• Posts Tagged ‘student_loan’

    When There is No Parental Cushion

    by  • April 24, 2012 • Tagged: ,  • Comments


    Learn to Say "No"

    Image: 401K

    Drawn in by all of the media hoopla, I recently found myself watching the first episode of Lena Dunham’s new show “Girls.” Early in the show, Dunham’s character explains to her parents that their decision to cut her off financially (in her mid-twenties, two years after graduating from college) is unfair and unrealistic, because all of her friends receive financial assistance from their parents.

    My views on the show aside, that was the (first) point where I stopped and thought to myself, “Ha ha, what?” Because while it might be realistic – I spent my first year out of college working with a great many twenty-somethings in New York who are at least in part supported by their parents – it makes me pause and consider how my generation handles finances.

    As readers know, I lived at home for a year in order to save up some money and pay off my college loans in full. For this, I’m very grateful to my mother – many parents wouldn’t agree to this arrangement. And yet the moment I moved out, it never would have occurred to me to ask my mother for money, for anything, ever. Indeed, while I was living at home, when her financial situation changed for the worse, I started paying a small, but not insignificant, amount of rent. I view the situation in this way: my mother helped pay for college, which is an incredible help; she allowed me to live at home to make my post-college financial transition easier; she has her own finances to deal with and no large sums of money to throw about; she does not “owe” me anything, and to expect some sort of financial contribution to my adult life would be – here comes the judgment! – profoundly selfish and spoiled.

    That said, I can sympathize with taking money when it’s offered. I grew up in an affluent area, and as a friend from a family where finances are generally not an issue once told me, “It’s hard to say no when your parents are offering you things.” I get that! Why would any sensible person turn down a hand-me-down car, or a spot on a family vacation, when it’s being offered? But I think a key issue for our generation to prove that we are functional, financially independent adults is to learn to say no, particularly when we know that we should. A different friend once confided that her parents had offered to help her pay for law school. “But didn’t your parents have to take out loans for you and your sister to go to college?” I asked, “And didn’t they take out a second mortgage on their house to finance those loans? And didn’t you tell me that they have credit card debt? Do you really think they can afford law school tuition right now? Have you talked about their retirement with them?” My friend agreed – it was generous, but unrealistic, and a prime example of knowing when it’s time to cut your financial cord.

    My husband is in a similar situation – his parents helped him to pay for college, and thereafter he was/is on his own, in part because he views this at as the adult thing to do, and in part because his parents are now putting his sisters through college and, like my mother, do not have large sums of money to send our way. How does this affect our finances? The main issue revolves around our emergency fund and other savings accounts. If something catastrophic were to happen, we are on our own, financially. Many of my friends, on the other hand, could turn to their parents with the knowledge that they have the money to help them out. And when we want to buy a house one day? We’ll be footing the bill independently – no stowed-away down payment fund waits for us later on (unless I have a very rich, heretofore unknown relative who would like to fund my dream colonial).

    Of course, like so many financial matters, how your parents do or don’t support you can vary greatly given the circumstances. But if Warren Buffet can teach his children how to handle their money, and push them out of the financial nest, then I don’t think it’s unfair to expect my generational cohort to support themselves as best they can.

    What are your views on early financial independence? How do (or would) you plan to support your children?

    6 Creative Debt Repayment Strategies for Your Student Loans

    by  • April 3, 2012 • Tagged: ,  • Comments

    With the already-high cost of education continuing to rise, the vast majority of students have no choice but to take on debt in order to finance their educations. Student loans can leave graduates financially crippled for years if they are improperly managed. If you need to take out a loan to pay for your schooling, it’s vital that you have a repayment plan in place long before you start to pay back the money you borrowed.

    Your student loan repayment strategy should go far beyond getting a job and making your scheduled payments. Given the amount of debt the average student has — which typically adds up to tens of thousands of dollars — it’s vital to consider all your options in order to manage your post-graduation finances and achieve overall financial health.

