Why I Have So Much Student Loan Debt (And Why YOU Should Avoid It Like The Plague!!!)

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A few weeks ago I posted the latest in my student loan drama.

A reader asked if I’d write a post explaining why I ever borrowed so much money for school in the first place. What was my thought process like when I took out the loans? What were my plans for a repayment timeline? And, just generally…what was I thinking?

I will speak only for myself, as every person is in a different situation.

First, if you’re a new(ish) reader, I recommend checking out my debt story to explain how I acquired so much debt in the first place (I haven’t always had debt! It all came while I was in grad school). And if you are curious, I’ve broken down all my Navient student loans in this post (keep in mind, that does not include loans from ACS). My latest debt update (with all debts) can be found here.

Why did you take out student loans in the first place?

I was so lucky to have parents who were financially able to help me through my undergraduate degree. For my first year (living on campus), they paid for everything – tuition, books, room, board, meal plan, etc. I worked part-time for fun money. Over time I took on more responsibility for paying my own bills. By my senior year of college they were still helping pay all my tuition and books, but I had been working a lot more to pay for my living expenses (rent, utilities, car, food, etc. etc. etc.) This worked well for me because I was able to gradually take on more responsibilities associated with “ adult life” instead of having it happen overnight when I turned 18. Not everyone is so fortunate and I am forever grateful for the gentle scaffolding I received in that regard. But one thing I always knew is that I would hit the end point of financial assistance once I graduated. My parents knew I wanted to pursue an advanced degree (I’ve always wanted to be a college professor, which requires a PhD), but we had all discussed it and I knew I’d be on my own in terms of paying for the degree. Perhaps interestingly, my stepdad (who married my Mom when I was 16, but has been in my life since 14) has a Ph.D. But things were so, so different when he’d received his advanced degree. So we never had a talk about how to avoid student loan debt, or the best way to minimize student loan debt. I don’t want to bash my parents – they did the best they could with the information they had (they really didn’t know how much it could cost to earn a Ph.D. today). But I do wish someone had pulled me aside and had a financial conversation with me about student loan debt. Instead, I simply viewed student loans as the only logical way to pay for my advanced degrees. There was never a question of doing anything differently.

But why so much student loan debt? How did it get so out of control?

Most of my student loan debt was incurred in my first two years of graduate school while I was living in Florida. I talk more about it here. Basically, tuition was insanely expensive for an out-of-state graduate student and I didn’t receive tuition reimbursement from the university. I racked up nearly $50,000 in student loans those first two years, alone. It all happened so quickly I never really wrapped my brain around it. At the time I had a good friend pursuing a medical degree (which we know is $$$$), and we talked about student loans one time. She talked about how she mentally compartmentalizes the money so she doesn’t stress about it. She actually made some metaphor of the money being “fake” – like Monopoly money or something. It made her feel better psychologically and it was easier to cope with racking up the kinds of loans she was taking out. I basically followed suit with the same strategy. The common (mis)conception I’d always been told was that “education is always valuable” and “student loans are ‘good’ debt.” Note, these are two things I vehemently disagree with now, but I bought into the myths at the time (along with all my grad school buddies).

So education isn’t always good? What do you think now?

I’m in higher education, so obviously I’m pro-college (I teach college courses so I’d be out a job if no one went to school!) BUT I know so many people who went to college just because that’s what they’d always been told to do. My belief now is that education just for the sake of education is a LUXURY. There’s nothing wrong with it. I love to learn! But unless you can afford to pay cash, it should be in the same category as a luxury vehicle. You don’t need it. Just going to school blindly with no plan for the future (in terms of career, projected earnings, etc.) is not wise in my opinion. Instead, high schools should offer prep courses or parents should sit their kids down and think about costs of college versus projected salary. They need to be in-sync. You wouldn’t take out $100,000 of student loan debt for a degree in German Polka History (Dave Ramsey’s example). You need to be sure that you’ll be employable after graduation! Are there jobs in your degree area? What is the starting salary? What is the average salary? How much is your degree going to cost? These are questions that young people should be examining before selecting a major and enrolling in classes. If you’re unsure, it’s not the worst thing in the world to wait a year before going to college! If parents are okay with helping a child financially and the kid wants to take general courses while they figure out what subject to major in, then that’s fine. I’m not going to judge anyone else. But for me and my children (when they reach college-age), we’re going to have some serious financial and career-oriented discussions prior to ever registering for that first college hour.

