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Student debt--what's your plan for paying it off?

SB621

Ideal_Rock
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Aug 25, 2009
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Yssie|1391314080|3606221 said:
I think I worded my post poorly - I'm horrified, but not by the fact that people choose to go to college and incur this sort of debt - it's the fact that anyone *has* to make that choice at all that I object to, viscerally. My family has always valued higher education and instilled that in me, and I applaud anyone who chooses to educate himself beyond the minimum necessity!! But it's outrageous that it should come with such a price tag - wherever you go, however many degrees you pursue :sick: I know exactly how much my parents shelled out for my private brand-name education and I was horrified by that number, too, at the time, but it's only after I started working that I fully understood just how much of a sacrifice that must have been for them. I am also genuinely awed by the resolve it must have taken to pay those loans off so substantially and so quickly - that takes incredible responsibility and commitment and I can certainly see how one could benefit positively in terms of learning money- and time-management to handle it!

Yssie I understood where you were going with it. I'm with the above poster that at the time I just didn't know better. My parents werent around to guide me so I knew I would take college loans on I just never knew how much, or how repayment worked etc. It was a rude awakening. And in the 8 years I have been out of college it seems the majority of schools have gone way up. I fear for how much I will actually have to save for my 2 kids. It realy does make a house payment look like peanuts. :knockout:

Honestly I would love to live in a place like New Zeland (i believe) where education is paid for and everyone has access to it. I know that would never work in the USA but I still love the idea.
 

vc10um

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IndyLady|1391382349|3606666 said:
vc10um|1391306881|3606129 said:
While I didn't live *quite* like a monk, I certainly lived relatively frugally the entire time I was paying off student loans.

I graduated in 2007 with roughly $115K in debt, just like SB, began repayments in November of 2007, and my husband and I paid the last bit off just before Christmas 2013. (Note: we could've paid them off sooner, but opted to also save a 20% down payment on a house and a 25% down payment on a car as well, so that extended my loan term...but with my interest rates being so low we were willing to do that in order to get the home and car we wanted.)

Aside from the awesome suggestions you've already received, I'd make the additional suggestion to monitor your interest rates and keep abreast of what the Fed is doing with them on the federal level. When I graduated, my private loans had a variable interest rate somewhere near 6.5%, IIRC. I resisted the urge to fix the loan, though, because I didn't think they would go any higher, but knew they could go lower. By the time the economy crashed out and the feds made all their cuts and whatnot, my interest rate had dropped to 2.75% and my minimum payments had been lowered by over $200/month.

Just be diligent. Any bit of money that's not in your emergency fund: put it toward the student loans.

Best of luck to you, and everyone else paying down these debts!

Do you think that its worth it to take private loans? My loans are federal loans, but some of my friends have taken private loans to help pay off their federal loans, or they took private loans out during their programs with their parents as co-signers. The pro is that private loans seem to have a lower interest rate; the con is that the interest rate varies and might end up higher than the interest rate of federal loans. You also can't use IBR or other programs to repay the private loans, but that's not an issue for me because I don't qualify for IBR.

Worth it? Well, I really had no choice other than private loans to cover the gap, as the only Federal Loans I qualified for were Subsidized and Unsubsidized Stafford Loans, which only covered up to $7500/year at the and I needed over $20K each of Sophomore-Senior years and $40K+ for my Freshman year (I was out of state at what is now the most expensive public school in the country for out of state students...when I attended it was #2...I established residence the summer between my first and second years)...limits were somewhat different for Graduate School and I don't recall them. So for me it was absolutely worth it because I wouldn't have the degrees I do or have had the amazing college experience I cherish and was worth every last bleeding penny without them.
 

Indylady

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Thank you VC10! I didn't realize that your federal loans didn't cover your costs. The friends I referenced elected to take on private loans even though they had sufficient access to federal loans. Thank you for filling me in!
 

Indylady

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justginger|1391316626|3606254 said:
I am also horrified - my knowledge of the realistic cost of higher education in the States is skewed - I went to a private, $30k/year school nearly 10 years ago, but was there on a full scholarship. I didn't really consider what a whopping huge bill that could have been. Alternatively now I'm doing a second bachelor's, in Australia the amount a university can charge per year, based on discipline of study, is capped. Medicine is set at ~$27k/year. However, 2/3 of that is paid by the government, leaving my program at ~$9k/year.

