's and put 50% into an IRA (probably aggressive since Im assuming you are young).

I too agree that you are in a good place with the types of debt you have. At the moment, assuming you use our advice, you will always have the money available to pay off the student loans entirely should you have an issue with your job, unexpected costs, etc:

So, in short, I wouldnt worry immediately about your student loans - you are in a good place and you should feel safe knowing worst comes to worst you can walk out of this situation now or in the future not having any debt should your situation become financially unstable due to job loss, etc:

If you are eligible to join USAA, I would GREATLY suggest you join them and start your aggressive IRA thru them. I moved all my investment and ira to them a few months back except for one investment account with BofA and I have seen double % of what I was getting with my previous institution. USAA is great.