When you were taking out student loans, what did you think would be the timeline for repayment?

Honestly, this is a subject my grad school friends and I talked about frequently. And you know what the common thought is? “I’ll have these loans forever.” When you graduate you’re put on a 30-year plan, the same as a mortgage, and you just assume they’ll be around forever. Maybe not everyone thinks this way but this was the overwhelming majority of opinions that I have experienced (that goes for grad students at both universities I attended, so it wasn’t limited to a specific place). I really didn’t think specifics in terms of payments and interest while I was in school. I never even knew the full amount I owed until after I graduated as I was doing my exit loan counseling. I knew I owed a lot, but I’d never had it all added up before in a single place until then. I had no idea that my monthly payments (before applying for IBR) would be over a thousand dollars a month, and that over a third of the payment would be going straight to interest. It’s incredibly overwhelming and scary to find yourself newly graduated, no job yet, and to discover you are responsible for a mortgage-sized debt.

Million dollar question…. Would you do it again?

I would definitely still earn my advanced degree (Ph.D.) because its required for the type of jobs that I want (and for the job I recently accepted!). Even if I hadn’t landed my new job, I wouldn’t say the degree, itself, was a waste. But if I had fully understood the implications of my sized student loan debt, I would have done everything in my power to avoid them or minimize them to whatever extent possible. Here are some real life things I would have done differently (that may or may not apply to other peoples’ situations):

  1. Work while in school. I did this in undergrad, but graduate school felt so all-encompassing that I didn’t think it was possible. You know what? It was. Eventually I came around while pursuing my Ph.D. and I taught several classes at the local community college. But the whole time I was in Florida (where, again, most of my debt is from), I didn’t do a single thing other than school. What a wasted opportunity to try to earn some money and minimize the loans I was taking out.
  2. Work on campus. Especially in Florida where I did not receive any tuition reimbursement, working on campus would have been invaluable. They paid pretty poorly (I think minimum wage at the time – about $8/hour) BUT they gave tuition reimbursement! At $1,000 per credit hour, that tuition reimbursement would have been worth it even if I had been working for free! I should have gotten a job on campus.
  3. Work (even for free) through any company that will pay for your education. This tends to be less common if you want to go into academia (like me), but I had several friends who worked for places (or interned, where they earned no paycheck at all), in exchange for a partial or full college tuition reimbursement. Think about your career trajectory and see if this can somehow work for you. Even many retail stores offer tuition reimbursement of some kind. You just have to do a little digging and asking around to find out if it would work for you!
  4. If your desired school is out-of-state, move there first! This is a big one that not many people know about. If you move somewhere (out-of-state) for school, you will be considered an out-of-state student for tuition purposes the entire time you stay there (not just first semester or first year). I learned this the hard way when I went to a school in Florida. We lived there full-time, hubs worked there and paid taxes there, we were considered residents in terms of our licenses and for jury duty (I even served on a jury while living there!) But we were NOT considered residents for tuition purposes. The way around this is that if you know you want to attend an out-of-state college, you can actually move there a semester (or year) before you plan to attend! A big secret tip for grad students, specifically… I know more than one person who did not get into their dream university. So they moved to the school’s city and started attending lab meetings and discussion groups on their own time. They even took a few classes as non-degree seeking students. And as long as they made a good impression and forged relationships with faculty members they were always, without exception, admitted the following year. Why? It shows extreme dedication to move cross-country and start attending a school without officially being accepted there! So for any future grad students who didn’t get into the dream program – there’s still a chance! Build those connections prior to matriculation and you’ll (1) likely get in the following year, and (2) be considered in-state for tuition purposes since you moved to the state before starting school!
  5. Look at tuition when determining a school to attend. I can honestly say I never once looked at tuition rates when deciding where to apply to and where to eventually attend. That is so, so, so silly on my part! This is REAL money that is going to take REAL years to repay, not to mention interest, etc. So look for places that are inexpensive and affordable! At the undergrad level, start with a community college (bonus – you can likely work full-time and take classes at night and on weekends). Then transfer to an inexpensively priced in-state university to finish up your bachelor’s degree. This will help minimize the amount of loans that are taken out to cover the tuition.
  6. Get involved in a cause! And apply for related scholarships. Really you should apply for every scholarship or grant known to man-kind. But I’ve found that it helps increase your odds if you get involved in some specific group (often a philanthropy of some kind) and apply for scholarships specifically targeted toward the group. As an example, when I was a grad student I joined an organization specifically for women in academia. I attended bi-annual meetings, mentored an undergraduate girl, served on annual committee panels and even organized a symposium one year for middle-school and high-school aged girls. As a grad student, I found various women’s organizations that offered grants and I was able to win several due to my extensive involvement in the women’s organization at my university. They weren’t huge grants, but they covered my costs to attend various conferences, paid for travel, lodging, conference costs, etc. etc. etc.