For all of those who had staggering debt and knuckled down to take care of it - kudos! It will feel incredible when you get to the end of those repayments! :bigsmile:

Wow--that is such a contrast to the cost of medical school tuition in the States. Is the program subsidized for everyone? How do you know the breakdown and the government's contribution? Here, there are some state schools that are significantly less expensive than other state schools--but I don't know the breakdown of what local/state government contributes to X school vs. another state's contribution.
 

Indylady

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TooPatient|1391318126|3606264 said:
We have a credit card that gives 3% cash back on all purchases and more on a few select categories. I use it for as much as I can (pay off as we use so it isn't getting any interest charge) and all the cash back goes to pay any loans we have -- starting with the highest interest loan first.
I've been taking any "left over" money at the end of paying monthly bills and transferring it straight to pay loans too. A few dollars here and a few more there can add up pretty quick!

I have minimal loans so far because I was lucky enough to not qualify for any aid (including loans) for a good chunk of my school so far. I say lucky because I was forced to work and DH & I paid out of pocket each quarter. It has been rough but it has certainly kept my loan amounts down!

I'm anticipating finishing both bachelor's degrees with about $20,000 total in loans (26,000 if you count the last bit from a mistake I made choosing a technical school right after high school).

Using the cash back from your card towards student loans is a great idea. I hadn't thought of doing that, but will definitely look into it. Right now, I get it back as a 'statement credit', but I'll look into taking that amount out of my savings and transferring it, etc.
 

SB621

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IndyLady|1391380896|3606654 said:
SB621|1391305904|3606108 said:
JulieN|1391303935|3606086 said:
Live like a monk.

Yup this exactly. I graduated in 2004 with around 115k in loans. I consolidated whatever I could and started repayments. Because I went back to school for my MBA some of my loans defered but I still made monthly payments. I never ate out, never went to the movies, worked 1 full time job and 2 part time jobs. I lived off the wendy's dollar menu to $5 a day for breakfast/ lunch/ dinner. I got a credit card that let me use points to pay back my college students loans, then I OK'ed it with my boss to forgo the company card and use that card for purchases. I also split a small apartment with a friend so rent was around $400 a month with utilities.

I won't say it was easy. I creid often and the stress of the bills I still blame on leading to early gray hairs I found. I basically had ZERO life and the ONLY time I ever got out was when my DH (BF at the time) paid for me. In the end I ended up paying all of it off except for an interest free loan I had for 8k in 3.5 years. My DH and I were getting married and I didn't want him taking on any of my college debt into our lives. My goal was to get it down to under 10k by the time our wedding rolled around, you can imagine this also led to us having a small wedding.

My recommendations is to:
-Consolidate as many as you can into 1 loan
-Start paying off whatever has the higest interest rate first vs. paying small amounts across many loans
-Pay whatever you can extra per month (without incuring more debt as a result). I set up automatic payments from my account on a weekly basis. That way every week I had a check going out to my loan company. the faster it was out of my bank account the drive to spend it was a heck of a loss less.

Goodluck!

You make such a good point to mention having 'zero life'. Going out, eating out, etc. is just so expensive. Its easy to drop $30 bucks on dinner and a drink. Staying in saves money, but its hard to have a social life. Any tips on doing both? A lot of my friends do have student debt too, but they don't care as much about paying it of ASAP, so its really hard to balance that.

I was lucky that my BF (now DH) basically paid for everything I did if we went out. I felt horrible about it then but now I'm the main breadwinner and I pay for lots of his stuff now, so it all equals out :bigsmile: Anyhow I just ended up doing lots of stuff that was free. Going to museums when they had no admission fees for that day, going hiking, only going out to dinner when they were running a 2 for 1 deal and splitting it with a friend. Though I was extremely frugal it was fun to come up with ways to still be busy. I did lots of movie nights at my apartment with friends. I got a library card for books and movies. I was alot more creative back then with my time and money.
 

TooPatient

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IndyLady|1391380896|3606654 said:
SB621|1391305904|3606108 said:
JulieN|1391303935|3606086 said:
Live like a monk.

Yup this exactly. I graduated in 2004 with around 115k in loans. I consolidated whatever I could and started repayments. Because I went back to school for my MBA some of my loans defered but I still made monthly payments. I never ate out, never went to the movies, worked 1 full time job and 2 part time jobs. I lived off the wendy's dollar menu to $5 a day for breakfast/ lunch/ dinner. I got a credit card that let me use points to pay back my college students loans, then I OK'ed it with my boss to forgo the company card and use that card for purchases. I also split a small apartment with a friend so rent was around $400 a month with utilities.