    Here are a half-dozen student debt management strategies that you might consider:

    1. Consolidate multiple loans. Many students take out loans from multiple sources, including government student loan programs, lines of credit and student loans through banks and other financial institutions. Managing individual payments can be time-consuming, confusing and costly, so if you have more than one loan to repay, consolidation can simplify the process. With loan consolidation, you essentially get another loan, which is used to pay back all your various creditors. Then, you are responsible only to one creditor, which can save you a lot of money in interest, not to mention a great deal of time and a lot of hassles. [ed. note: please don't do it like I tried to with a payday loan - a representative from fridayfriday.com said that "we endorse sensible lending and that students need to understand that a payday loan is not a way to consolidate debt, not even in the short term."]
    2. Purchase appreciating assets. Most students don’t think about using their loans to make investments, but if you have the capability, you can really get ahead by using some of your student loan money to finance assets that are likely to appreciate in value over the duration of your education. The classic example of this approach is to use some of your student loan money to make a down payment on a house, and live in the house as you go to school. When you graduate, your house will likely have appreciated in value to a significant degree, and you can sell it at a profit and use the proceeds to pay back your loans. If you want to explore this option, you may have to enlist the help of your parents to come up with all the money you need, not to mention the income and credit rating necessary to secure a mortgage.
    3. Know your repayment options. There are four main types of repayment schedules: standard, graduated, extended and income-dependent. A standard schedule requires fixed payments over a specified period of time (typically 10 years). Graduated payments are lower at first, then move up as you secure higher levels of income. Extended repayment plans are like standard plans, except that they are spread over a greater period of time; this will result in more interest charges, but it will also decrease the amount of your month payments, making them more manageable. Income-dependent repayment plans base payment amounts on your income and typically come with longer amortization periods.
    4. Adjust your repayment schedule. In addition to knowing your repayment options, remember that you may qualify to change them if necessary. For example, you might move from a standard repayment schedule an income-dependent or extended one if you are having a hard time meeting your monthly obligations.
    5. Consider the military. If you join the military, either during college or after you graduate, you can also qualify for unique payment postponements, deferments or even debt forgiveness. You can learn more about special options available to military servicemen and women through the Federal Student Aid website.
    6. Look into deferment and forbearance. As an absolute last resort, you can defer your student loan payments or apply for forbearance status if you meet certain income and debt load criteria. However, you should only use these approaches if you have no other option. Interest will continue to accumulate while your loans are deferred; all a deferment does is buy you some time to get your financial house in order. Forbearance can have an adverse effect on your credit rating, which can significantly inhibit your financial future.

    With post-graduation debt loads becoming a fact of life for more and more students, taking the time to create a plan will pay dividends down the road. If you properly manage your student loans, you can save a great deal of money in interest and protect your credit rating, enabling you to finance other essentials if you take care to live within your means. Above all, remember that your student loans are an investment in yourself and an investment in your future. The standard rule of thumb is that a college education translated into $1 million in lifetime earnings, so don’t let the rising costs of education prevent you from pursuing knowledge and building towards a better future. It is also a good idea to consider the idea of earning your education online. Today, online programs are just as thorough as their on-campus counterparts are, as they provide you with a high-end education that is sure to increase your earning potential. In addition, taking online courses will cost you less money, allow you to work full time while attending school, and you are eligible for financial aid once you will out the FAFSA form. When you bring all of these aspects together, it is easy to see why so many people are now taking their courses through an online university.

    This is a guest contribution from Bill Hazelton, CEO & Founder of CreditCardAssist.com, an industry leading credit card comparison site, providing tips, advice and information on balance transfers, zero interest promotional offers and the very best cash back rewards programs.  You can subscribe to his RSS feed or find him here on Google+, Facebook and Twitter.

    Is Misery Worth It?

    by  • March 21, 2012 • Tagged: , ,  • Comments

    Metro North, My Old Friend

    Metro North, My Old Friend

    Image: F. Hoffnar

    When I graduated from college in 2008, like many people my age, I graduated with debt. Thanks to my college’s stellar financial aid policy, a generous parent who believed the cost of higher education was worth it, and some substantial saving on my own part, that debt was a very reasonable amount (more than $10,000, but less than $20,000). I knew that I wanted to be rid of it as soon as possible, both to have that mental burden lifted (because I am the kind of person who is HAUNTED by finances), and because I would be unlikely to find any kind of savings vehicle that would produce a higher interest rate on the cash I had than the interest rates on my student loans.

    Because I am a little bit of a wacko, I decided I could pay this off in a year. I would be working in New York City, and while my salary would be low (hurray publishing jobs!) I would be able to live at home and save money (this is a great advantage that I know many, many young people don’t have, and I realize how lucky I am).

    I’ll say a few things about “saving money” in New York City – even the cheapest things are painfully expensive, and the easiest things are kind of miserable. I wasn’t paying rent, but I was paying about $300 in commuter expenses a month. I was living at home, but I was traveling almost two hours each way, every day, and it took its toll. I was paying off my debt, but I was skipping happy hours and lunches out to do so. After six months of this, I was worn out. After a year, I was miserable.

