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Bubacus
January 31, 2012, 19:53
Man,

I am getting the tar kicked out of me on a student loan at 6% right now just north of 100K. Never missed a payment and still can't refinance because I consolidated when I was a bit more naive and had no clue about real world finances. Cant claim the interest on the loans because I make a little north of 78K.

The question is: Since you can't refinance your student loans, is it better to take out another type of loan at a lower interest rate at this point. If so what types of loans are out there.....

Worst case scenario, I'll just try to double up on payments.

Abominog
January 31, 2012, 20:23
What is the length of the loan? That's important.

If you have no collateral, 6% is pretty damned good! You'd be hard pressed to find a personal loan anywhere near that rate.

If you own property, a home equity loan may work. I'm guessing though you probably don't.

Thus you are left with the student loan dilemma.

I do question, if the loan is hurting you, how could you double up on payments? Your best bet would be to do exactly that.

If this is a 20 year loan, note that your roughly $800 monthly payment now won't buy you a nice dinner 20 years from now, so you won't suffer so much 10 years from now, and if you're a bloody doctor $800 will be but one more set of rotors for the Porsche race car.

Speaking of which, I came up with a pretty good scheme where you could flip a NIB Porsche to get the loan down to 3.49%, but your monthly payment will double, and in the long run you'll only save $20,000.

Mark IV
February 01, 2012, 09:20
Is the prohibition on deducting the interest based on your gross income or adjusted gross income?

thunderchicken
February 01, 2012, 10:58
If you can pay it off with a home equity loan its a good deal if not it is unlikely you can get a much better rate. The occupy folks have a legitimate gripe about student loans people who bought to big of houses get interest rate breaks, bankers who loaned stupidly get interest free money to loan again (hopefully less stupidly) but students who arguably took loans to invest in themselves get no break.

gunplumber
February 01, 2012, 11:46
I disagree with the whole "forgive student loans" crap - it should be called "legalize our stealing money"

Now you can't dump student loans in a bankruptcy.

But it's a complicated circle. Why should colleges lower their fees when students have easy access to money to pay them for the widget they are selling?

Anyway, hopefully you got a heck of a good education with a real profit potential. Never understood people mortgaging their future for a degree in something useless like psychology. You may have an option of working for some government or quasi-government field that will pay off your loans for you.

Anyway - 6% at 100,000 may be worth a refi if you can do it, or a HELOC, but you can't get blood from a turnip. If you end up in a situation where you can't pay the unsecured debt, they can huff and puff but really can't do anything. If you tie it to real estate, you can lose the real estate.

On the other hand, if your consolidation tied the student loans into a new loan so it isn't a student loan anymore, then it might be discharged in a bankruptcy. With your income it may be hard to qualify for a bankruptcy, the moral issues aside. Who cares if it ruins your credit, you shouldn't be using credit. Credit is evil.

That being said, just double down on your payments. My house is on a15 year at 6% and I'm ten years into into it. I figure paying extra on the mortgage is about a wash to a couple thousand in fees, so at this rate it will be paid off in another 3-4 years instead of 5. By that time the value may have partially returned. So even if spent a lot of time and effort to refi at 4% - there isn't much point in it. $100,000? With your income level, I don't see a point - just need to get super-aggressive about paying it off.

With your income, you can probably modify your life style a bit and get super-focused on this thing and just pay it off.

Debt is a heavy yoke. Check out Dave Ramsey for a different way of thinking.

tdb59
February 01, 2012, 11:51
Debt is a heavy yoke. Check out Dave Ramsey for a different way of thinking

Mark, sometimes, I am positively amazed at your responses.
This is spot on.

Bubacus
February 01, 2012, 12:03
With your income, you can probably modify your life style a bit and get super-focused on this thing and just pay it off.

