Student loan mayhem: Part II

[Ultralight]

This is wacky, but it appears that my student loan payment went from $350 a month last year to $285 a month for this coming here.

They just completed my re-up for Income Based Repayment and this is what they calculated for me based on two months of my most recent pay stubs.

My payment is lower? There must be some kind of mistake!

[lessisbest]

Why keep the thing around any longer than necessary? If you've been making $350 payments, continue at that rate (and more when you can) and get this debt off your back whether the payment is lower or not.

[Williamsmith]

The lower your payment, the less each individual loan gets addressed, the less principle you pay, the more interest accrues, the more interest accrues, the more they will eventually make off you when by no fault of your own through life's cruel odds (insert accident or physical/mental illness here) you will violate their terms of the loan and they will jerk the rug out from under your feet and tell you that there will be no loan forgiveness. The longer you remain owing, the more they maximize their ability to soak you for as much as possible by virtue of increasing the odds something bad happens to you. The best case scenario for them is to keep you paying until death do you part.

Minimalism does include not only freedom from the burden of things but freedom from financial burdens also......right? Unfortunately, at least with an auto or home loan, you can declare bankruptcy and allow repossession of the asset. Not so with your student loan, what are they going to repossess? Which ought to get you thinking about how honest they are being when they allude to an eventual forgiveness of part of your loan.

And at at this point with just 100 or so physical possessions, what is your total net worth?

I know now the amount of money you owe sounds insurmountable but that's how they planned the scam in the first place. I recommend picking the smallest loan with the highest interest rate and target that one. Get off the income based repayment scam one loan at a time.

Be be a loan minimalist. Easy for me to say, I really do sympathize with you.

[Zoe Girl]

Are you on the plan for public service employees to have the remaining balance written off in 10 years due to your service? I would take the lower payment then, there is a day when it will be paid then regardless of how much you pay now (as long as you are current and on the IBR).

[Ultralight]

Why keep the thing around any longer than necessary? If you've been making $350 payments, continue at that rate (and more when you can) and get this debt off your back whether the payment is lower or not.

That is not how it works. Besides, I owe around $150k with interest compounding everyday. I could put every spare penny into it and I would still not pay it off before 25 years (when the remainder gets forgiven).

And as it is now, I am on the Public Service Loan Forgiveness program. So no matter what my payment amount is, as long as I pay on time every month for ten years and continue to be a public employee then the rest will be forgiven after the ten years of service.

So actually, the less I pay per month, the better...

[Ultralight]

The lower your payment, the less each individual loan gets addressed, the less principle you pay, the more interest accrues, the more interest accrues, the more they will eventually make off you when by no fault of your own through life's cruel odds (insert accident or physical/mental illness here) you will violate their terms of the loan and they will jerk the rug out from under your feet and tell you that there will be no loan forgiveness. The longer you remain owing, the more they maximize their ability to soak you for as much as possible by virtue of increasing the odds something bad happens to you. The best case scenario for them is to keep you paying until death do you part.

It is possible that something could happen -- a glitch in the system, the GOP dismantles the Public Service Loan Forgiveness Plan, a tragedy befalls me, etc.

But if you felt this way about everything you'd be frozen in life by risks. So I am working the system the best way I can under the circumstances I am in. This means:

Keep working for the gubmint. Stay in the Public Service Loan Forgiveness Plan. Pay on time. Keep payments low and based on my income. I also have one year of "any reason" forbearance I have saved up, so I can use that if I lose my job. But I can also submit proof of my loss of job and get other deferments. If I lose my job and get another one for the gubmint or a non-profit I can get right back on the Income Based Repayment and the Public Service Loan Forgiveness.

I feel like I have explained all this before. haha


Minimalism does include not only freedom from the burden of things but freedom from financial burdens also......right? Unfortunately, at least with an auto or home loan, you can declare bankruptcy and allow repossession of the asset. Not so with your student loan, what are they going to repossess? Which ought to get you thinking about how honest they are being when they allude to an eventual forgiveness of part of your loan.

Again, you cannot let risks freeze you into doing nothing in your life.


And at at this point with just 100 or so physical possessions, what is your total net worth?

My net worth is massively negative. I own a 2012 Nissan Versa -- that is the only possession I have that is worth more than a couple hundred bucks. But I owe student loans of about $150k. Also: I don't care much about "net worth."


