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Advice Wanted!

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I’ve been doing a lot of thinking about our debt payoff journey and feel as though I’ve come to a bit of a crossroads. Sometimes having an objective opinion (YOURS!) is just what it takes for me to gain a little perspective or see something from another angle, so here’s the deal….

I’ve been (borderline-obsessively) checking and re-checking my budget/debt spreadsheet, trying to determine the best course of action. It appears that we will be able to pay off the Wells Fargo card much sooner than previously expected (probably by June!!!), and the plan has ALWAYS been to snowball that payment toward our last credit card – Bank of America.

But a careful examination of ALL (of our many, many) debts leaves me feeling a bit unsettled about the decision. I think the money may be better allocated toward a different debt.

To get a big picture, I’m going to break from the mold a little and lay out my debts now (mid-month) instead of waiting until the beginning of June. So here’s the big debt picture (listed by APR – highest to lowest). Note the “Deferment Ends” column. I have listed minimum payments for my student loans once deferment ends.

PlaceCurrent BalanceAPRMinimum DueMin Due (When Deferment Ends)Deferment End Date
Wells Fargo CC$334513.65%8787N/A
Sallie Mae - Dept of Ed$55788.5%0692/10/15
Sallie Mae - Federal Student Loans$45648.25%6262Current (no deferment)
Carmax$229947.75%470470N/A
BoA CC$21407.24%3535N/A
ACS Student Loans$213887.24%2524010/28/14
Sallie Mae - Dept of Ed$652367%07372/10/15
License Fees$56232.7%5555N/A
Medical Bills$82530%100100*Still does not include Mayo Clinic bill
Totals$139121

 

My thoughts are totally fragmented, so I’ll lay them out bullet-style.

  • I recently discovered that one of my Sallie Mae Department of Education loans is at an 8.5% APR….ALL of the others are at 7% so I had mistakenly thought this one was 7% too, and had previously lumped them all together. I’ve now separated this debt because it will be my highest interest-rate debt after WF is paid.
  • When deferment ends my plan has been to consolidate my student loans and try to get a lower interest rate. So its possible the 8.5% could be getting a reduction in February.
  • After my Wells Fargo card is paid in full, my plan is to go try to refinance my car loan for a lower APR (currently 7.24%). So its possible I can get this interest rate lowered.
  • People may disagree with this one (particularly as my #1 goal has ALWAYS been to eradicate CC debt), but now I’m feeling less urgency about getting rid of my BoA debt. I feel the money might be better spent going toward a higher interest student loan??? Additionally – any credit gurus out there? I’ve read that if you have $0 CC debt it can actually ding your credit score a little (not as significantly as having too much debt-to-credit, but there’s still an impact). Being as I’m trying to refinance student loans and cars, I’m thinking that leaving a little debt on my lowest APR card right now might not be terrible? (Note: I’m NOT suggesting I stay in debt forever….just saying I may be better served to allocate funds toward higher APR debt currently while I’m playing the credit score game).
  • My ACS student loan deferment ends in October, at which time the payment will increase to $240/month.
  • I’m mathematically-minded so my preference in debt-repayment is highest APR first (regardless of balance).
  • That said, if I were to rank-order my debts in order of the PERSONAL satisfaction I’d receive from paying them off (that whole psychological aspect component), I’d rank: Wells Fargo, Bank of America, Carmax, License, Student loans, medical debt).
  • My current inclination (a rough combination of mathematical and personal satisfaction factors) is to rank order debt repayment as such: Wells Fargo, Sallie Mae (first the 8.5% APR, then the 8.25% APR loan), Bank of America, license, Carmax, remaining student loans (ACS & Sallie Mae 7% APR), and medical debt still dead last.
  • At the same time, I’m trying to think of some strategy to leverage the extra money we have right now. While student loans are still in deferment I have a good amount of extra money to throw toward debts. Once deferment ends my funds will be greatly divided. I’d like to strategize to eradicate some of the lower-amount debts so that – once deferment ends – my funds aren’t being split into 15 different directions!
  • Ever heard of using a 0% APR credit card to pay student loans??? Remember that 0% offer I got that everyone said I should take? I never did (and won’t need it since I’m kicking WF’s butt right now!), but maybe I could use it for the 8.25-8.5% APR student loan debt??? Yay? Nay?
  • Keep in mind we’ve only budgeted $1500/month for debt repayment, though we’ve been putting extra toward debt each month if we have money available after paying our bills.
  • Another couple considerations to throw into the mix just for fun…at some point (before all of our debt is gone), we’re going to have to cash-flow some major expenses: serious dental work for my husband (discussed earlier today), and a new work truck for my husband (if we’re lucky, maybe it will last until next winter….we already had several problems this past winter). Plus all the “baby” related items as our girls grow older – buying the supplies to convert cribs into beds, newer carseats when they outgrow the old ones, etc.