I won't say it was easy. I creid often and the stress of the bills I still blame on leading to early gray hairs I found. I basically had ZERO life and the ONLY time I ever got out was when my DH (BF at the time) paid for me. In the end I ended up paying all of it off except for an interest free loan I had for 8k in 3.5 years. My DH and I were getting married and I didn't want him taking on any of my college debt into our lives. My goal was to get it down to under 10k by the time our wedding rolled around, you can imagine this also led to us having a small wedding.

My recommendations is to:
-Consolidate as many as you can into 1 loan
-Start paying off whatever has the higest interest rate first vs. paying small amounts across many loans
-Pay whatever you can extra per month (without incuring more debt as a result). I set up automatic payments from my account on a weekly basis. That way every week I had a check going out to my loan company. the faster it was out of my bank account the drive to spend it was a heck of a loss less.

Goodluck!

You make such a good point to mention having 'zero life'. Going out, eating out, etc. is just so expensive. Its easy to drop $30 bucks on dinner and a drink. Staying in saves money, but its hard to have a social life. Any tips on doing both? A lot of my friends do have student debt too, but they don't care as much about paying it of ASAP, so its really hard to balance that.

We have a group of friends that do dinner regularly. Someone sends an e-mail each week (just generic group reminder that someone can offer to host) and if someone wants to host they reply to the e-mail letting everyone know they are hosting. (we do Friday nights but you could do a standing night or rotate to fit schedules -- we do standing because Friday is the big dinner night in Jewish tradition and also because if you try to find a night that works for all it will just never happen)
The host provides the house for people to meet in plus drinks and paper plates, cups, plastic ware.
All who want to attend reply that they will be there.
Each person/family brings a main dish and a side dish to share with all. Not coordinated so you get quite an assortment of stuff!

Costs us about $20 for all three of us to go and bring dishes to share (everyone brings a fair amount so there is not question of plenty).
Hosting is a bit more but still along the lines of $30-50.
 

GliderPoss

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OMG you poor things! :shock: I suddenly have a new appreciation for the Australian education system. A 3 year average BA degree would usually be no more than $20K and most off it is subsidised by the government - then you automatically pay it back once you earn over a certain threashold. ie. I only did first year (then quit) so owed about $6K. When I got my first job paying over $40K my repayments began. Took me about 2 years to pay it off as they only take a small amount each pay cheque. Cannot believe how much US university costs - amazed ANYONE would actually go for that cost! :-o
 

manderz

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I am about to start replaying my undergrad, as I just graduated last August. My plan is to pay 50% more than the minimum, with the extra going to the highest loans first. I have about $20k in debt so far. I'm in the process of applying for grad school, so if all goes well, I should be starting in the fall. I plan to pay while attending to help reduce my overall debt, and grad school should add another $16k. I know it could be worse, but earning potential for my area (any field, not just mine) is not very good.
 

amc80

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One month at a time. I only had around $20k, so the payment is low. Plus it's at 3% or something crazy so I'm not in a huge rush.
 

PintoBean

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$85K in loans for $120K in tuition, graduated in 2011, part time evening law school while working full time. Paid off around June 2013.

What helped me pay off my loans faster was making WEEKLY payments. Let's say the monthly payment is $1,000 - I would pay $250/week. More money would end up going towards the principal since interest compounds daily by paying weekly versus monty. I was fortunate to also get bonuses which I threw onto the loans. Any birthday money or other cash gifts got thrown onto the loans as well. I also was lucky enough to be able to pay more than minimum per week. But if you can't pay more than the minimum due, break the amount due into smaller, more frequent payments. You will start seeing the due date begin to move out, which is also a nice buffer for a rainy day.

I'm not the most articulate when it comes to finances, so I hope this made sense. :-o
 

PintoBean

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I also developed a gift giving strategy. I made sure to redeem my Discover reward points for gift cards that I would then gift for the holidays and birthdays. DH's family is significantly bigger than my side, and they love celebrating EVERYTHING so those gift cards definitely were a huge cost savings!
 

nkarma

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HotPozzum|1391471266|3607320 said:
OMG you poor things! :shock: I suddenly have a new appreciation for the Australian education system. A 3 year average BA degree would usually be no more than $20K and most off it is subsidised by the government - then you automatically pay it back once you earn over a certain threashold. ie. I only did first year (then quit) so owed about $6K. When I got my first job paying over $40K my repayments began. Took me about 2 years to pay it off as they only take a small amount each pay cheque. Cannot believe how much US university costs - amazed ANYONE would actually go for that cost! :-o

You kinda have to because you are more likely to get a high paying job. My sister and best friend live in Australia. My friend is a manager at Big 4 consultancy and it's amazing to hear about the senior people there that do not have a college degree. I like that there is no ceiling for people without degrees. Also, while tuition is less subsized by the government, in general housing, food, etc...is cheaper in the states than most of other Western countries.