Actually, I think this is just the common sense thing that I just need to do. I've had people tell me to take out a home loan so I can claim the interest, but now adays, trying to tack on that time of dough to a home loan probably isn't going to happen.

tdb59
February 01, 2012, 12:17
I've had people tell me to take out a home loan so I can claim the interest

That is the accountant's argument, looking at reduction of tax burden in percentages, instead of net dollar cost over time.

When you write a check, it is your dollars you are spending, whether it goes to the lender, or the IRS. The adage 'time is money' applies here.
Doubling up on payments is great, but even if you can not double up every time, pay as much over the actual due as possible, and the amortization will be recalculated.
Stay disciplined!

1gewehr
February 01, 2012, 12:19
Beans and rice until paid off.

Taking money from a gov't program will ALWAYS bite you. But, you know that now.

martin35
February 01, 2012, 12:20
The government was the ultimate guarantor of the vast majority of homes loans. The government set the rules and regulations.
The government set the rules for student loans,,, more student loans are in default or arrears than are home foreclosures,,, homeless people have huge student loans.
In both cases the tax payers are on the hook for all losses.
Like the fella said "how's that easy credit working out for you"?
Credit gives you the a appetite for things you can't afford,,, who's fault is that?
If you are part of the entitlement regime it's never the individuals fault,,, poor things.
Bubacus is not looking to avoid his obligation but like any one he would like to minimize his existing debt,,, so I reckon his education is paying off,, he might even get what he pays for in the long run.

gunplumber
February 01, 2012, 12:52
One additional thing. A truly motivated person will want to put every bit of extra money on the debt. But you must also have an "emergency fund".
Suppose you lose your job. You can't pull that extra $10,000 you paid back out of the loan. So figure out what your minimum expenses are for housing, power, gas, etc. and put that in savings and/or cash. How many months is up to you. I work with my hands and am self-employed. If I become sick or injured, there is no "safety net". No unemployment, no workers comp. So for me, I want a minimum of 6 months of food in the pantry, and 4-6 months of mortgage payments in cash/savings.

I had a business line of credit I used for large inventory purchases and then I put every spare penny on it to pay it back off. I kept zero in savings figuring if I needed quick cash I could draw on the LOC. Till BofA decided out of the blue to cancel the LOC. Leaving me with zero savings. My friend was in the same boat. He is in a high dollar business with his accounts receivable following 90 days in arrears to his accounts payable. So he used his BofA business LOC to float the 90 days. Until BofA canceled his LOC with no warning. And he had a 0 balance. Now he had $80,000 in payable he wasn't going to get from receivable for another 90 days. Almost lost the business over it.

So if it were me, I'd make minimum payments until I had at least 3 months expenses in the bank, then I'd pay every penny on the debt. No movies, no cable, no fancy dining. Weed my "toys" down to a minimum. You're paying around $500 a month in interest. You can buy a lot of toys for an extra $500 a month, AFTER that monkey is off your back.

gunplumber
February 01, 2012, 13:03
The mortgage interest deduction lowers your taxable income, it is not a direct deduction from amount owed as charitable contributions to qualifying groups would be. You want to pay me a dollar so I give you 70 cents back? We can do that all day. You still have a net loss.

I had done just about every stupid thing I could have, starting with that first $300 credit card I got from the kiosk as the university - why not, they gave me a free shaving kit. I was so cool flashing that card around - hey, I have a credit card, I'm important! Then I had my truck stolen and used a credit card for the down payment on a new truck I could easily afford with the job I had teaching elementary school. Then I got recalled to active duty with an 80% cut in salary. It went downhill from there. When I came home from Desert Storm, I was $50,000 in personal debt, unemployed, and living out of my car. I now put credit in the same category as petting rattlesnakes. There is no safe and sane way to use it. You may skate for a while, but getting bit isn't a matter if "if" but "when".

dakdak
February 01, 2012, 13:19
Student loans that go into default...
Unlike ALL other debts, are NOT, and CANNOT, be included in a bankruptcy.
Thanks to George Bush Senior, (Globalist Left-Wing Scum).