I’ve liked not splitting priorities, so I can focus on eradicating one debt at a time, but I won’t have that luxury much longer, as the minimum amounts due on many of the currently-deferred student loans are going to be increasing within the next 1-8 months and forcing me to split up our finds.

Your thoughts, recommendations, incite?

And….GO!!!

 

Ashley

Texan at heart; Arizonan on paper. Lover of running, cheese, camping, and family (fur-family included!). Blogger, motivated to get out of debt YESTERDAY! Follow along with my journey!

Latest posts by Ashley (see all)


47 Comments

  • Reply debtor |

    For me, this is easy – GET RID OF BOA. Yes, the Sallie Mae is marginally higher interest rate but at the same time, your loans have the option to go into forbearance if anything should pop up in life. Additionally, if youpay more than the minimums you should be getting your due dates pushed back if you choose. To me it makes sense to have flexible debt than inflexible debt. Your credit card payments will always be due no matter your financial situation.

    Additionally, your monthly income looks like you might have phased out but if you haven’t keep in mind that student loan interest is deductible for a lot of folks.

    I don’t think it’s workt th 3 or 4 points the credit rating impact will have to keep BOA lingering.

    And then if you are planning to consolidate your loan anyway, it would be better to have just one student loan payment to make as opposed to a student loan and a credit card.

    That’s what I would do if I were in this position anyway.

    PS. What’s up with these new ads? Kind of weird to be asked to complete a survey to read content – seems a little spammy.

    • Reply Ashley |

      Does it really only impact credit score 3 or 4 points or was that just a “guesstimate?” If that’s the only impact then its really minimal. I thought it had a greater baring on credit. I’ve read the “ideal” debt-to-credit ratio is under 20% (from eyes of credit scoring agencies), and if you have 0% (which is what I’d have once we pay off BoA, because I believe it only considers CCs/revolving credit – not student loans or car loans), then it actually hurts your credit. Anyone know???

      • Reply debtor |

        it’s a guesstimate – i know it doesn’t affect it that much. i paid off all my CC’s last month (about 6.5k) and my score went UP 3 points (big whoop dee doo, i expected more). I don’t think it’s enough of a difference for it to factor in your decision making. I see from the comments before that your issue is the fact that your min payments on the loans would be high once you are out of deferment. Are you making payments now? If not, i might just put a little towards the students loans now but still get rid of the BOA. Credit card debt is unnecessary and I think should be the first step in becoming debt free.

        In all honesty, if the load became too much you can always alter you student loan payments. I can’t scroll up and look at the numbers now bc of the stupid survey thing but I think your car loan still had a pretty high balance so then that and your student loans could be your next target.

      • Reply Hannah |

        I vote to get rid of the BOA. You will feel much better having it gone. Then you can start hammering at the Sallie Mae.
        You want your utilization as low as possible on credit cards. Your credit card company typically reports your balance once a month to the credit bureaus, and they should be able to tell you what date this is.
        My personal strategy for utilization is to use my credit card as I usually do for food and etc, and then pay it off throughout the month. However, I will leave a few hundred dollars to post to the statement date, and this should be the amount that reports to the credit bureaus. This shows usage and activity, but very low utilization.

  • Reply Georgie |

    Consolidating won’t lower the interest rate on your student loans unless they are variable loans from pre-2006 in which case you are locking in the lower rate. When they consolidate they will do what is called a “weighted average,” meaning they will average all your interest rates and add something like .5% and that will be the new rate. Especially if you have multiple loans at different rates, I doubt this will do you any good. It’s mostly only something to do if you feel you have too many payments to keep track of without consolidating.