Those are my tips. Feel free to leave any additional tips in the comments section.

And if you are a parent or mentor to a young person about to graduate high school, don’t be scared to pull him/her aside and have a frank discussion of the long-term implications of student loan debt (and all the drama that accompanies them). Knowledge is power! : )


June 2015 Budget Update

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Hey, guess where I am! Traveling again, that’s where! Whoa! Considering we hadn’t initially planned to travel at all this summer, I’ve been pretty busy! This is already my second trip of the summer (first trip posted here), and I’ll be making a third trip either at the end of this month or beginning of August, depending on timing of my Dad’s tests and doctors’ appointments so I can be there when he receives an official diagnosis.

Fortunately, I get to say that this trip is much more pleasure-based compared to the last one. I’ve never mentioned, but my Dad owns two properties. His primary residence is in Utah and his secondary residence is in Wimberley, TX (south of Austin-area). So this trip included the entire family – we all loaded up the car and drove cross-country to visit family in Austin, spend time together for the 4th of July holiday and take advantage of my last week before I start my full time job (eek!!!) Plus, my Dad was in town so I’ll be able to go and help him with some things on his property. With all of his health issues he’s going to be forced to sell his Wimberley property because it has a lot of acreage and there’s no way he can maintain it as he struggles with his physical decline.

So….killing lots of birds with one stone. We didn’t leave to come out here until July 2nd, so the expenses associated with the trip will fall within the month of July. But similar to our other family-related trips, it’s going to cost us a minimal amount out of pocket. My mom gave us a little money for gas and we’re staying for free with family. I bought a bunch of groceries when we first arrived and we generally take family out to lunch or dinner once while we’re in town. But for a week long trip the costs are pretty minimal.

I’ve got lots to do in the short time we’re here so I’m going to run. Here’s how the month of June shaped up with our spending:

 

Place Amount Spent
Rent 1055
Electricity 150
Water 53
Natural gas 21
Sprint (2 lines) 119
Cable/Internet 99
Car Insurance 156
Health Insurance 394
Trash 35
Preschool 1181
Gift-Giving 50
Restaurants 119
Entertainment 25
Groceries 550
Gasoline 81
Household Goods 41
Clothing 8
Parking 19
Work Purchases 20
Debt Payments 725
Total 4901

A couple quick budget-related notes before I run out the door:

Remember we had a very low income this month (no income from hubs’ business), so we had to raid our EF. One of our top priorities in July will be to replenish it. As a result, our debt payment is way below our average and we put no money toward savings.

Our preschool expense was above average because it included the deposits I had to put down for our new preschool ($75/each), which starts mid-August. Also, watch out – electricity is sky rocketing as our temperatures are climbing. I already received July’s bill and its over $200! Ouch!

I hope you all had a safe, healthy, and happy 4th of July to you American readers, I wish any Canadian readers a happy belated Canada Day, and just happy week to all the rest of you! : )


Month in Review- June 2015

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Hey Everyone! I hope you’re all having a great week.

It’s July 2nd, so that means it’s time for a month in review. June went by in a flash, didn’t it? The summer months always seem to fly by so fast.

Since I didn’t post on Tuesday, I want to share a couple of items that happened over the weekend:

  • The same couple that I went out with earlier in June, invited me and GF out again; this time for dinner AND a movie (BTW- Jurassic World is AMAZING). I happily said “Yes!” but it also broke my “fun” budget for the month, which I carried $50. It wasn’t a big deal since my buddy asked me earlier in the week and I was able to budget for the dinner and movie out of my paycheck vs. having to dip into my emergency fund. I’m just really excited that I don’t have to say “No” to everything anymore.
  • I didn’t have a debt update to share since my last paycheck of the month is delegated to paying my mortgage and some other smaller bills. If I didn’t have any plans during this week, I could normally set aside $70-80 for a debt payment. Since I went out to dinner instead, I made no debt payment this week.