    I won’t go into the details of said misery, because no one wants to hear the whining of a lucky post-grad who managed to pay off her debt. But I will say that year took its toll. Yes, I’d paid off my debt, and saved up a nice-sized emergency fund for the future, and even splurged a little in-between, setting aside money for furniture for my future apartment (IKEA, of course) and a monetary gift for my sister before she went abroad her junior year of college. But there were days when I felt so beaten down, when all I wanted was to get more sleep and time to myself instead of rushing to catch a subway, then a train, then a bus; when I wished I could stay out late with friends at a bar without torturing myself over the cost or falling asleep before the night even started.

    Sometimes I wonder if the monetary savings of that year were worth the emotional and physical toll. What, exactly, is the cost of our current happiness? Is it worth it if the future payoff is great? Or should we not torture ourselves quite so much in exchange for financial payoff?

    Better Late Than Never – 2012 Financial Goals

    by  • February 27, 2012 • Tagged: , , , ,  • Comments


    Number #1 is REALLY important.

    image: JohnONolan

    The last time that we made publicly available financial goals was in 2009. That’s like, before the dinosaurs in internet time. Sure it’s almost March, but that doesn’t mean that it’s too late to make goals for 2012. The goals this year won’t be too different from years past, which goes to show that we’re still struggling with the same things. Old habits are hard to break. Without further ado, here’s our goals for this year:

    1. Increase our savings to $30,000 to purchase a home.  If I ever get around to another net worth post, you’ll see that we have between $18K and $19K in the bank. Sad, because it around the same amount we’ve had for the last two years.  We’d like to put a substantial amount of money down on a home; considering home prices in Chicago, we’ll be able to make a 10% down payment with $30K. I still think that renting isn’t a bad deal, especially with our cheap $1,000 per month rent, but our family’s life situation has changed enough that buying a home makes more sense to us. I just hope that interest rates don’t go up too much in the next year.

    Stretch goal: Save $35,000. I may have to prostitute myself and Her and/or sell our baby.

    2. Pay off student loans that were transferred to a credit card at 1.99% for life, about $3,000. We made a transfer of $11,000 to a credit card that offered us a 1.99% APR for life  in 2007. We’ve been steadily banging away at the balance of the card, and we have a little under $3,000 remaining. This should be pretty easy and we could do this right away, but having it written down will help to ensure that we actually do it.

    Stretch goal: Get federal student loan debt balance to under $40,000. Truth is that it might be under that, I have no idea what the current balance is.

    3. Increase income by at least $1,000 per month. I’ve been diligently working my butt off in order to realize this goal. I’ve been making some crucial connections with people in my network and have been given some business opportunities from them. Ohmygosh that was so marketing-speak, so let’s try this again: I schmoozed with some people with crappy websites and they’re going to pay me to make them better. Also, this blog. It makes money. Yeah.

    Stretch goal: Increase income by $2,000 per month. I’ve done it before, I just need to do it again.

    So in the interest of transparency (which is the buzzword of the year, yeah?) I’ll post an update every month to let you know how these are going. Accountability, AMIRITE?

    Financial Goals for 2009

    by  • January 19, 2009 • Tagged: , , , , ,  • Comments

    While we are already pretty well into 2009, it isn’t too late for us to officially declare our 2009 financial goals. We’re now married, so our financial priorities have changed accordingly…and they happen to be house and baby, not necessarily in that order and probably not for at least a year from now. That said, 2009 is going to be a year of heavy financial preparation. Here’s what we’re setting out to accomplish:

    Pay off student loans that have been transferred to 0% balance transfer (BT) cards

    In late 2008 both Her and I opened 0% BT credit cards for the purpose of paying off the remainder of the private student loans. The total amount was a little over $13,000, and we started making payments in December 2008. The cards’ BT rate expiration dates are this year in September and December. Therefore, we’re going to pay off the cards in order of BT rate expiration. We’re allocating $1,000 per month towards paying off those cards. That way, we should be making our last payment in December 2009.

    While we’re paying these off we’re paying the minimums, about $400 total, towards the other student loans that aren’t at 0%.

    That brings us to a total of ~$1,400 per month for student loan payments. Ouch.

    Stretch goal: pay off half of the student loan on the 1.9% BT, about $4,000

    Save $15,000 for a down payment for a house

    We’ve written a lot of posts on our ideas on housing. Summary: we want to buy, but haven’t had any money so we’ve rented and get a great deal, now we’re saving, but have no idea where or when we’re buying, but no suburbs, please.