I got super lucky with my loans which may be why I don't think they are a big deal. I had a few smaller ones that were 6% & 4% in which I just paid all that I could every month into right after graduation and paid them off in 2 years. I set a budget for myself with high loan payments right after graduation and stuck to it. The really lucky part is that my husband and I both have larger loans that we got 1.65% when we graduated. We are just paying the minimum payment over 20 years cause really if we invest the money, we will get more than that.

I have to say that I have never seen myself or others more satisfied than when they worked really hard to earn, save, & pay for their heart's desire (college education, home, etc...)
 

rubybeth

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We've already paid off all our student loans, which took us about four years. We had close to $54,000 combined, with a second BA for my DH and a graduate degree for me. No debt from our undergrad degrees. We used the Dave Ramsey snowball method and just threw every spare penny toward the debt. I use Mint.com and track expenses in a spreadsheet, so we always knew how quickly we could get out of debt.

I'd say the main thing that helped was that we got married when we were still in school, and when we got jobs, we minimized lifestyle inflation (did not increase our spending to match our new income). We stayed in our 1-bedroom apartment. We have only paid cash for cars. We have no other debt, and always pay our credit card bills in full. We enjoy inexpensive or free hobbies. When we travel, we try to do it as cheaply as possible. And now my DH is back in school for a graduate degree, and we are paying cash this time. Someday, I'd love to skip the mortgage and just pay cash for a house. Right now, we are looking at retiring early, a la Mr. Money Mustache. There's a lot of power in living frugally, or at least well within your means, and not letting a paycheck dictate what you do with your life.
 

NovemberBride

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I am going to give a very different answer than anyone else here. My plan is to keep my students loans as long as possible. While we have more than enough money saved to pay them off completely, we have made a conscious decision not to do so. Both DH and I have loans from graduate school (JD and MBA), and we consolidated them upon graduation, locking in interest rates under 2% on the federal loans and rates that are under 3% on the private loans (private loans are not locked, but have been under 3% as long as I can remember due to the low interest rate environment). In our view it is the cheapest money we will ever get, even our mortgage has higher rate (although not by much and we aren't trying to pay that off either). At this point, we are dumping money into our retirement, our kid's college funds, the stock market and savings to buy additional real estate. Our returns on those options are far outpacing the interest we are paying on student loans. If that ever were to change, we would pay off the loans.

I wouldn't recommend this course of action to everyone, we lucked out in graduating at a time when interest rates on student loans were at a historical low and we also consider ourselves to be financially savvy (we both work in finance). I would agree that for most people it makes sense to try to pay off loans as soon as possible, but I just wanted to offer a different perspective that in some cases it does not make the most financial sense to do so because you can maximize your returns by investing money elsewhere. But we don't subscribe to the idea that all debt is evil (i.e. we do not follow Dave Ramsey), we believe if managed correctly, it can be a tool used to leverage and increase wealth. But it can be dangerous for those who don't understand it or use it prudently. I would never advocate taking out a loan for a vacation or to buy jewelry for example. But on the flip side, when I bought my car in 2012 I was offered a 0.9% interest rate. I had the cash to pay for the car outright but chose to take the loan. I left my money invested and got returns of over 10% last year, so for me it worked out well.
 

pandabee

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Paying it off as soon as I can. Unfortunately my lowest interest loan is still 5.6% and the others are 6.8% (but I get a slightly lower rate for auto payments). I graduated last May from professional school with over 70k (all from grad school as I attended a state school and had scholarships to cover undergrad) and my plan is to have it all paid off within 2 years of graduation.
 

rubybeth

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Yeah, our interest rates were above 6%, otherwise I think we might have kept the debt and invested instead, but we also began paying them off in 2009, after the market kind of tanked and all of our savings accounts were earning about 1% or less and our investments weren't really doing much, either. So paying off the 6% debt was basically an immediate 6% return. It drove me nuts that we were paying so much in interest per day, and I could login and watch it go up. We also often made weekly payments (we get paid opposite weeks, so this worked well). We paid off a small loan of DH's first, so getting that first $5k done and gone was awesome. My loans were consolidated, but it was fun watching it go down by at least a thousand each month, until the total was around $6k and we just tapped savings to pay it all off. Now we invest all that money each month instead. :bigsmile:
 
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