Student Debt Advice

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sundercj
Posts: 10
Joined: Wed Aug 30, 2017 3:34 pm

Student Debt Advice

Post by sundercj » Thu Oct 05, 2017 1:10 pm

So I'm just out of school and I'm setting up my student loan repayment plan.. I've been doing a lot of research and trying to figure out my best options but I wanted to get some opinions.

https://imgur.com/a/Bpgtz

This is a summary of my different loans separated by the different servicers. The first three have a grace period of 6 months and the last has a grace period of 9 months (I graduated at the end of May). I plan to not pay any towards my Perkins loan for the next 6 months since it's not accruing interest and I don't have any minimum payments on it yet. The rest of my federal loans are unsubsidized and subsidized stafford loans with an okay interest rate. I am planning on just paying the minimum payment on those for now because I am not too worried about that interest getting out of hand and I believe it's not a bad thing to carry some low(ish) interest debt (Correct me if I'm wrong).

Then there are the two private loans in my mom and dads names. Pretty high rates and have already been accruing a good amount of interest. I plan to pay as much of those a month that I can, particularly focusing a little more on my dad's. Probably about 500 to my dads and 400 to my moms. I have very recently been looking into capitalization and that scared me a little bit, but I'm not sure I fully understand it and how it could affect my loans. I'm not exactly sure when my interest would capitalize on these private loans or even how to find that information out.

I have also come across some options on choosing to apply my payments as refunds or just payments. I'm not exactly sure what's meant by that or how it could affect my payments. Then it asks me to choose which loans my excess payments go towards.. I assume I should just choose the higher interest loans.

I'm just getting a bit overwhelmed by a lot of it and hoping to get some advice from someone with a little more experience with student loans. My rates are pretty high.. Should I consider consolidation?

Thanks guys

guitarguy
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Joined: Mon Dec 20, 2010 4:10 pm

Re: Student Debt Advice

Post by guitarguy » Thu Oct 05, 2017 1:52 pm

sundercj wrote:
Thu Oct 05, 2017 1:10 pm
So I'm just out of school and I'm setting up my student loan repayment plan.. I've been doing a lot of research and trying to figure out my best options but I wanted to get some opinions.

https://imgur.com/a/Bpgtz

This is a summary of my different loans separated by the different servicers. The first three have a grace period of 6 months and the last has a grace period of 9 months (I graduated at the end of May). I plan to not pay any towards my Perkins loan for the next 6 months since it's not accruing interest and I don't have any minimum payments on it yet. The rest of my federal loans are unsubsidized and subsidized stafford loans with an okay interest rate. I am planning on just paying the minimum payment on those for now because I am not too worried about that interest getting out of hand and I believe it's not a bad thing to carry some low(ish) interest debt (Correct me if I'm wrong).

Then there are the two private loans in my mom and dads names. Pretty high rates and have already been accruing a good amount of interest. I plan to pay as much of those a month that I can, particularly focusing a little more on my dad's. Probably about 500 to my dads and 400 to my moms. I have very recently been looking into capitalization and that scared me a little bit, but I'm not sure I fully understand it and how it could affect my loans. I'm not exactly sure when my interest would capitalize on these private loans or even how to find that information out.

I have also come across some options on choosing to apply my payments as refunds or just payments. I'm not exactly sure what's meant by that or how it could affect my payments. Then it asks me to choose which loans my excess payments go towards.. I assume I should just choose the higher interest loans.

I'm just getting a bit overwhelmed by a lot of it and hoping to get some advice from someone with a little more experience with student loans. My rates are pretty high.. Should I consider consolidation?

Thanks guys
Re: Capitalization - the interest you accrued is added into your principal balance, and you then pay interest on your interest. Not ideal to say the least. If you can pay down any big chunks of that accrued interest before it capitalizes, that would be a good thing to do.

I had loans with Navient and they seemed to capitalize (even if it was a few dollars) pretty much quarterly once my payments started. You should be able to call them, wait on hold for upwards of an hour before finally (maybe) talking to someone that knows anything whatsoever, and *maybe* they'll be able to tell you when your capitalization will happen.

TheAncientOne
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Re: Student Debt Advice

Post by TheAncientOne » Thu Oct 05, 2017 2:09 pm

How much will your income be? 94K is a high amount for student loan debt. Is this just for undergraduate?

The key thing is to live a spartan lifestyle and get this debt paid down ASAP. I'd limit 401K contribution to whatever your employer matches. If you don't have a job that pays well, you need to get a part time job on weekends to help.