    Of the above summary, the most tangible thing we can do to move forward with our housing decision is to save, save, and save. We’re socking away $300 per paycheck into savings with automatic deposits.

    Stretch goal: Save $20,000. This is entirely possible, but with the way the economy is going we’re not going to get our hopes up.

    Contribute the maximum to our Roth IRAs, $10,000 total

    …this of course assumes that we will be able to contribute to Roth IRAs. We’re actually going to start this in April when our taxes have been all sorted out, and contribute until April of 2010. Our monthly contributions to our Roth IRAs will amount to $833.33.

    Stretch goal: Be comfortable with our cash flow so that we can increase our 401(k)/SIMPLE IRA contributions at work by at least 1%. Alternatively, we can also put money into a Self-Employed 401(k), starting out with 5% of our business income.

    I’ll check in with these goals every quarter to see how we’re doing. How are your goals shaping up for this year?

    Newlywed Money Management

    by  • October 15, 2008 • Tagged: , , ,  • Comments

    In the last post, Her did a good job of listing the emergency/insurance financial aspects of being newlyweds. In addition to those tasks, we also have many money management issues that need to be worked out. They are as follows:

    • With the very large student loan payment gift, we’re now left with how we should tackle the remaining loans.
    • We haven’t contributed to any non-employee sponsored retirement plans this year. Maybe we should change that?
    • What are we going to do with the cash we have saved?
    • Since we’re not saving for a wedding anymore, how should we divert the extra cash we have on hand?
    • Taxes! We’re definitely going to have to change our withholding and maybe have to take some last minute financial actions to avoid paying hefty taxes this year. I think I messed up my earlier estimate of our tax situation. We’re also unsure about the large gift we did receive and its tax implications. We’re definitely going to have to see a tax guy.
    • What are our short (1 year), intermediate (5 year), and long term (10+ years) financial goals?

    Ugh, lots to think about. We’ve already been answering some of these questions, but need to make some final decisions. I’ll be posting about the details of each decision in the next few weeks.

    The Gift Tax, Student Loans, and How It STILL Doesn’t Apply to Us (or YAY for Unified Credit)

    by  • September 5, 2008 • Tagged: , ,  • Comments

    Eh, so in my last post I may have very liberally applied some IRS rules to our (well, the donor’s) situation.

    Let’s go over the exemptions of the gift tax again, shall we?

    • Gifts, excluding gifts of future interests, that are not more than the annual exclusion for the calendar year,
    • Tuition or medical expenses you pay directly to a medical or educational institution for someone,
    • Gifts to your spouse,
    • Gifts to a political organization for its use, and
    • Gifts to charities.

    See that part in bold? Yeah, I may have left that out of my last post. After some exhaustive googling, it seems that there is indeed a difference between paying a student loan to an institution who gave it out (eg, bank, Salle Mae) versus paying the tuition directly to an educational institution (eg, college, preschool).

    While reading more about this whole gift tax thing, I came across something called the Unified Credit. I had a little trouble wrapping my head around this, so I hope to be a little clearer than mud when explaining it to you.

    In 2008, an individual can gift up to $12,000 to any number of individuals without any tax implications – it doesn’t even have to be reported. Any amount over $12,000 given to anyone would have to be reported and is subject to the gift tax.

    Each individual is given a $345,800 “unified credit” on gift taxes throughout his lifetime (which equates to $1 million of gifts over the annual exclusions). When a person applies this credit to gift taxes, the amount is reduced for the lifetime of the individual. Thus, if a person is taxed $1,000 on a gift and applies the credit, that person would have $344,800 remaining to apply for his lifetime.

    The credit is called “unified” because any amount that is used to credit gift taxes is then subtracted from the credit given for estate taxes. If an individual dies in 2008, he gets a $780,800 credit on his estate tax (which equates to a $2 million estate). Using the example in the last paragraph, if he applied $1,000 of credits over his lifetime to cover his gift taxes, then he would be left with a $779,800 credit on his estate taxes.

    Since the credit is subtracted from lifetime use, a person can choose to not use the credit towards the gift tax and save it for his estate. That is pretty complicated stuff that I won’t go into any more detail.

    Whew. Still with me? So what does all this mean for us?

    Not a thing. We still are not responsible for any taxes as the recipients of this gift.