Student loans that go into default...
They are turned over to a small group of collection agencies now found to be some of the worst scum of the earth crooks in the business. They also can tack on up to 25% additional fees even if they negotiate with the borrower unsuccessfully. That's 25% each time someone tries to get the loan back on track. These fees are but one of several parts of a set of corrupt practices used to allegedly, "rehabilitate" the loan that cost the borrower much more than in a conventional loan.

Usury...
Many people with student loans that have lost their jobs etc., now have loans that are 3 to 4 to 5 times the size of the original loan amount. This is happening in a few years, not 30 years as in a mortgage. It is the result of refinancing, defaults, extra fees, and so forth.

See...
The CBS News 60 minutes program on student loans.

%...
Until recently, very recently, the collection agencies could, with the fed-gov, garnish wages at percentages of income that were so high the borrower could not make ends meet.

Not All...
Not all defaulted student loan borrowers are deadbeats. Some are out of work, replaced or kept from work by computer programmers and ops people from India, China, Pakistan, and so forth. Some went to trade schools and are replaced when the factory outsources production to some of the above mentioned countries.

STOP...
Stop the usury, knock the loan interest off and tell people to pay what is a goodly agreed upon amount monthly, let people include it in bankruptcy (the judge will know if it's a legit request). Stop shipping jobs and factories overseas while we ship hundreds of thousands of people here to take jobs from Americans.

enbloc8
February 01, 2012, 19:21
I worked in the student loan industry to pay my way through college. Worked mostly with records, then as a skip tracer on current loans for my last two years of school. Nailed a couple of a**holes obviously trying to skip out, but I also saved one guy's bacon when a deferment he'd applied for didn't go through (form sent but never received), he never followed up, and he was literally within days of default when I found him.

Ironically, what I observed there made me refuse to take out a student loan until my last year in college. I only saw a few people with six figures of debt in my time (all at the same school), but I saw plenty of horror stories of people owing five figures' worth of debt with no practical way to pay it back.

riffraff2
February 01, 2012, 20:01
The mortgage interest deduction lowers your taxable income, it is not a direct deduction from amount owed as charitable contributions to qualifying groups would be. You want to pay me a dollar so I give you 70 cents back? We can do that all day. You still have a net loss.

I had done just about every stupid thing I could have, starting with that first $300 credit card I got from the kiosk as the university - why not, they gave me a free shaving kit. I was so cool flashing that card around - hey, I have a credit card, I'm important! Then I had my truck stolen and used a credit card for the down payment on a new truck I could easily afford with the job I had teaching elementary school. Then I got recalled to active duty with an 80% cut in salary. It went downhill from there. When I came home from Desert Storm, I was $50,000 in personal debt, unemployed, and living out of my car. I now put credit in the same category as petting rattlesnakes. There is no safe and sane way to use it. You may skate for a while, but getting bit isn't a matter if "if" but "when".


I am shocked!! You an elementary school teacher! Your stock with me just went way up. I know that doesn't matter to you but it is still true.

Bubacus
February 01, 2012, 20:01
Well, thinking about it, I don't have kids yet and have a little nest egg going just in case the roof needs to be done or the furnace dies on me, I might just do a little contract/part time work and throw it towards the loan. I know I wouldn't have been able to get the job with out my education so I can't moan too loud.. Thanks for the encouragement and advice.

riffraff2
February 01, 2012, 20:11
Well, thinking about it, I don't have kids yet and have a little nest egg going just in case the roof needs to be done or the furnace dies on me, I might just do a little contract/part time work and throw it towards the loan. I know I wouldn't have been able to get the job with out my education so I can't moan too loud.. Thanks for the encouragement and advice.


Hang in there. And yes, 6% is a very good rate.