First priority should be to get your parents' loans paid off.

mega317
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Re: Student Debt Advice

Post by mega317 » Thu Oct 05, 2017 2:17 pm

sundercj wrote:
Thu Oct 05, 2017 1:10 pm
with an okay interest rate. I am planning on just paying the minimum payment on those for now because I am not too worried about that interest getting out of hand and I believe it's not a bad thing to carry some low(ish) interest debt (Correct me if I'm wrong).
You are wrong. 4 and 5% is not particularly low. I'd pay off the higher rates first but I wouldn't carry this just because the rate is lower. What else would you be doing with money that could pay these off?

LEB1230
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Re: Student Debt Advice

Post by LEB1230 » Thu Oct 05, 2017 2:18 pm

I'd recommend you pick up a copy of The Total Money Makeover by Dave Ramsey and read it. I wish I had read it much earlier in life than I did. Once you are through baby step three come back here for your investing advice.

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neurosphere
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Re: Student Debt Advice

Post by neurosphere » Thu Oct 05, 2017 2:25 pm

No need to waste time with Navient regarding capitalization.

For federal (stafford) loans, the interest capitalizes at the end of the grace or deferment period. Perkins loans are subsidized, so there is no interest to capitalize. You don't mention what kind of loans the mom/dad loans are, but perhaps they are "parent plus" loans, which I believe will also capitalize when the grace period expires.

From a strict financial standpoint, in order to minimize interest you would want to pay off as much interest on the highest interest rate loan prior to the end of the grace period.

Don't forget that if you choose REPAYE for the loans which are eligible for an income driven plan (such as the stafford loan) you may be able to get an interest subsidy which will lower the effective interest rate on your loans (depending on your income).

When was your graduation date? When do you start a job? If you are graduated by unemployed right now, your "income" is zero, and your income driven minimum payments will be "zero" for 12 months. This will provide (at most) an interest subsidy which cuts your interest rate exactly in half. You can always pay extra (but then you decrease the subsidy).

If cash flow is a problem, or your income is low enough that you'll get a subsidy, here is one strategy:

-- consolidate all loans at the end of the grace period. Include the perkins, because consolidation will make this loan eligible for REPAYE and thus the interest subsidy.
-- Choose the REPAYE plan.

Whether this is a good idea or not depends on your income and marital status (if any spousal income), as well as the nature/type of the mom/dad loans. But if you qualify for an interest subsidy it may put your loans into the range where you may NOT want to pay off any faster than normal, and instead invest/save any extra cash flow, say in a 401k.
-- Real name: Sotirios Keros. If you have to ask "Is a Target Retirement fund right for me?", the answer is yes.

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Pajamas
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Re: Student Debt Advice

Post by Pajamas » Thu Oct 05, 2017 2:29 pm

sundercj wrote:
Thu Oct 05, 2017 1:10 pm


I have also come across some options on choosing to apply my payments as refunds or just payments. I'm not exactly sure what's meant by that or how it could affect my payments. Then it asks me to choose which loans my excess payments go towards.. I assume I should just choose the higher interest loans.
That option is asking you whether you want to use the excess payment amount to reduce the principle on your loans or for making your monthly payments early. Unless there is some particular reason you want to make your payments early, such as as traveling without secure internet access or going on a retreat or similar, you should choose to apply the extra money to reduce the principle on the highest interest rate loan unless there is some specific reason not to, such as needing to pay your mother back before your father or similar.

Something else you should do with any excess earnings besides contributing to retirement accounts to receive an employer match and paying down the principle balance on your loans is to create an emergency fund. You don't want to be in a situation where you can't make the regular monthly payments for some reason such as changing jobs.

sundercj
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Re: Student Debt Advice

Post by sundercj » Thu Oct 05, 2017 2:31 pm

TheAncientOne wrote:
Thu Oct 05, 2017 2:09 pm
How much will your income be? 94K is a high amount for student loan debt. Is this just for undergraduate?

The key thing is to live a spartan lifestyle and get this debt paid down ASAP. I'd limit 401K contribution to whatever your employer matches. If you don't have a job that pays well, you need to get a part time job on weekends to help.

First priority should be to get your parents' loans paid off.
I make 60k. Total monthly income after tax is $3500. I pay roughly $1400 a month on gas, insurance, rent, groceries, etc. That leaves me with $2100 for saving and paying off debt. I currently have my budget sheet setup to pay about $1100 to debt and $1000 to save/invest. Half of that I will invest for retirement and the other half I will save for a good used car and an emergency fund.