    Her’s relative who gave us this gift would be responsible for reporting the gift because it is over the $12,000 annual exclusion. Of that gift, $38,000 is subject to the gift tax. Her’s relative can apply whatever remaining unified credit to that tax and probably wipe it out completely, or can pay the gift tax if she is doing some advanced estate planning.

    Her’s relative is a smart enough woman to know what she was doing – I’m pretty sure that she thought this out or at least discussed this with a tax professional.

    So, will anyone owe taxes on this gift? Probably not.

    We are NOT tax professionals so please don’t take this as advice. Seriously, we’re just bloggers. See a tax professional for a definitive answer.

    The Gift Tax, Student Loans, and How It Doesn’t Apply to Us

    by  • September 3, 2008 • Tagged: ,  • Comments

    9/5/2008: Updated post is now up – The Gift Tax, Student Loans, and How It STILL Doesn’t Apply to Us (or YAY for Unified Credit)

    9/4/2008: This post has been edited for accuracy. Another post will be up shortly to clarify this one. I have struckout the inaccurate portions of this post, but will leave the whole thing up for posterity.

    A few weeks ago Her wrote about a generous relative who paid off $50,000 of Her’s student loans. Since then we’ve received a few comments about possible tax implications of such a large transfer of money. Admittedly, we didn’t think about it at the time, so we did some research.

    Of course the tax that would apply to our situation would be the Gift Tax. To understand the Gift Tax, I turned to the IRS’s FAQ on Gift Taxes.

    The IRS definition of a gift is

    Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.

    One can gift up to the annual exclusion ($12,000 in 2007) to another person without triggering the gift tax. Also, one can gift up to the annual exclusion to multiple people without triggering the gift tax. There’s a whole bunch of rules on exclusions that I’m not going to get into.

    What surprised me is that it is the donor who would normally have to pay the tax, but special arrangements could be made so that the donee could pay the tax.

    Of note of the Gift Tax are the exceptions, which are as follows:

    1. Gifts that are not more than the annual exclusion for the calendar year.
    2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
    3. Gifts to your spouse.
    4. Gifts to a political organization for its use.

    Since Her’s relative paid the student loan directly to the institution holding the loan, all of the money can be transferred tax-free. If Her’s relative cut us a check and then we paid the loan, Her’s relative would have to pay a tax on the very generous gift. It is very important to note the difference. Her’s relative doesn’t even have to report that any money was transferred.

    If someone is going to make a payment for your tuition / student loan that exceeds the annual exclusion, make sure it is paid directly to the loan institution so that no gift tax will be triggered!

    Originally, Her wanted the relative to cut us a check and then we would take care of it. We didn’t know about the tax implications at the time. It is a good thing that the relative just paid the loan company directly. Since she did that, no one has to report anything, and nothing will be taxed. Yay!

    #1 Financial Priority After Marriage

    by  • August 20, 2008 • Tagged: , ,  • Comments

    Our wedding is coming up and today we had a long talk about the future of our financial priorities after marriage. While we have many financial goals, we feel it’s best to focus on just one in order to make rapid progress. With the recent payment a relative made on Her’s private student loan debt, paying that off has suddenly become feasible in the short term (as opposed to the 29 years left on the loan, we can now imagine paying it off in under TWO years). So that will be our very first financial goal as a married couple. What was your first financial goal as a twosome?


    by  • August 15, 2008 • Tagged:   • Comments

    Michael Phelps became the world’s greatest Olympian, Lin Miaoke was deemed “cute enough” for television, and a generous relative paid off $50,000 of Her’s student loans. But which one is having the Best Week Ever??

    If you said “Fairy Godmother sticks it to Sallie Mae,” then you are correct, and you guess things really specifically!

    Stick around and watch our net worth pop briefly up above zero, then flop into the negatives like shares of Countrywide stock! (yep – there’s still tons of student loan debt!) Yayyyyy!!!!

    Miscellaneous Tax Stuff

    by  • February 5, 2008 • Tagged: , ,  • Comments

    No cohesiveness in this post, just tax stuff that’s been on my mind…

    1. It’s the beginning of February, and all of our W-2′s, 1099′s, and other weirdly numbered tax documents are in. Right now they’re sitting in a pile with all of our other financial crap – I get the feeling that neither Her or I don’t really feel like dealing with it. In years past, we usually run to the computer and do a quick run of our numbers (this and last year using TaxAct) to see if we will owe or receive a refund. With all of the extra paperwork, we’re a less enthusiastic.