    You should not pay off your student loan with a CC, see https://www.wisepiggy.com/credit_tutorial/debt/should-i-pay-off-my-student-loan-with-my-credit-cards.html

    • Reply Ashley |

      Wow, I’m glad I asked! I had no idea that’s how loans were consolidated (I guess since I haven’t done it yet). I always thought/hoped I could improve my credit score and get a lower rate, but my loans are post 2006 (and not variable), so it may make no impact whatsoever on the APRs if I were to consolidate

  • Reply Angie |

    I’ve used a 0% credit card offer to pay down my student loans. It works well if you have a calculated plan and leave a good 1-2 month buffer as a fail safe. It doesn’t save a whole lot of money in the scheme of things though. On a 12-month balance transfer for 5000@8.5% you have the potential to save ~$125-$150 over the course of the year.

    Personally, I have a hard time not going in order of interest rate. So I would vote to get rid of the 8.5% student loan first. That being said, the range of interest rates in your case though is not that wide. That makes me more inclined to pay off debts in order of risk rather than rate. The driver would be to rid of debt that has the highest payment to balance ratio. Then you are paying down the loan which will provide you the most flexibility for your money. For instance, using 20k to payoff your car loan would provide much more cash flow flexibility than using the same 20k to payoff a student loan. Additionally, I would give additional weight to accounts that could not be deferred in hard times (student loans, then credit cards). Keeping all this in mind, risk-wise I would advocate paying off your car loan next. However, when adding in emotions….. I’d probably go the following order…

    1. Well’s Fargo
    2. BOA credit card (feeling free of poor spending decisions to motivate you.
    3. Carmax Loan

    In terms of consolidating, when I did it they just averaged/weighted the loans based on their respective interest rates. So as a whole the interest rate didn’t really change a whole lot. Consolidating gives you a lower payment primarily by qualifying you for a longer repayment term because of the higher combined balance. An additional benefit to consolidating is to lock in a rate if the APR is variable. Is this 8.5% loan a private student loan or federal?

    • Reply Ashley |

      Good point on looking at the payment-to-balance ratio! I agree being done with Carmax would free up a TON of money, but at the same time, there’s NO WAY I’ll be done with it before deferment ends in February, which makes me somewhat more inclined to pay toward the 8.5% and 8.25% student loans, because I could try to have those completed by February, thus eradicating those two payments. But, I definitely understand the point about student loans being lower risk (since theres the option of forbearance, etc.). Hmmmmm, I’m still undecided.

  • Reply Den |

    I think you should finish paying off Wells Fargo, then hit BOA as fast as you can and get that gone! Then focus on reducing the interest rates of your car loan and student loans (consolidation)…..then do minimum payments on student loans while you throw everything extra at the car loan. I would NOT do a balance transfer for the student loan debt – it’s a slippery mindset.

    Focus like a laser – Wells Fargo, Bank Of America, Car loan – then you will have a lot more options for student loans and your upcoming other life expenses.

    You’re doing great!

  • Reply AS |

    I doubt you would be able to refinance the car loan at a lower rate, for a used vehicle it’s not outrageous. Plus you’ll incur fees to originate a new loan, so if you do go down that route look at the big picture.

    Student loan consolidation, if you are going to pay a premium to consolidate, don’t do it. Autopay your bills and pocket the fee / consolidation spread, and don’t get tempted by a lower monthly payment in exchange for a longer term because that’s just delaying your ‘debt free date’ .

    I would attack the consumer debt first — ie. credit cards and auto, before education loans. Just be sure that the extra auto payments are going to prinicipal and no fees are being added to the extra payment.

    Presumably interest is being charged on deferred loans, which sucks, but you have other bills that you can prioritize first. The ~0.625% spread between education and auto rates will cost you $62.50/yr in extra interest but would give me peace of mind because of the flexibility of education debt.

    • Reply AS |

      One more thing to add – once these deferments end, you have another ~$1000 per month to your monthly minimum obligations. Do you have a gameplan for that, it’s a big increase?

      • Reply Ashley |

        It’s a HUGE increase! I think that’s why I’m considering knocking out two of the student loans (before Carmax). My thinking is I can knock off WF (June) 8.5% student loans (by August), 8.25% student loan (by November), and BoA (by January). Note that this is a very “tough” schedule of repayment, so it may not be possible, but that is my hope. Then when deferment ends in February, I’ll owe roughly $1600 per month in debt (no more minimums for WF, BoA, or the first 2 student loans listed). So in the end the monthly debt payment will be pretty comparable to what we’re paying currently. I totally “get” that the student loans are lower-risk (option for forbearance, etc.), but I want those minimum payments gone because every $60 adds up! This is what I meant when I mentioned “strategizing” my repayments. What do you think??

        • Reply AS |

          I see, I didn’t realize the full picture at first, and I like your thinking.