DoctorB
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Re: Student Debt Advice

Post by DoctorB » Thu Oct 05, 2017 2:36 pm

TheAncientOne wrote:
Thu Oct 05, 2017 2:09 pm
How much will your income be? 94K is a high amount for student loan debt. Is this just for undergraduate?

The key thing is to live a spartan lifestyle and get this debt paid down ASAP. I'd limit 401K contribution to whatever your employer matches. If you don't have a job that pays well, you need to get a part time job on weekends to help.

First priority should be to get your parents' loans paid off.
You dont need to get the debt paid down ASAP necessarily. Sign up for an income-based repayment plan, and you only have to worry about minimum payments based on your income for 20 years, then the rest is forgiven. Just make sure not to consolidate with a private company and keep it with the government or else you lose the government benefits.
Make sure the credit cards and otehr forms of debt are taken care of first. You can still get a mortgage and have a high student loan balance because only the current monthly repayment matters when qualifying for a mortgage.

Don’t necessarily pay off your parents’ loan, that is their responsibility. Worry about yourself and your own credit and career first and foremost because you will be living longer than them. When they die, the estate will only have to pay tax on the forgiven debt.

retire57
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Re: Student Debt Advice

Post by retire57 » Thu Oct 05, 2017 3:53 pm

LEB1230 wrote:
Thu Oct 05, 2017 2:18 pm
I'd recommend you pick up a copy of The Total Money Makeover by Dave Ramsey and read it. I wish I had read it much earlier in life than I did. Once you are through baby step three come back here for your investing advice.
+1

Nate79
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Re: Student Debt Advice

Post by Nate79 » Thu Oct 05, 2017 11:40 pm

Pay down this mess of a debt asap. Live like you understand you are broke and in a mess. Sounds like you are throwing a lot of money at the debt which is great. Save for a car to pay cash (keep it a cheap car) and emergency fund is critical. Unless you want to be in debt forever like the other lemmings I would keep up the good work.

sundercj
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Re: Student Debt Advice

Post by sundercj » Fri Oct 06, 2017 6:32 am

Nate79 wrote:
Thu Oct 05, 2017 11:40 pm
Pay down this mess of a debt asap. Live like you understand you are broke and in a mess. Sounds like you are throwing a lot of money at the debt which is great. Save for a car to pay cash (keep it a cheap car) and emergency fund is critical. Unless you want to be in debt forever like the other lemmings I would keep up the good work.
Yeah I'm fairly certain I will be able to pay it all of in ten years. My job is pretty reliable and with my degree I could probably find a job with about the same salary if I had to. I'm just trying to see what the best way to get it paid off is in terms of paying it off sooner than ten years and paying the least interest.

LEB1230
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Re: Student Debt Advice

Post by LEB1230 » Fri Oct 06, 2017 6:53 am

If you got serious and worked hard (maybe pick up a part time side job) you could have these loans paid off in 3 years or less. I wouldn't worry about saving/investing until you had these debts paid off. Once these debts are paid off you will then have plenty of "extra money" to invest. No way would I sign up for a plan to carry these loans for 20 years and hope they are forgiven, lots of things can change in the next 20 years and I wouldn't trust our government to honor a forgiveness plan.

benevo
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Re: Student Debt Advice

Post by benevo » Fri Oct 06, 2017 7:03 am

sundercj wrote:
Fri Oct 06, 2017 6:32 am
Nate79 wrote:
Thu Oct 05, 2017 11:40 pm
Pay down this mess of a debt asap. Live like you understand you are broke and in a mess. Sounds like you are throwing a lot of money at the debt which is great. Save for a car to pay cash (keep it a cheap car) and emergency fund is critical. Unless you want to be in debt forever like the other lemmings I would keep up the good work.
Yeah I'm fairly certain I will be able to pay it all of in ten years. My job is pretty reliable and with my degree I could probably find a job with about the same salary if I had to. I'm just trying to see what the best way to get it paid off is in terms of paying it off sooner than ten years and paying the least interest.
I too would suggest consolidating - but not just with federal servicers. While private loans CAN be scary (and I would strongly recommend not doing one with the traditional/big banks), some are actually quite good. Check out Earnest (which I use), Sofi, etc. Many offer the same benefits that federal loans provide, and many even offer career advice, etc. I lowered my graduate loans from 10 years @6.8% to 6 years at 4.5% and I anticipate paying off within 3-4.

Good luck - and, congratulations on your graduation!

