STUDENT LOAN REPAYMENT OPTIONS: IBR PAYE REPAYE STANDARD REPAYMENT ETC ETC

Danny's graduation just keeps getting closer and closer which means one excellent thing: we are getting closer and closer to having a real income. But it also means that we are getting closer and closer to having to make a decision on how we are going to tackle his MOUNTAIN of debt. So, I've gone through each of our options (or lack of options, but hopefully it is helpful for you). Without further adieu:

Lets start off by looking at this fancy chart. You should create your own HERE as it is helpful in reviewing what the best option is for you.























1. IBR

to qualify: must have FFEL, Stafford/Graudate Plus loans (can't have anything that contains Parent Plus loans)

Pros:

• Loan forgiveness. After 25 years, the remaining balance of your loans disappear.
• Live better lifestyle immediately after graduation. This is as a result of the fact that you will  be making low monthly payments.This is appealing to people who have been students (and living like students) for more than 10 years.
• Never have to pay more than what would be required under 10 year standard repayment plan. 
• Payments change with income.This helps ensure that your payments are affordable- if you get a job that pays less, then your payments will decrease. 
• Possibility for saving and investing money earlier

Cons:

• Doesn't incentivize you to make lots of money (since its based off percentage (15%) of income. The more I earn, the more I pay, while interest is accruing).
• Pay FAT taxes the year that your loan is forgiven. You are taxed on the remaining balance of your loan (which, for medical and dental students, can easily be more than $1million). Meaning, you might be paying $100k - $400k JUST IN TAXES the year your loan is "forgiven"
• You have debt hanging over your head for 25 years 
• Your loans will earn more interest 

IN SUM: Good for people who have high debt compared to income and or family size. Or who want to live a more comfortable lifestyle and not concerned about lifetime value of the loan. 

2. PAYE:

To Qualify: Must have Stafford or Graduate Plus loans that were taken out ON OR AFTER Oct, 1, 2011, or have consolidaton loans that were made on or after Oct 1, 2011 OR direct loan borrowers can qualify if they have no loans made before Oct 1, 2007.

We don't qualify for this so I didn't research this too hard because its too depressing on what we are missing out on. If you qualify, really consider taking advantage of this!

Pros:

- 10% of your income for twenty years and then it is forgiven.
- Allows you to live comfy-ish lifestyle immediately after graduation
- total balance of your loan that you end up paying will likely be less than what you would have paid under the conventional loan option (or any other option for that matter, see chart customized to our situation above)

Cons:

- you  have debt hanging over your head for 20 years.
- You'll be taxed on the remaining balance that is forgiven plus whatever your income is that year, so that will HURT

3. REPAYE

Pros:

- good option if your job is not reliable or you think for some reason you may earn LESS money in the future
- only pay 10% of whatever your income is. So if you went to school and then decided to become a SAHM for example, you would pay $0 (since your income is $0).
- good option if you don't qualify for PAYE

Cons:

- Accrue WAY more interest than other repayment options
- Get taxed (as discussed above) when your loan is forgiven


4. STANDARD:

The standard plan sets up your payments such that you'd pay off your loans within ten years.

Pros:

- smallest amount of interest accruing
- gets rid of debt hanging over your head the fastest

Cons: 

- living like students for another 10 years (ideally less, since ideally you'd be throwing more money at these monthly than what is due)
- takes a lot of discipline to not spend the money you are making



So, our expenses could look something like this next year:

Yearly expenses based on $150,000 income (ps, we don't know what exactly our income we'll be, so this is just a random figure I chose out of the air) 

Taxes: $37,500 - 49,500 (25-33% depending on how we file) 

Tithing: $15,000

Housing: $9600

Food: $5000

Standard loan: $62,000 IBR: $17,976 PAYE: $15,000 REPAYE: $15,492

Car maintenance: $500

Clothes: $500

This factors in basically no discretionary income- gifts, vacations, etc. And this could change a lot because it depends quite a bit on what our actual income is.

Super appealing to only have to spend 15k on student loans next year instead of 60k! But super unappealing to think about getting taxed to death in 20-25 years. And super unappealing to STILL be paying loans in 20-25 years. In the end, its a personal choice, obviously. What do you think? What have I not considered? What are you doing for your student loans?? Or what are your plans?? HELP US DECIDE-- comment below! 

Student Loans: March Debt Update

Progress is progress I guess! 

Kind of. Except that I looked at Danny's dental school loans and his masters degree loans this week. Its like looking after you squish a bug or blow your nose- you've gotta see it but you really really really don't want to. But you do. But really you don't. He's only accrued $60k in INTEREST so far. BAH. I just about passed out. 