Jaxxas
February 01, 2012, 22:33
Well, thinking about it, I don't have kids yet and have a little nest egg going just in case the roof needs to be done or the furnace dies on me, I might just do a little contract/part time work and throw it towards the loan. I know I wouldn't have been able to get the job with out my education so I can't moan too loud.. Thanks for the encouragement and advice.




If you only have bills and no children the WHOLE world is open before you! Only you are at risk! Honestly you have no real issues that can't be solved by diligence and perseverance. You may not realize it, but you have the world by the horns, not vice versa!

catmguy445
February 02, 2012, 22:32
Like Gunplumber, I had a 15-year home mortgage, and I paid it off in seven years, mostly by putting some extra money each month on the balance. However, if you're going to make extra payments, don't just double up on the payments. The way loans are amortized, for most of the first half of the payment period, about 90-some % of your payment goes to interest. So what I did was to include an extra 100 dollars a month, and specified that it was to be applied to the principal of the loan, not the interest. The last year I was paying on it, there was about 5000 left on the loan, which would have been paid off by the end of the year, but the finance company raised my monthly payment right after the first of the year, and they raised it enough that it really made me mad. So I called them up, got the exact amount that I owed, and wrote them a check for the entire balance of the loan, which pretty much cleaned out my checking account, but it was worth it. I figured that not having a mortgage payment, I'd be able to put money back in the checking account in fairly short order. And it did work out that way. After adding up all the numbers, I figured out that I had saved roughly $20,000 by paying the loan off early.


Mark is also right about credit. It's evil, and makes you pretty much of a slave to the bank that issued the credit card. At the moment, I have two credit cards. One of them I only use once or twice a year, just enough to keep it active, and the other one is a Cabela's credit card which I use like a plastic checkbook. I pay off the balance each month, and pay zero interest on the card. I also only write one check a month, to pay off the card balance, which means I don't have to buy checks as often, either.

I'm not real sure how your student loan is set up, but if you can apply extra money to the principal each month, that's what I'd recommend. Sit down and figure out exactly how much you can afford to pay on the principal each month, and stick to it. And if it's only a hundred or two, that still will help a lot in the long run. If whoever owns the student loan won't let you do that, then I'd go with Mark's suggestions.

def90
February 03, 2012, 14:32
Well, thinking about it, I don't have kids yet and have a little nest egg going just in case the roof needs to be done or the furnace dies on me, I might just do a little contract/part time work and throw it towards the loan. I know I wouldn't have been able to get the job with out my education so I can't moan too loud.. Thanks for the encouragement and advice.


Gunplumber is right on..

I am working part time as well at the moment while I own and operate my own business out of necessity. Credit cards and a slumping building industry killed my business though it does look like it is picking back up a bit again.

I would do what you are saying above but put a positive spin on it. Rather than thinking how all of the money you are making while moonlighting is just going to pay off debt, make that money your daily spending and fun money and make your regular job your paying off debt money. It's funny how sometimes working 2 2nd job shifts on the weekend can be more palatable when you know that money is going in your wallet for your next attempt at having a little bit of fun in life rather than just writing a check to a bank somewhere.

croftonaviation
February 04, 2012, 08:57
I will chime in with my experience. First as others have said credit is the devil. It's bad, don't do it. At my high point I owned (financed) several light aircraft with a flight school,a DC-3 freighter,and was partners in an on demand freight operation. I was on top of the world. Or so I thought. Several bad decisions latter I was filing for chapter 7 and I lost everything. It was the longest pain full downward spiral into hell you can imagine. Now it's all cash and carry. A mortgage is one thing, most people can't throw down for a house, but for everything else "cash is king". If when starting my venture into the world I had followed a dave ramsey plan I would have been light years ahead. I still may of had to weather a bad decision or a slow economy but I would have had the tools to do it. Of course if someone had been talking I don't know that I would have heard, as it really all boils down to self control. I have it now but it came way to late. You are getting some good advice from people here, take it.

Tom