How did you handle your student loans?

Discussion in 'Teacher Time Out' started by pete2770, Nov 4, 2011.

  1. pete2770

    pete2770 Comrade

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    Nov 4, 2011

    (Note I haven't finished school yet, I just like to plan ahead - the debt is still climbing, sadly.)

    I'm debating how I'm going to handle mine when all is said and done.

    Let me start by saying: I hate debt and avoid it like the plague, but in this case it was a necessary evil that I plan to pay off rapidly. It's not feasible to live and pay off full graduate credits without living in extreme poverty, at least not for me and my situation.

    I'm big on budgeting, and I follow some pretty core principles that logically lead me to "pay it off, pay as much as you can afford to each month until it's gone." My goal is (well was) to finish paying it off in five years instead of ten to be done with it.

    Here's where my logic gets side tracked. These are Stafford Loans at the typical 6.8%. The interest leads to a tax credit yearly of what is it, $250 bucks, and that's not much - but it's a cap, so logically I'll try to not exceed the $2,500 in interest payments. Now, considering I'm going into teaching all these caveats are thrown up all over the place. The magic words "loan forgiveness" start being thrown around, albeit with some very tight terms like, teach in a qualifying school for five consecutive years, in a needed subject. (The school only has to meet the requirements for one of the five, so it's not too bad, I guess.)

    You financial gurus, I know there's a lot of you out there, that rocked your loans, let me know. What would you do?

    Obviously, if I don't work in a school that qualifies, that's null and void. But then there are other caveats specific to these type of loans that you can play around with, that may benefit you in the long-run. Such as purposeful deferment (not forbearance, I would never do that unless my life depended on it!). For instance, I have a six month grace period when I'm out of college. I can extend that period of deferment for three years based on unemployment/underemployment, whether that's three years total or six years combined as you can claim underemployment and unemployment deferment. I know it's hard to bite the though of being strategically underemployed or unemployed, but it may be best to limit the interest one pays until suitable employment can be found.

    However, that's not the type of deferment I would ever want to use, as it would be under the assumption life is going very bad at that point. The deferment that's got my mind blown is deferment for college enrollment. Teachers are REQUIRED to take continuing education. So wouldn't it make sense that I'd be a halftime student and can start deferment again each time I take those classes (still able to make my monthly payments on the principle without penalty I assume) and start the six month grace period over again each time I take a new class?

    I've kind of been rambling out my thoughts so I wouldn't forget anything, and I still probably forgot a lot, but let me summarize.

    -----------
    Be financially smart: pay the loan off in five years, and don't try to outsmart the interest. Play it straight.

    Pay the minimum monthly balance (getting purposefully rocked by interest) for five years in anticipation of loan forgiveness to the tune of $17,500 (which should cover the remainder of my debt interest+principle).

    Practice timed out loan deferments, at least once a year, while doing teacher continuing education, to stop the accumulation of interest while making minimum or above minimum monthly payments on the loan to rock the principle. (Not worried about the debt going up too much, as I wouldn't add new classes to the loan (and that would kill other entitlements, and I'm fairly sure teachers get half rate at in-state institutions here for their credits). If my thought is correct each deferment would last for the college semester, Aug-Dec + six months, assuming I only took a class one semester a year that'd be just shy of a full year of deferment. Am I wrong to assume I could defer the duration of my loan until it's paid off?

    --------------------

    Pros, please ring in.

    If it helps my total debt after completion of my program will range from 25k-35k. The large variance will be due to changes in my program. (A switch from being able to do it locally 25k, to having to move and finance that move when they no longer offer my work locally, 35k.) Which, based on all the calculators I've run, totals less than the typical starting salary at my location. Which means even at the high end it is a "feasible" loan.

    Thanks in advance for your input!

    I promise, aside from this, I refuse to take on debt. I embrace only buying only what I can afford openly.
     
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  3. JustMe

    JustMe Virtuoso

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    Nov 4, 2011

    No pro. But my husband and I graduated together and we wanted to eliminate the loans as soon as possible. I don't personally know a single teacher who has had their loans even partially forgiven (I know it happens, but no one I know has qualified), so I determined I wouldn't either and I needed to just pay. My concern was that I started my master's degree program immediately upon graduating and then continued for a Rank I immediately after that. Thankfully we were in a good financial situation which allowed us to pay for those programs out of pocket as the semesters came. We had six months after first graduating to pay his loan (since he wasn't getting an additional degree) and mine was deferred because of my enrollment. So, we saved during those six months and paid his loans off first. Then, while paying for my grad schooling, we also paid what we could on my loans (there was no pressure as they were on hold). We arranged it so that we would have no college debt (or any other debt besides the house) by the time I had my master's.

    Not having the debt was an incredible relief. I didn't want to mess around hoping for this forgiveness program or that program for it all to just fall through. If you, though, have reviewed the requirements and feel you could qualify, then that's obviously something to consider. Maybe you could save the money you would spend on the loans so you have that banked if you don't qualify. And if you do, fun time for you. :)
     
  4. Irishdave

    Irishdave Enthusiast

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    Nov 4, 2011

    I worked in a "poor" district so many of the teachers had much of their loans forgiven.
    As for me I paid for10 years about $120 a month.
     
  5. czacza

    czacza Multitudinous

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    Me too, Irish Dave...paid 'em off over time...about 10 years.
     
  6. Major

    Major Connoisseur

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    I was fortunate enough to go to school on a full athletic scholarship. But if I had taken a loan I would have paid it off........ in full. :)
     
  7. MissScrimmage

    MissScrimmage Aficionado

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    I have almost paid off both of my student loans, and I am in my 3rd year of paying them off. I pay well above the minimum payments every month. I have received substantial tax returns the last 2 years which helped decrease the amount quickly. Also, once the balance is around $1500 I just write a cheque and wipe out the rest.
     