As for June, there was a lot that happened, so to review:

  • Firstly, now that most of my smaller debts are paid off (with only one more to go below $10,000) I had an internal struggle (The Hard Wins) on how to deal with the the fact that the payoffs are going to be few and far between now.
  • The day after my “Hard Wins” post, I increased my 401k contribution from 4% to 10% (which I mentioned in the comments of that same post). Update: I think this was a wise decision. For one- I haven’t noticed much of a difference in my take home pay. It ended up being about a $60 difference, but it’s definitely not hurting my ability to pay my bills. Plus, it’s awesome to see my retirement account grow so much faster!
  • In the following post (Time Off), I decided to use the month of July as a vacation from paying off debt to both enjoy my vacation to Disney and clear my head so I can hit August refreshed and ready to go. Update: vacation is only 7 days away (yay!) and this Wednesday’s paycheck marks the first paycheck in a LONG time (if ever) where I didn’t have to make a debt payment. I’m using all the extra  money to buy myself some new clothes and to stock up on supplies (more on this on Tuesday)
  • I went out for dinner and drinks with a with an awesome couple, in which my “fun” fund came in really handy (here) and was most definitely worth it.
  • In this post (Birthday Party), I went to a good friend’s son’s 1st birthday party. Since I started an ESA account, I figured I give the gift of some cash for my buddy to start one of his own for his son.
  • In the same post, we began our planning for Disney. Since we are driving down, a lot of you had some great ideas our how to make our trip as fun and as frugal as we can. We’ve incorporated many of the ideas into our plan as we want to spend as little money as we have to on our drive down and then back up.
  • Lastly, we had a little Father’s Day celebration (Father’s Day) where GF did some amazing little things for me, as I am the father to our kids (lol, they’re dogs). We also started cementing our Disney plans and GF used her couponing skills to get us a whole bunch of goodies on the cheap.

As for my debt paydown, no big milestones met this month, but I still paid off $1,592.21. Down to a balance of $48,466.83. Not my best month, but not my worst, either.

Hope everyone has a great holiday!


Summer Book Club Review: Complete Guide To Money

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It’s time for our first summer book club review!

Did you read Dave Ramsey’s Complete Guide to Money with me?

ramseyphoto credit

If not, no worries! I’ll be announcing the next book club read at the end of the post! And read my review anyway – maybe you’ll get something from it even without reading the whole book.

Let’s get started….

My general thoughts are that the book basically rehashes a lot of his other books that I’ve read (I’ve read Total Money Makeover and EntreLeadership). Even so, his writing is fun and engaging. He’s definitely a charismatic speaker and it comes through in his books, too. There are a lot of repeat stories that I’ve heard before on the radio (and/or read in previous books), but there are certainly some new ones too. Also, he’s pretty honest and open about the fact that the book covers all the same stuff he talks about on a regular basis. So you go into it almost expecting a bit of a review (at least that’s the case if you’re a regular Ramsey reader or radio show listener).

One of the things I enjoy is that Ramsey includes “We Did It” stories throughout the book as a motivating tool to read about real life people who applied his principles to reach their financial goals. I also like that he pulls in Twitter and Facebook posts as an added connection to readers.

Here are some quotations (some are direct quotes some are paraphrased) of things that jumped out at me as I read through the book:

  • If you start at age 16 and never have a car payment, but instead invest the difference, you’d retire a multi-millionaire just by avoiding car payments. Why not teach THAT in school?
  • Debt is a product. It’s the most successfully marketed product in all of history.
  • Dave’s grandma always said: “There’s a great place to go when you’re broke….. To Work!” (<<<my personal favorite quote from the book!)
  • Most families going through Financial Peace University program are debt free except their house in 18 months!!!
  • How would it feel to have absolutely no debt hanging over you?
  • How much of your income is currently going out in the form of payments every month (e.g., credit cards, home equity loan, mortgage, car loan, student loan, etc.)? What could you do if you actually got to keep that money?