At least he graduates in a couple of months and can start knocking those bad boys out. 

xoxo

February Debt Update

Credit card debt;         $0
Undergrad loans:        $0
Car loan:                     $0 (but to be fair, not by choice, see HERE.
Summer loan 1:          $0 (paid it off before interest accrued. Schwing!)
Law School Loan 1:   $8,370 (6.8%)
Law School Loan 2:   $12,492.75 (6.21%)
Law School Loan 3:   $13, 619.46(5.41%)
Danny's Loans:       +$500,000

Amber's total debt: $34,482.21

I didn't feel that impressed by this until I checked out my October debt update. I guess we are making progress after all :) 

Setbacks

A few days after Christmas, we were driving to meet up with some friends. The highway looked nice and dry, until we got to one section, just about to go over a bridge, and Danny said "is the ground wet?" [Kind of, it was black ice.]

Just as he set it, we started fishtailing. I couldn't get control over the car, and we started spinning. We were in the left lane, so were spinning in the left lane and shoulder. There was plenty of traffic behind us- I just remember seeing lots of bright headlights, and especially the lights of a semi-truck. I don't know how it missed us. Eventually we hit the concrete barrier in the center, in the front and then in the back, where Max was sitting. The air bags went off at some point while we were spinning, before we stopped. Danny was shouting, and the whole time I was just thinking about Max. Was he ok? Was he going to be ok? If he was ok, was he scared because we were screaming? Everything was in slow motion. I was praying for the car to stop. Eventually it did. Danny was shouting at me (it was loud, we were on the highway) to get out of the car because we were hanging into traffic. I couldn't- my door was crushed shut. Probably my biggest fear in life-- being trapped. It was even worse because all I wanted to do was check Max and hold him and let him know everything was going to be ok, but I couldn't. I was stuck. And I kept imagining the worst, because I couldn't hear him crying, I could only hear Danny shouting.

I was shouting at Danny to hurry and get Max out and get out of traffic and onto the shoulder.
A kind lady pulled over to help, she offered to let max sit in her car (it was warm). Danny put him in her car and started walking towards me. I started SCREAMING for him to not leave Max. I envisioned her driving away with my baby after he had just survived that crash and I was panicked.
While this was all going on, I was calling 9-1-1. Danny was on the phone too (he called my mom). My mom (and brother) arrived right about the same time as the cops & firemen. I've never been so happy to see them.

We unloaded everything from the car and signed some papers for the cops and firemen. They checked Max to make sure he was ok and they installed his car seat into my mom's car. We got in her car and just drove away and we just sat there, staring into space, in complete disbelief at what had just happened. I couldn't stop shaking and was really cold the rest of that night. We all had some pretty serious soreness and migraines for several days (lets just say if it was us against the airbags and or the concrete barrier we hit, the airbags and barrier won. big time). And I, being the driver, felt a lot of guilt (and still do) for nearly killing us and for killing our car. But we were ok. And so grateful for our lives. And especially grateful for Max's life and for his car seat.

pics from when we went to look at the car at the car storage place. 

I really can't even complain about the bummer this put in our finances and in our digging-out-of-debt plan, because I really am just so grateful that we are all alive. Especially my two guys, who I am pretty dang crazy about. 

But, it was certainly a setback. 

We still owed about $2800 on our car. 

We have a $1000 deductible on our insurance.

Our car was kind of a junker, so we were just crossing our fingers, hoping to break even. 

Our insurance was actually really decent to work with. There wasn't a lot of haggling and arguing over a price-- they offered about $5500 which obviously covers the balance of our loan and the deductible with a tiny bit left over.

And-- as a bonus, if you weren't aware, most insurance companies will pay for you to get a new carseat! In our case, we got about $350! 

Some take aways we learned: drive carefully out there in stupid winter, be nice to your insurance company and maybe they will be nice back (but if they aren't, haggle your way and get what your car is worth!), and don't take your days on this earth for granted. 

We haven't decided what we'll do as far as replacing the dang thing goes. $1700 doesn't exactly cover much of a new (used) car. TBD! 

October Debt Update

Made a $1900 payment today on one of my law school loans. My total debt looks like this now:

1. Law school mini loan: $3500 (interest 5.5%, none accruing until March)
2. Car Loan: $5500 (interest 3.3%)
2. Law school loan 1: $12,500 (interest 6.7%)
3. Law school loan 2:$12,500 (interest 6.1%)
4. Law school loan 3: $13,000  (interest 5%)
5. Undergraduate student loan: $0

Amber's total debt = $45,000

Slowly but surely we are digging our way out of this mess.

Still haven't decided how we will attack Danny's debt when he graduates but will cross that bridge when we get there. The debate always goes back between taking advantage of IRB/PAYE versus just knocking the dang thing out. What are your thoughts? IRB or no?

Payment Numba 4

Ouch. More interest accrued than I was able to make a payment on. That blows!

My loans are such that the federal govt has combined them all on myfedloan.org. Nice because I can view them all together and really comprehend how much interest is accruing but dayummmm it hurt to look at.

The good news is that with my next pay check I will be able to fully pay off my undergrad student loan. Woo woo!

Someone today recommended that I take out another loan (such as a home loan) that has a lower interest rate to pay off my student loans (which have a rate of 7%) -- anyone have thoughts on this?? Is that even allowed? Is that a bad idea?