student loan debt

[nj593]

Hi guys been a while. For those that have been around since I use to be on hello.
Question! Anyone have any thoughts on how I can bring down student loans? I did the IBR but that brings it down to around $250.00 which is still crazy. Without IBR it would be around $1,100 last I checked monthly, forget that. I owe a total of 58k including grad school credits. The other issue is I do not know of one place where I can take all these loans that are scattered everywhere and consolidate. Any thoughts of a place that will find them all for me and consolidate them at a normal rate? I want to pay this crap off for the next 10 years and be done with it..

Thanks

[cookderosa]

Hi guys been a while. For those that have been around since I use to be on hello.
Question! Anyone have any thoughts on how I can bring down student loans? I did the IBR but that brings it down to around $250.00 which is still crazy. Without IBR it would be around $1,100 last I checked monthly, forget that. I owe a total of 58k including grad school credits. The other issue is I do not know of one place where I can take all these loans that are scattered everywhere and consolidate. Any thoughts of a place that will find them all for me and consolidate them at a normal rate? I want to pay this crap off for the next 10 years and be done with it..

Thanks

I'm not 100% sure, but I do think if you consolidate, that you'll have to extend the life of the loans and likely will take LONGER to pay them off. Have you heard the concept of "debt snowball" before? It's a Dave Ramsey term, though it's been around forever. Here's the basic premise:

List your debts from smallest balance to largest (I'll make some up for the example)

$700 abc loan, $50/month
$1400 def loan, $120/month
$5900 ghi loan, $175/month
$12,900 jkl loan, $225/month

So, let's figure your monthly payment is $570.

First step is to raise cash, even if it's an extra $20/week selling off your junk on craigslist or an extra part time job 1 night per week. Doing this, you manage to scrape together $100 per month. You apply it like this:

abc loan $50 (regular) + debt snowball money $100 = $150 sent
You do this until your abc loan is paid off. YEAH!

Now, you have freed up that payment $50 and can try to keep adding that $100 per month too. That gives you $150 that you will now send with your def loan!
def loan $120 (regular) + debt snowball money (50 from before and 100 from extra) total payment going each month $270. Where this loan was going to take a year to pay off, you'll rock it out in 5 months AND that $270 now is going toward the third loan on top of the payment you were going to send.

Fast forward, by the time you start to attack the jkl loan, you'll be sending in $670 month on just that loan! All this time the only thing you did was added $100 per month to your income. So that last loan was set to pay off in 57 months - almost 5 years, but by snowballing you bring it to ZERO BALANCE in under 2 years.

I don't know anything about your personal life or income, but since you're still in school, you just need to tighten the budget and pay the IBR until you can increase your income and get rocking on that balance. Dave Ramsey, teaches how to get out of debt, check him out on Hulu.

[Prloko]

Do you own a home? Mortage rates are rediculously low these days (like 3%). A HEL will bring your payments down considerably (but probably about the same rate as your IBR). downside is closing costs, and now owing this money for 30 yrs vs 25 for the IBR, but you can always pay it quicker. Both mortgage and student loan interest is tax deductible, so it's a wash there. I believe any amount forgiven under IBR will be taxable, so I definitely would speak with a financial advisor on this one.

Hi guys been a while. For those that have been around since I use to be on hello.
Question! Anyone have any thoughts on how I can bring down student loans? I did the IBR but that brings it down to around $250.00 which is still crazy. Without IBR it would be around $1,100 last I checked monthly, forget that. I owe a total of 58k including grad school credits. The other issue is I do not know of one place where I can take all these loans that are scattered everywhere and consolidate. Any thoughts of a place that will find them all for me and consolidate them at a normal rate? I want to pay this crap off for the next 10 years and be done with it..

Thanks

[chiquitacobbe]

Cookderosa- I use this method of paying off debt now with exception of the extra income. I already work fulltime and don't have any additional time to bring in more, but once one debt is paid off I add that payment to the next one. It's great because I'm already used to not having that money anyway so it doesn't hurt me. Also, instead of paying off the lowest amount first I am paying off the highest interest debt first and making minimum payments on the lower interest ones. This month I will have one CC debt paid off and will be moving on to the next. If you can stay focused and not change the plan it really works!!

[cookderosa]

One of my favorite quotes "you can't borrow your way out of debt."

[nj593]

I love the idea Cook I will check it out and start this. Thanks everyone for the info and taking the time to respond.

[Lindagerr]

I agree with the home equity idea. Unless your interest rates on the student loans are less then 4 percent you will save with the home equity. Look around and compare rates and closing cost, some banks are giving lower rates and higher closing cost others just the opposit. Most home equity loans can be set up for a 15 year payback and there is no penalty for early payoff. If you use Cooks numbers of amount owed and payment you will probably find your payment would be lower so if you just pay the same as you are now you will have it paid off in 10 years.

[Publius]

The total of 58K probable entails the the following 3 things: Principle, Interest, and late/collection fees. You may be able to negotiate on the last one. First two are out of the question but you may have a shot on cutting some of what you owe down. (something I've heard Dave Ramsey talk about)

[bogey72]

If you are already on IBR, I think you are pretty much locked into that plan. The only way that I know of to shorten your payoff period is to be employed by an entity that qualifies you for PSLF or Public Service Loan Forgiveness. Otherwise, you'll pay $250 or more per month for the next 20-25 years with no guarantee that the loan will be "forgiven" and not taxed as income at the time when your debt slave servitude term is finished. PLSF knocks it down to 10 years (120 payments) and any remaining debt is supposed to disappear without any tax ramifications.

BTW, I think the student loan bubble will burst way before anyone reaches that 25 year "forgiveness". The combination of rising education costs and a terrible job market are creating a perfect storm that will result in a large part of our particular generation having very little to contribute to the economy. 20-30 somethings with 60-100k in loan debt won't be buying houses and new cars anytime soon which will further depress the economy. If you can't do PSLF, just ride out the $250/month payment until the system implodes. I also agree with the others that if you have enough home equity or other assets to cover your debt, do it immediately and get those despicable student loans behind you as quick as possible.

[AlbaTiVo]

I would not recommend using home equity to absorb other debts.