While reading the book I also jotted down a couple of my own personal stories that related to things Dave mentioned in his book.

  • When I was a kid (not even 18 yet), I got a membership to Columbia House. They send you a bunch of free DVDs, but then start mailing you random DVDs every couple weeks which they bill you for in-full until you send notice to cancel your membership. I’d gotten caught up in the program and hadn’t canceled in time and owed money that I never paid and, eventually, it went on my credit. Again…we’re talking about something from nearly 15 years ago. The debt was small (under a hundred dollars), but it stayed on my credit forever – well past the 7 year mark – because creditors can do an account inquiry, which counts as account activity. Eventually I just paid the debt off so it would go away, but I was shocked to find out that the whole “it drops off your credit in 7 years” myth is NOT always the case. Columbia House showed me that by hanging around probably 12 years or so.
  • Ramsey talks a lot about how debt collectors have all kinds of terrible techniques to get you to pay THEM before any of your other bills. After my grandfather’s death, my maternal grandmother (who now lives in assisted living funded for by my mother) didn’t have a lot of income. She got behind on her bills and had credit card debt collectors calling her relentlessly. They convinced her to pay her credit card bill before her own mortgage and utility payments (which my mom was forced to step in and cover to keep the lights on). Obviously you shouldn’t be taking on debt you can’t afford to pay back. But you should also make sure you have a roof over your head and food in your fridge (and electricity to power the fridge) before paying back scummy credit card companies! No debt is the way to go!
  • Ramsey talked a lot about the power of marketing on buying decisions. I saw this come to light the most when I was planning our wedding 5 years ago. I swear, everything is marked up 10x just because its associated with a wedding. An identical product intended for a birthday party (instead of wedding) is so much cheaper! There’s something about weddings, specifically, that make people feel obligated to spend. I remember joking with friends at the time…. “if you truly love each other, you’ll order the specialty cocktail napkins with your personalized monogram! If you don’t upgrade but opt to stick with the regular napkins, you’re surely destined for divorce!!!” No, no one literally said those words to me. But that’s certainly how it felt!!!

Overall, I’d give the book 3.5 out of 5 stars. It never drew me in to where I just couldn’t put the book down. But its a quick and engaging read and has lots of helpful info, even if much of it is review.

What did you think?

What would you do with your extra money if you didn’t have any debts to pay?

And….drumroll please……..

Our next summer book club selection is:

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Your Money or Your Live:  9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence.

So pick it up from your local library. This will be our selection for the month of July. If you have another (financially-oriented) book you’d like to read, leave a comment with your opinion and I’ll select another one for August!

 


Wear, wash, repeat

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I feel like my days are on a serious repeat cycle and this post could pretty much be a duplicate of last weeks, with one MAJOR difference. I am anticipating a check today that will be the last payment towards my consumer debt…July 1st deadline goal met (almost as it hasn’t gotten here yet.) I feel like I should be doing some sort of happy dance or woot, wooting, but really I am just ready to keep plugging along.

I am really enjoying having choices with my money, rather than just looking at what bill is due next. And I really like the idea of not having to fork over a large portion of my money to debt anymore, but I do still have a ways to go. I have picked my next debt goal and am looking at the timeline now so will post that soon.

Now the news from this week…

The housing question is still looming. I have until the 24th of this month to let my apartments know if I am moving out at the end of my lease to avoid any addition fees. I also have the option to go month to month at that time or sign a shorter lease or another year long lease. I know I will not be signing another year long lease, but everything else is still up in the air. So more on that later too.

I’m continuing to do daily chauffeur duties to swim team practice, day camps (this week the littles are at a free VBS,) and gymnastics practice. I feel like I never have a solid block of time at home or if I do it’s at night when I’m exhausted, so not being as productive as I hoped. That is something that I need to change as I continue to try and build my business!

I’ve two extra kids staying with us this week, 8 year old twins. They are from a single mom family and she is really struggling financially so hasn’t been able to afford to run her air conditioner or hire a sitter for them. I just couldn’t stomach the idea of them staying alone day in and day out in a hot house, so voila they are here. They live about 3 hours from us, so she will come on the weekend and we will evaluate the situation for next week. (One of my twins is gone for the week at Ministry and Leadership Training, so it hasn’t been quite as tight as it would have been. Plus, these twins get along like gang busters with Little Gymnast so they are having a blast together.)