    2. While we are less enthusiastic, I ran the numbers for all of my paperwork only. It seems that when I filled out the w-2 calculator last year after I received a raise I may have goofed a little; preliminary calculations are projecting for me to receive about a $4,000 tax refund. Hey Uncle Sam, I’d like some interest on that! No?

    3. Speaking of the IRS w-2 calculator, it seems that it has been unavailable for a little while now. I’d like to adjust my withholding so that I don’t overpay my taxes. We also need to see if Her’s withholding is sufficient as well. Since we’ll be married this year, we have to figure out how that will affect our tax situation.

    4. We need a tax guy. While I’m fairly confident that I ran the numbers correctly, things are starting to get a little more complicated that I’m comfortable with. Revenue from this website has forced us to turn this into a business operation; therefore we’d like to get the eligible tax deductions. Also, as stated above, we’re getting married this year and will need to account for that in this year’s tax planning. I’ve asked around, and surprisingly enough one guy’s name did pop up more than once. I didn’t expect that since there’s a billion tax guys in the city.

    5. After we get married, our income will be too high to collect the full student loan interest deduction. Heck, we may even go over the income amount to collect any of the deduction. That means we have a bigger incentive to pay that sucker off more quickly.

    6. When the hell did tax planning becoming something I worried about? Must…continue…to…resist…getting…older…

    What’s been on your mind about taxes lately?

    Managing Our Debt – A Review Of How We Live With A Large Debt Burden

    by  • December 19, 2007 • Tagged: , , ,  • Comments

    photo: iandavid

    Over at The Digerati Life, Silicon Valley Blogger muses about handling large debt loads. Her examples include two bloggers who have large amounts of debt: the always controversial Casey Serin and a newer blogger Debt Kid. She also narrates a story of a man she knew who bought a $1.5 million dollar home, but who had a bunch of contingency plans should things go financially awry.

    In our own writings, I have to admit that we can be brazenly blase about the amount of debt that we have and how we’re tackling it. I feel that we can do this because we’ve come up with our own action plan to manage our debt. When we first started this blog, we had $18,054.88 in credit card debt, and $135,966.11 in student loan debt. Many people look at those numbers and tend to freak out; we did too. Fast forward to today and we’ve eradicated all of the credit card debt, and we’re working to accelerate the student loan payment. Here’s how we’ve managed this amount of debt without waking up in cold sweats.

    1. We have relatively low rent. This was our first step for our finances after college and has been paramount to freeing up cash. Currently our housing costs are 18% of our take home income (about 10% of our gross).

    2. We used the debt snowball for debts with balances of under $1,000. We had a few cards with a few hundred dollars debt on them; each of them demanded a minimum payment every month. One of things I do like about Dave Ramsey’s debt snowball is that it frees up cash relatively early in the debt payoff. Even though it made more mathematical sense to pay off the higher balances first, when we paid off the lower balances it freed up more cash in that it was one less minimum payment we’d have to deal with.

    3. We applied freed up cash towards the higher interest rate balances. When we first started this blog, I was paying off a debt that was at 20.99%. As soon as a few of the lower balance cards were paid off, the extra cash went towards battling the debts with monster interest rates.

    4. We took advantage of great credit card deals. I managed to lower the debt of my credit cards to 0% and 2.99%; Her got all of her debt on a card with 0% interest as long as we made 2 purchases a month on it.

    5. Since we started this blog, we increased our income by at least 42%. In these two years, I received three pay raises; Her received two. We also have some income from this site. The extra cash definitely made sleeping at night easier.

    6. We have an emergency fund. Yeah, it’s not clearly defined, but we know that if there is an emergency that arises we can take money from our savings. After the wedding, we plan on having 6 months of expenses remaining in our savings accounts.

    7. Once we paid off the credit cards, we took advantage of another offer to put $11,000 on a card at 1.9%. We put exactly that amount of student loan on there, saving us a lot of cash in the future.

    8. We have not incurred any new consumer debt. We vowed to never pay another penny in credit card interest and now take advantage of rewards programs.

    9. We are a one car family. Shortly after moving to Chicago I sold my car; it was costing me a lot of money to have it in the city. With the car we do have, we minimize our expenses.

    10. We continue to look for ways to increase our income, use leverage and arbitrage to get better interest rates, and make solid decent financial decisions.

    For us, it was these actions that showed us the light at the end of the debt tunnel.

    Are you under a mountain of debt? How have you managed it? How do you let it not keep you up at night?

    Our 2007 Goals Status, Part 2: Increase Student Loan Payments

    by  • December 7, 2007 • Tagged: ,  • Comments

    This is part 2 of our retrospection on our 2007 goals. See part 1 here.