  8. TeacherApr

    TeacherApr Groupie

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    Nov 5, 2011

    I am currently applying for ibr (www.ibr.org) and getting an income based repayment plan. Since I am a teacher, if I pay on time for 10 yrs, the balance will be forgiven. If you don't work in a service position such as a teacher, social worker, etc. then it will take 25 yrs.
     
  9. pete2770

    pete2770 Comrade

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    Nov 5, 2011

    Thanks everyone for the replies. I figured most of you would do it the old fashion way, paying the loan in full either early or on time. I guess, by old fashioned I mean the "right" way as in how it would have to be done with zero government intervention. ;)

    Thank you for that link TeacherApr...I'd heard about income based repayment, but blew it off because of the 25 year term. I didn't realize that teachers and other service workers could keep the loan at a 10 year term with smaller payments...that's definitely good to know.

    @JustMe, you and your husband are in a good place. You both have a solid financial mindset, and because of that you lose the number one stress-cause in relationships, money troubles! I really hope I'm lucky enough to find a partner that shares those ideals too. On another thing you said, worrying about not qualifying for things - I do worry. That's my big push to stick with the tried and true pay it off quick and forget about this special junk method. I don't want to end up paying way more interest, and then fail to get what I anticipated...it just ends up hurting me.

    We'll see, I thank you all again for the input.
     
  10. TeacherApr

    TeacherApr Groupie

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    Yes, well, I have no choice and people's circumstances are different. I am a single mom who has not been able to pay on this in many, many years. The payments are as much as rent and when I haven't made any more than $33,000 and am just now getting child support, it's been impossible to do ...well, unless I want to forgo having a car to get to work, a place to live, diapers, food, etc...... Not only that but when I applied for grants and such I was disqualified because my parents made to much money and it was ASSUMED they would help me out. Being as my dad was a control freak back then, he was NOT going to help me out unless I went to a Community College. SO, look what ASSUMING gets you....I can't pay it so they will. Oh well. I'm a little bitter with that whole situation towards my father AND the government in that aspect....

    so...don't ASSume that everyone is able to "responsibly" pay off their loan "as they should" because me doing this doesn't mean I'm not responsible. I'm plenty responsible.

    And hey, if I read your entire post wrong, I do apologize but I'm a little offended by your first part. :mad:
     
  11. Ms. I

    Ms. I Maven

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    Nov 5, 2011

    I transferred my loans onto credit cards when I found 0% balance transfrer promos (especially when they had no balance transfer fee). I'm still paying on them now.
     
  12. pete2770

    pete2770 Comrade

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    Nov 5, 2011

    :D I love the internet.

    No, I didn't intend for you or anyone to read it like that at all.

    That's why I quoted "right," as I thought it would signify that it's not actually right, but what's thought of as right.

    I don't look down on you or anyone, and I don't think any way is better or worse. That's why I came here, to this thread, is for general guidance. I openly said I wanted to consider all options, assisted or not, and posts like yours, and the information others have given me has been valuable to that end.

    I thank you for your insight, and again I just want to say that's not how I meant for it to be interpreted.

    Take care.

    And to be fair, you assumed that I thought the "right" way was the responsible way. Again, the quotes, hehe. What you did is equally responsible to any other method of paying off a loan.
     
  13. pete2770

    pete2770 Comrade

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    Nov 5, 2011

    I would definitely do that if I knew I could pay them off in the 0% term, but I wouldn't risk it before that.

    Around 5k though, I think I'd swing that to a 0% interest account of possible, which would increase after a year I assume.
     
  14. TeacherApr

    TeacherApr Groupie

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    Awesome! So we are all ASSes :whistle: lol
     
  15. Caesar753

    Caesar753 Multitudinous

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    Nov 5, 2011

    I recently qualified for a $5k loan forgiveness for working at a low-income school for five years. I don't consider that "government assistance"; rather it's a special perk that I received for working in a low-income school. I'm not getting that $5k for free or for sitting on my butt for five years. I worked for that money, and I see it in the same way as I'd see getting $1k tacked onto my salary every year as a sort of "hazard pay" for working in an inner city school. All kinds of employers offer financial incentives for working in less than ideal situations. Since my employer is the government, it's the government that's offering me the incentive. I see no difference.

    Programs for loan forgiveness exist to serve a purpose. There are always very clear guidelines and expectations for those programs. If you qualify for those programs, I don't see the harm in taking advantage of them. I don't think there's any sort of moral or ethical problem with it, either. If I were eligible for a larger amount of my loan to be forgiven, I'd do that.

    Do what you want to do. Take the loan forgiveness or don't.
     
  16. JustMe

    JustMe Virtuoso

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    I don't consider it government assistance either. I certainly looked into it (I just didn't qualify). In fact, I'm deleting my other post because it reads like I equate the loan forgiveness to welfare when I don't.
     
  17. pete2770

    pete2770 Comrade

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    I will try to take whatever forgiveness I can get, don't get me wrong. I just don't want to end up in a situation where I expect it, don't get it, and end up hurting because of it.
     
  18. XOEmmyLouOX

    XOEmmyLouOX Rookie

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    I don't see any harm in taking advantage of loan forgiveness programs that are out there. If you don't qualify then pay what you can. Life happens. Situations change. Who knows when after you are done with school you will find a full time teaching job. It is good to plan, but you have to be willing to change those plans. I always suggest meeting with a financial advisor if you are really interested in making a plan.
     

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