Speaking of Little Gymnast, today is his birthday. Now that’s something I can get excited about. When he found out he would not be getting his iPad screen fixed for his birthday, he gave me a revised frugal list…he’s getting everything he asked for: 1 gallon of grape juice, silly string, Reeses Pieces and a new blanket. (His Thomas the Train comforter is on it’s last stuffing!) We will go out to dinner tonight with his dad to celebrate…he’s chosen Golden Corral for the unlimited food and chocolate fountain!

So I’ve got lots of news, but nothing definite. Expect detailed posts coming on:
1. The next payoff goal and timeline.
2. A new, maybe not so extreme budget…maybe. We’ve gotten used to this one and it really hasn’t been that bad.
3. Details on our new family car.
4. A decision on housing as soon as I make one, lots still going on around this so can’t even hint to what the outcome will be.

I hope you are well and enjoying your summer and staying cool. The heat has been stifling and these last few days have been our first break from 90+ degree weather, so I’m dreading seeing what my electric bill will be. But I am oh, so grateful to be a in place where I can run it without worrying about being able to pay the bill. And run it to my comfort. I know that many people can’t do that. We have much to be grateful for, even on our strict budget.


Retirement Options

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Let’s talk retirement.

Until just this past year, hubs and I had saved absolutely nothing toward retirement. And, even this past year, we had just started saving $100/month (only in the months where we had an extra $100 to spare). In April we opened our very first Roth IRA for 2014 with a whopping $1,000 investment. That’s it. That’s our full retirement.

I’ve had in the back of my mind that I would start more aggressive retirement contributions after we’re completely consumer debt-free (the only thing left is the car!). But now that I’ve landed a full time job things are shaking up a little.

One maybe odd thing about this job is that they require mandatory retirement contributions. I’ve never heard of that before (but this is my first full-time job, so maybe it’s more common than I think???). Also, there are two separate retirement options. At first I mistakenly thought I could switch between the two, but that was inaccurate. After reading more (and speaking with HR), I’ve learned that once I select a plan – that’s it. There’s no changing the plan. Ever. For the entire duration of my career at the university, I am locked into the retirement plan (note: I can still change investments within the plan, see more below).

The big difference is that one plan is a defined benefit plan, whereas the other is a defined contribution plan. The defined benefit plan has a higher mandatory contribution and match (currently 11.48%, compared to 7% for the defined contribution plan), but it scares me that someone else is entirely in control of the investment. Plus, the defined benefit plan pay-out isn’t based solely on the amount contributed (like the defined contribution plan), it’s based on years of service, average monthly salary, and an actuarial formula.

In contrast, the defined contribution plan benefits are based solely on the amount I’ve contributed and how the investment performs across time. It allows me to select the investment company and investment allocations myself. So even though the match is a smaller percentage, I may be able to make it up with interest and growth across time (and benefit pay-outs aren’t contingent upon years of service, average salary, etc.).

There are lots of other factors to consider as well (e.g., the defined benefit plan offers health care subsidies after retirement and better long-term disability than the defined contribution plan). It kind of sounds, to me, like the defined benefit plan is similar to a pension….only it’s not free money from the employer. It’s money that has been paid-in by the employee (and matched by employer) all throughout the employee’s career. When I googled “defined benefit versus defined contribution” everyone says to participate in the defined benefit plan, at a minimum, and to add the defined contribution plan if possible, too. But I think this is different because the websites I looked at were assuming that the defined benefit plan was paid in full by the employer (not by employee contributions). Also, at my job it is not possible to participate in both. It’s an either/or (and no moving between them).

I’m leaning toward the defined contribution plan simply because the peace of mind of being in control of MY money instead of relying on someone else to be in control (also, I don’t like that the percentage of contributions in the defined benefit plan varies and that vesting doesn’t apply until termination of employment).

Reader thoughts or opinions? For anyone who would like to see the fine print, I’ve attached a retirement comparison chart I received. Thanks!!!

Retirement_ComparisonAug_2014

If you had the option, would you select a defined benefit plan (similar to a pension, but with mandatory employee contributions) or a defined contribution plan (just like a regular 401(k), with a 7% company match)? Why?