    The second goal that I’m going to discuss today is putting extra money towards student loans. Her’s student loans come in two flavors: private and federal loans. The federal loans have interest rates that are <4% and have balances totaling ~$40,000. The minimum payment for these loans are automatically deducted from our account once a month.

    The remaining ~$80,000 are private loans, with interest rates high enough to kill most vermin and maybe other small mammals.

    Ouch, yo.

    For 2007, we decided to attack this a little more aggressively. The minimum amount owed per month is ~$775 for this loan. Instead of paying this amount once per month, we paid $450 every two weeks. This ensures that we tack on an extra $900 on the student loans for the year since we’ll be making the equivalent of an extra payment, plus another $150 per month we pay over the minimum. Our total extra student loan payment for this year is then ~$3,000. In our experience, paying every two weeks also limits the amount of interest that accrues so more of our payments go towards principal.

    Looking back at this, the additional amount seems pretty measly, but then again a year ago we weren’t anywhere near the financial place we are now. We’re going to look to revise this goal for next year.

    We also helped out this goal by transferring $11,000 of the private loan balance to a credit card with a lifetime interest rate of 1.9%. That alone saves us a ton in future interest costs.

    Status: Completed

    Upromise is Now Helping to Pay my Student Loan

    by  • April 9, 2007 • Tagged:   • Comments

    Upromise has recently partnered with Sallie Mae, a big student loan company who I happen to have most of my student loans with. I have also had a Upromise account for over a year. The result of the partnership is that now Upromise will now make automatic quarterly transfers of the money in my Upromise account to make a payment toward my Sallie Mae loans whenever my Upromise account has more than $25.00 in it. By my estimation, this will probably happen twice a year, paying off about $50 of my loans each year. Not bad for a hassle-free program! For more information visit the Sallie Mae page on the Upromise web site.

    Inspiration for Student Loan Repayment

    by  • September 6, 2006 • Tagged: , ,  • Comments

    student loan debt next

    I wonder what was first?

    Sometimes I meet people who are so financially savvy and responsible that they inspire me. I recently met a co-worker whose story can be an inspiration to anyone struggling with the burden of student loan debt. This woman is in her early twenties and graduated from college with $15,000 worth of student loan debt. She wants to go onto graduate school, but doesn’t want her undergrad loans to continue to accrue interest while she pursues another degree. So she has chosen to put off going to graduate school until she has entirely repaid her undergraduate loans. She wants to get back to school as soon as possible, so she’s made debt repayment her urgent priority. Here’s what she’s doing to ensure she’ll be back in a lecture hall in three years or less:

    1. She started repaying her loans as soon as she graduated, even before she had found a “real” job. She is still technically in deferment, but has already made a payment every month since graduation.
    2. She is working full time at her “real” job, plus she told the boss that she is willing to work overtime on any project in the office. So now she’s serving as a pinch hitter for my project team, and pulling some very late nights to earn extra money.
    3. In addition to her full-time job, she also has an agreement with a local restaurant to be a part-time pinch-hitter waitress there. So on nights when she can’t get overtime at her real job, she waitresses at the restaurant.
    4. Every dollar she earns in overtime or at her second job goes directly toward student loan debt repayment.

    When she told me her story, she seemed tired but upbeat. She knows this will only be for three years, so she feels she can struggle through. Knowing the exact date when she will be debt-free keeps her going!

    Have you been inspired by a student loan repayment story?

    Paying off Student Loans Ten Years Sooner!

    by  • June 20, 2006 • Tagged:   • Comments

    After realizing that for every $100 extra we put toward my private student loan debt, we save $1326.76 in interest, we’ve been tossing around the idea of shortening the term on my loan. Tonight I finally called my lender to get rate quotes. My loan term is currently 25 years at about $750 per month, but we’ve been adding $100 to our payment every month for a while. My lender said that if they cut the term by five years, we would need to pay $785 a month. And to cut it by ten years, we would need to pay $869 a month…or roughly what we have been paying anyway.

    I was shocked! It feels so fantastic to be able to see the light at the end of the tunnel. To think that we will be completely debt free in 15 years, even if we pay nothing more than the new minimum, feels great! I’m sure that as our incomes rise we’ll be able to chop away at it even faster. This is the best I’ve ever felt about my loans!

    If you have any flexibility in your budget, and you’re paying off student loans, consider shortening the term. You’ll save with a lower interest rate and pay less compound interest.