I know now the amount of money you owe sounds insurmountable but that's how they planned the scam in the first place. I recommend picking the smallest loan with the highest interest rate and target that one. Get off the income based repayment scam one loan at a time.

I only have one loan. My loans are consolidated.

Your plan of getting off Income Based Repayment would cost me like $1500 a month. I would then have $1000 a month to live on. And I would have to pay, under the normal repayment plans for at least ten years -- which is how long I have to pay my much smaller amounts ($285 now). Why the heck would I get off Income Based Repayment. Mathematically, is makes no sense.


Be be a loan minimalist. Easy for me to say, I really do sympathize with you.

I am a loan minimalist. I paid off all my other debts -- car, dentist, orthodontist, ex-wife, etc.

My only debt is student loans. And I am doing the best I can with the risks I have to assume with the information I have and the income I earn.

[Ultralight]

Are you on the plan for public service employees to have the remaining balance written off in 10 years due to your service? I would take the lower payment then, there is a day when it will be paid then regardless of how much you pay now (as long as you are current and on the IBR).

Yup, I am on IBR/PSLF.

[Tammy]

Stay the course UL! When you hit ten years your net worth will suddenly jump into positive territory. It's a good plan.

[Williamsmith]

When you were accumulating all this student loan debt, is this how you were planning to discharge it or didn't you really give it much thought? Serious question. Do you think that psychologically, this could have contributed to your minimalism, lack of interest in the American Dream and fear of having children?

[Ultralight]

Stay the course UL! When you hit ten years your net worth will suddenly jump into positive territory. It's a good plan.

I don't know if it is a good plan, but it is the least bad plan. All the plans I have access to are bad! hahaha

[Ultralight]

When you were accumulating all this student loan debt, is this how you were planning to discharge it or didn't you really give it much thought?

At the time I did not give it much thought, but I considered Teach For America and some other forgiveness plans, though they were/are not as comprehensive as the PSLF program is. The PSLF program did not exist back in my day.

I also had this rationale mostly: "I'll just drag this debt around for life because to live means to be in debt."

I did not know any better back then. I was not brought up in a financially literate way, so I had to figure things out on my own. The process is ongoing.


Serious question. Do you think that psychologically, this could have contributed to your minimalism, lack of interest in the American Dream and fear of having children?

Psychologically it has contributed to my minimalism. Debt is a big part of it mentally and emotionally. But the biggest part is that I have never been much of "stuff" guy. I was always more into having leisure time. Friends got jobs when I was a teenager. They wanted cars and gasoline and stereos and other toys. I just wanted to play guitar, read books, and practice martial arts. All things fairly low on the stuff scales.

Lack of interest in the American Dream? Well, I will say this: Massive debt makes it so I will not even entertain the idea of a big house, 2.3 kids, and a couple minivans.

During all of my adult life I have been either apprehensive about having kids or totally against it, save about six months during my marriage. My then wife and I both had good, steady jobs with benefits. We both just sort of looked at each other one day and thought: "Hey, maybe we should do this! Maybe we should have a baby!"

We thought it over and also considered adoption -- which was more to my preference.

But at the end of the day she decided she did not want kids, and I agreed. Looking back, I am so glad we did not have kids.

I'd be a full time single dad right now -- no doubt about it. Her sister left her husband and gave him custody of the kids -- without a fight. Her own mom is emotionally distant too.

When my ex and I got Harlan he was just a little pup -- ten weeks. I had to take him out a lot, clean up his messes, take care of his kennel cough, worms, etc. And when he would whine in the middle of the night I'd have to take him out to pee.

My ex simply could not handle this stress or the deviation from her interests/hobbies/art. She cried over Harlan and wanted to send him away.

Now, once he was out of the puppy stage she was fine with him and took good care of him. But raising a baby takes much more time and effort than a puppy.

I am sure she would have gotten out of there before the "terrible twos."


I remain apprehensive and/or against having kids now because of all the horror stories people tell me about kids going berserk, getting addicted to drugs, involved in crime, having babies when they are like 14 years old, and because of all the unfortunate tragedies that can happen -- car accidents or cancer of the everything, for examples. Also: The environmental impact. And how could I shield the kid from advertising, religions, and other social problems? I could not.

Also: I am not married or life partnered now. And I am dubious I will ever be married or life partnered again. I am a difficult man to love. hahaha

And I would not want to raise a kid in one of those broken, split up, splintered families.

Make sense?

[Williamsmith]

I think I get it.

Kind of a Dr. Seuss philosophy on life....