Lackluster June 2015 Debt Update

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So remember how we had a no-income month of May with hubs’ business?

That really hurt us in terms of our ability to make big debt payments. I even said at the beginning of the month that we were going to cut out some of the debt payments all together (like the car payment and balance transfer loan, which don’t have minimum payments currently due), and pay minimums on everything else.

Well, its one thing to say something and another to actually do it.

And although we really didn’t have the funds to do so (I had to tap into EF funds), I made some payments toward all of our debts for my own psychological satisfaction. That being said, it’s not like I was able to do an awesome job on debt payments this month. In fact, I believe this is our lowest debt payment since I started blogging here (back in March 2014).

And there’s one thing thats certain in regard to debt eradication. If you aren’t moving forward, you’re moving backward. There is no “stationary” option available.

So, unfortunately, I also have to tell you that our debt actually increased this month (not due to new debts, but due to accruing interest on the existing debt).

However, the additional debt has been totally puzzling to me. It’s all from my student loans and, although I have a lot of student loan debt, every single month my debt has been going down. This month I actually made a larger student loan debt payment than normal and my debt somehow went up.

I called Navient to ask about what happened.

How is it that every single month I pay (X) and my debt decreases. This month I paid (X+$67) and my debt somehow increased? It doesn’t make sense that I paid more and somehow my overall balance has gone up?

The person I spoke with had no idea. She took down some information, said she’d file a report, and someone would get back to me. That was two weeks ago and still no news.

I called back another time to try to figure it out.

This time, I was told that even though I’m on income based repayment where unpaid interest is forgiven on my subsidized loans, apparently the unpaid interest is only forgiven on a quarterly basis? Meaning, the interest continues to accrue and is only forgiven once every three months.

This makes no sense to me. Navient is a little bit trickier, but it’s clear as day from looking at all my debt updates (you can go through the archives for yourself), that my ACS loans (which are all subsidized) have had the same balance – to the penny – ever since I applied for income-based-repayment (last August). But my minimum payment doesn’t even cover the interest, so it’s clear that the unpaid interest has been forgiven every month, not just once a quarter. Otherwise, my balance would have continued to rise every month as I make my minimum payments.

My IBR status hasn’t lapsed, supposedly this policy isn’t new (in regard to only forgiving interest once per quarter), and there’s absolutely no logical reason I can think of that explains it.

But with BOTH of my student loan carriers this month (Navient and ACS), my balances have gone up.

Can anyone explain this to me? Pretty please with a cherry on top?

It’s absolutely maddening! It’s such a helpless feeling to know I owe this money, but to feel like somehow I’m getting screwed over – only no one believes me and no one seems to think anything is amiss.

To sum up…

  • I’ve made the same payment every.single.month. My balance has always decreased.
  • This month I made the same payment PLUS an extra $67 payment.  And somehow my balance increased.

Part of me still thinks maybe this is a new policy (only forgiving interest quarterly) and the representative I spoke with simply didn’t know or realize it. Otherwise, how do you explain that BOTH of my loan service providers had the same issue in the same month?

It really makes me want to knock out my car loan debt ASAP so I can start to kill these student loans. They absolutely need to die.

Now that I’ve gone on my rampage, let me show you the actual debt numbers.

PlaceCurrent BalanceAPRLast Payment MadeLast Payment Date Original debt, March 2014
Capital One CC-17.9%-Paid off in March 2014$413
Mattress Firm-0%-Paid off in May 2014$1381
Wells Fargo CC-13.65%-Paid off in May 2014$7697
BoA CC-7.24%-Paid off in June 2014$2220
License Fees-2.5%-Paid off in April 2015$5808
Navient - Federal Student Loan$39088.25%$116June$4687
ACS Student Loans$214117.24%$77May$21035
Navient - Dept of Education student loans$666676.55%$307June$63254
PenFed Car Loan$146422.49%$100June$24040
Balance Transfer student loan (Former Navient 1-01)$53370% (through April 2016)$100June$5937
Medical Bills$60860%$25June$9000
Totals$118,051 (Last month = 117,815)$725Starting Debt = $145,472

I can’t beat myself up about it too much. Next month will be better. Onward.

Seriously though – anyone else on IBR have this issue where unpaid interest was not forgiven this month? Is it a new policy to only forgive interest once per quarter? Why have I never experienced this before?


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