    Help Your Child Choose a College and Career

    by  • June 14, 2006 • Tagged: , ,  • Comments

    Most would agree that college is a good investment. But as with all investment vehicles, some perform better than others. The same is true for choosing a college and a career. No matter who pays for your child’s college education, you can help your child make an informed decision.

    First, talk with your child about choosing a major. What are they interested in? What kind of careers are they thinking of pursuing? Sketch out some possible career options they might follow. Have your child go to salary.com and look up the average starting and peak salaries for each career option. Also have them research what degrees are necessary for each career.

    Next, compare financial packages at the schools your child is applying to. Help your child calculate the total cost of their four-year degree, plus any additional degrees they will need for their career choices. You might want to exclude any financial aid that is contingent on maintaining a certain GPA, since many freshmen struggle with the transition and lose their scholarship.

    Talk with your child and clearly define how much (if any) financial assistance you will give them. Help them calculate how much loan assistance they will need to cover the entire cost. Help them calculate how many years that debt will take to repay and how much the monthly payments might be.

    Finally, put it all together. Compare their potential salary with their potential debt service. Most kids haven’t dealt with such large dollar amounts before, so help them relate it to your own family expenses. If you have a family budget, share it with your child. Discuss how a salary must cover the basics of food and shelter, plus debt service. If there are big financial differences between several schools or careers, talk with your child about the lifestyle they will be able to afford immediately after graduating, and ten years after graduating. Discuss the trade-offs of each option, such as stress, freedom, and fulfillment. Keep the conversation friendly and work as a team – remember, the goal here is just to become informed.

    This is not meant to say that anyone should choose a college or career based solely on the financial rewards. However, this exercise can help your child make an informed financial decision when choosing between several school and career options. Sharing your life experience and gentle guidance can help your child make the best choice.

    Should You Pay Off Student Loan Interest While In School?

    by  • June 13, 2006 • Tagged:   • Comments

    Today we got a question from Anne, who asks,

    My daughter is beginning her first year of college, and we are those awful parents who were not able to set aside anything to pay for her education. She has received a few scholarships. Only eligible for $600 in financial aid. Anyway, she will be securing a loan that we will help her with. Should we pay the interest on these loans while she is in school or just wait until she is out and start then?

    Anne’s question is a good one, as there are many tax laws and loan rules to consider. Here’s what I suggest:

    Since it sounds like you are financially able to help while your daughter is in school, give her cash gifts that equal the interest accrued and have her use them to pay off the interest early. This will allow her to take an annual interest tax deduction (you can’t, unless you are the holder on the loan). If you are the holder of the loan, then you can just pay the interest yourself and take the tax deduction. In this scenario, she will graduate owing only the principal of her loan.

    Alternatively, you could decide not to pay the accrued interest. After she graduates, any accrued unpaid interest will be capitalized and added to the principal of her loan. This changes the status of that money from interest to principal. This is important because this means that she cannot get the tax deduction on it anymore (the deduction is only for interest, not principal) AND she’ll be paying interest on her interest. There is nothing good about this scenario.

    If she is responsible for paying the accruing interest all along then she will avoid the double-interest-no-tax-break mess. In addition, paying the interest now will make the loan feel “real” to her while she’s in school, so it won’t be a surprise when it comes due after graduation.

    Finally, Anne, there’s no reason to feel awful about your decision. Children need love and support and it sounds like you are giving your daughter plenty. You did some important things right:
    -You clearly defined to your daughter exactly how you can and cannot help financially, so she can plan accordingly.
    -You are advocating for her and using your experience to help guide her financial decisions.
    -You are being careful with your own and your daughter’s finances, setting a good example for her.

    Good luck to you and your daughter – she’s lucky to have parents who can help her make good financial choices and advocate for her!

    Student Loan Vultures Are Plucking My Eyes Out!

    by  • June 12, 2006 • Tagged:   • Comments

    Sometimes I can’t decide what’s the worst part about my student loans…the $600 in interest that accrues every month, or the student loan consolidation vultures who mercilessly spam me with offers I do not even qualify for. Just today I received no less than four solicitations from different companies who want me to consolidate my student loans with them. My mail won’t even fit in my mailbox anymore. I called the Opt-Out phone number two months ago and it’s done nothing to stem the carnage.

    The crazy thing is that I can not possibly qualify for their offers. Federal loans can only be consolidated once, and I did that when rates were lower a few years ago. The amount of trees that are wasted on this useless barrage is a shame. Anyone got any ideas?