TSR
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Re: Student Debt Advice

Post by TSR » Fri Oct 06, 2017 10:10 am

It's easy to feel like this is all a terrible emergency, and in some ways it is. But you're going to be ok. You're ahead of the game for thinking and caring about this stuff. There is no prize for winning the race to pay this off sooner than everyone else. That won't show that you are financially smart. What shows that you are financially smart is developing a plan that will put you in the best position in the future. Please think carefully about any advice you get that says you shouldn't do any investing while you have student debt. The math is strongly in favor of doing some tax-advantaged investing (401k and Roth especially) while you're still paying off debt, and OVERWHELMINGLY in favor of investing up to any employer match. Look at those things closely. You may ultimately decide that you want to put everything toward loans, but that is not necessarily the mathematically optimal move, and I typically advocate for a "do both" strategy. I did that with my student debt and I'm very happy I did.

Good luck.

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JupiterJones
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Re: Student Debt Advice

Post by JupiterJones » Fri Oct 06, 2017 10:12 am

sundercj wrote:
Fri Oct 06, 2017 6:32 am
I'm just trying to see what the best way to get it paid off is in terms of paying it off sooner than ten years and paying the least interest.
You could try to finagle the bagel with loan consolidation or something, but that's not really going to do much.

In the end, the only way to get out of your debt emergency is to toss as much money as you can at it, as quickly as possible.

The less easy your life is while you do this (in terms of working a lot, being disciplined, and not spending on other things you might want), the shorter that period of you life will be.

Me? I'm a fan of paying off debts in smallest-to-largest balance order. Others recommend largest-to-smallest interest rate order. But really, you could do them in random order. That sort of thing is small potatoes compared to the main action that's going to get you results: Just shoveling money into your gaping debt hole like a crazy person.

:sharebeer
Stay on target...

beehappy
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Re: Student Debt Advice

Post by beehappy » Fri Oct 06, 2017 10:31 am

sundercj wrote:
Thu Oct 05, 2017 1:10 pm
So I'm just out of school and I'm setting up my student loan repayment plan.. I've been doing a lot of research and trying to figure out my best options but I wanted to get some opinions.

https://imgur.com/a/Bpgtz

This is a summary of my different loans separated by the different servicers. The first three have a grace period of 6 months and the last has a grace period of 9 months (I graduated at the end of May). I plan to not pay any towards my Perkins loan for the next 6 months since it's not accruing interest and I don't have any minimum payments on it yet. The rest of my federal loans are unsubsidized and subsidized stafford loans with an okay interest rate. I am planning on just paying the minimum payment on those for now because I am not too worried about that interest getting out of hand and I believe it's not a bad thing to carry some low(ish) interest debt (Correct me if I'm wrong).

Then there are the two private loans in my mom and dads names. Pretty high rates and have already been accruing a good amount of interest. I plan to pay as much of those a month that I can, particularly focusing a little more on my dad's. Probably about 500 to my dads and 400 to my moms. I have very recently been looking into capitalization and that scared me a little bit, but I'm not sure I fully understand it and how it could affect my loans. I'm not exactly sure when my interest would capitalize on these private loans or even how to find that information out.

I have also come across some options on choosing to apply my payments as refunds or just payments. I'm not exactly sure what's meant by that or how it could affect my payments. Then it asks me to choose which loans my excess payments go towards.. I assume I should just choose the higher interest loans.

I'm just getting a bit overwhelmed by a lot of it and hoping to get some advice from someone with a little more experience with student loans. My rates are pretty high.. Should I consider consolidation?

Thanks guys
can you refinance these to lower rates? For example, this deal by First Republic (http://www.biglawinvestor.com/one-perce ... -are-back/) is 1.95% fixed rate if you can swing 5-years, but even the longer term rates aren't bad at all.

sundercj
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Joined: Wed Aug 30, 2017 3:34 pm

Re: Student Debt Advice

Post by sundercj » Fri Oct 06, 2017 12:17 pm

Yeah I'm thinking about doing both retirement and putting a good amount towards my loans. I'm not eligible for my works 401k until I've been here for a year. So that will be in about 8 or 9 months. They do annual profit sharing that is consistently 15% of my salary and it goes into my 401k. Until I'm eligible for that, I'm going to start a Roth IRA through Vanguard and put about $300 a month in it, leaving me with $1200 for my student loans. I'm probably going to do a lower minimum payment plan on my federal loans with lower rates so I can put more money towards my higher rate loans. I'll do this for a couple years, which would be about 35% of my income towards debt, 20% towards retirement and the rest will be my typical expenses/saving. Then I'll probably start paying off my loans more evenly, hopefully applying some good bonuses towards them whenever they come along. I appreciate everyone's input. It is extremely helpful.

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