"Today was good. Today was fun. Tomorrow is another one."

OR

"I know it is wet and the sun is not sunny. But we can have lots of good FUN that is FUNNY."

[LDAHL]

I wouldn't worry about how or why you raked up the debt: it's a sunk cost (finance talk for water under the bridge).

I think you're right to pay the minimum and cling to that job for dear life (provided it isn't killing you by inches, and it might even be worth a couple of inches). That kind of debt forbearance and forgiveness is a huge tax-free perk. Maybe put the extra sliver of cashflow you're saving into a Roth, since you assign such little marginal utility to tchotchkes and your marginal tax rate is so low. Besides, Capitalism is fun!

If the job isn't too, too horrible (versus the realistic alternatives, not the ideal) your breakeven comp for leaving the current situation and paying the market rate would seem to be quite high. If you vest at some point in a pension or other retirement plan, it might be even higher. Your current plan makes sense to me.

[freshstart]

I think you make sense. And the Roth is a great idea. Harlan got lucky that you got custody, although it sounds like it wouldn't have been much of a fight.

[Ultralight]

Your current plan makes sense to me.

Thanks. I am just going to keep hammering away at it.

[lhamo]

Regarding why your payment went down, most likely it is related to the ratio between your income as stated on your most recent tax return and the federal povery guidelines that are used to determine what your "disposable income" should be.

This blog post explains how IBR rates are calculated: http://www.consumerhelpcentral.com/ibr-calculate/ [Note: There seems to be an error in his explanation, though -- you should subtract the 150% of poverty level number from your AGI, not the other way around as he has stated it]

And this webpage shows the federal poverty rates for 2016 (which seem to have been announced on January 25th: https://aspe.hhs.gov/poverty-guidelines

PS: I ran a quick version of the calculation and it looks like if your AGI is 40k, your IBR repayment should be just under $280/month ($277.25). So if your AGI is just a little over $40k, that would explain why your payment was changed to the current amount.

PPS: While I would usually advocate for a Roth over traditional IRA/401k, in your case because the TIRA or 401k would further reduce your AGI (and therefore further reduce your IBR payment amount) you might want to consider putting any extra money into the TIRA/401k first. For example, if you make $40k and could manage to put $4k into TIRA/401k per year, that would reduce your AGI to $36k, and reduce your monthly IBR to just $227.25 -- you would have $4k+ earnings in retirement savines AND pay $600 less in IBR, plus lower your taxes a bit. I know you don't have much room in your budget, but if you are willing to post numbers maybe we can help you find some ways to economize on other things so that you can take advantage of these deductions.

[iris lilies]

So i have to ask OPSince i dont remember, how many more years on this paymeny program?

[Yppej]

The lower your payment, the less each individual loan gets addressed, the less principle you pay, the more interest accrues, the more interest accrues, the more they will eventually make off you when by no fault of your own through life's cruel odds (insert accident or physical/mental illness here) you will violate their terms of the loan and they will jerk the rug out from under your feet and tell you that there will be no loan forgiveness. The longer you remain owing, the more they maximize their ability to soak you for as much as possible by virtue of increasing the odds something bad happens to you. The best case scenario for them is to keep you paying until death do you part.

Minimalism does include not only freedom from the burden of things but freedom from financial burdens also......right? Unfortunately, at least with an auto or home loan, you can declare bankruptcy and allow repossession of the asset. Not so with your student loan, what are they going to repossess? Which ought to get you thinking about how honest they are being when they allude to an eventual forgiveness of part of your loan.

And at at this point with just 100 or so physical possessions, what is your total net worth?

I know now the amount of money you owe sounds insurmountable but that's how they planned the scam in the first place. I recommend picking the smallest loan with the highest interest rate and target that one. Get off the income based repayment scam one loan at a time.

Be be a loan minimalist. Easy for me to say, I really do sympathize with you.

+1

[Yppej]

That is not how it works. Besides, I owe around $150k with interest compounding everyday. I could put every spare penny into it and I would still not pay it off before 25 years (when the remainder gets forgiven).

And as it is now, I am on the Public Service Loan Forgiveness program. So no matter what my payment amount is, as long as I pay on time every month for ten years and continue to be a public employee then the rest will be forgiven after the ten years of service.

So actually, the less I pay per month, the better...

The less you pay, the more I and other taxpayers pay.

[Ultralight]

The less you pay, the more I and other taxpayers pay.

In a sense, yes.