          You’ll pay off Wells Fargo regardless, clearing $87 per month for other bills or debts. You’ll probably hit the BofA loan too, for another $35.
          Then, between now and Feb 2015, you think you can apply an additional ~$10K over and above your current minimum obligations to debt repayment.

          So you could either cut the car loan by half, roughly, but that doesn’t reset your minimum payment until ~27 months further down the line when you’ve fully paid off the car, or put that to paying off the 2 smaller education loans now and freeing up $131/mo in cash flow which is important due to the big pending payments increase and other planned expenses.

          I can see your logic in that, it’s well thought through. And you save a small bit of interest in the process. I like it!

        • Reply Theresa |

          It is a good thing you got your financial house in order. $737 a month WOW! that is nothing to sneeze at. I had no idea your loans were coming out of deferment so soon. I think the plan state directly above is the best one. And how motivating to get as much paid off before February. Another thing to consider is that your girls will most likely be potty trained in the next year. So there should be a diaper savings on the horizon. And don’t get bamboozled by pull ups! Waste of money.

          • Rachel |

            I agree Ashley — I think your plan is a very smart one. By knocking out those loans, you’d lower your total payment and save a little on interest!

            On risk: Freeing up your cash flow is a way of lowering risk. Having your payments raise so much when you may not be able to make the payments every month is risky. Just depends at how you look at it ….

    • Reply jeffrey |

      The survey ad which should appear only once a week after answered is currently being tested.. You can also avoid them all together by reading the post on the front page so there is no need to answer them if you don’t want to. If you answered and they are appearing more than once a week, please let me know (there have been some issues and we are trying to iron them out)

      The bloggers here don’t get paid at all for blogging. We are trying to find a way that they can earn a little bit for telling their story because they do put in a lot of time writing here.

  • Reply scarr |

    FYI: When I consolidated my student loans, my credit took a hit because it is a new loan therefore the old loans are paid off and are no longer active – I lost about 15 points. Also, after every loan I was able to pay off my credit went down a few points (about 5 points), again because the account was closed. Credit cards are revolving debt and having a zero amount should not hurt your score if you have not closed the account.

    I was initially upset that my credit score would decrease after paying down student debt, because HELLO I am paying off debt early, why should I receive a lower score for being responsible? After a while, I stopped caring about my actual credit score and cared more about the accuracy of my credit report. I’m not saying go ahead and let yourself bang up your credit, I’m saying if you are paying off debt, expect your credit score you go down. In all honesty, I’d rather loose a few credit points than owe money to Wells Fargo or Sallie Mae ANY day. I sleep just fine 🙂

    • Reply scarr |

      I should add, my credit is in the 700’s even after loosing points due to paying off student loans early. I will say, and this is a bit Dave Ramsey of me, but when you are paying off debt you should really focus on just that – when you start thinking about obtaining new credit while already in serious debt something isn’t clicking 🙂 I disagree with Dave in that I believe in this day and age you do need a good credit score becuase jobs, insurance and other things look at your score. But I am not advocating being in debt just to have a stupid score. Hope that makes sense 🙂

    • Reply Kiki |

      Scarr, it’s truly bizarre how the credit industry is set up. My husband and I once had difficulty financing a new car after 18 years of marriage because we had always paid cash for older vehicles (read clunkers). We had absolutely no debt at the time, although we did have have one or two cards still open but at zero.

      I think if we all realize that the whole scoring thing is a kind of scam, we can relax a bit. The system is set up to reward consumers for debt and interest payments. Some people aim to have a score of zero. (I don’t even know what my score is, but I don’t have any debt either.) My personal philosophy is to reduce debt with perseverance and not get too hung up on credit scores. Ashley, I tend to vote for paying off credit cards first. There’s just something about that albatross (credit cards) around our necks!

  • Reply Kristina |

    Someone’s getting neurotic about her money….

    With regards to carrying a balance on a credit card…NO. Once you get it paid down, leave it alone unless you can make the full payment that charge cycle. You have plenty of other loans on your credit history, and those will effect your credit score good or bad (depending on you keeping up with payments.) Paying them off will help your score too.

    How old is your vehicle? Do you belong to a credit union? (I was able to refi my vehicle thru a credit union at a ridiculously low rate that unfortunately is more than 0%, but still low).

  • Reply KLM |

    I would attack WF first, too because its your highest interest rate. Because the interest rates among the rest of your debts (minus the license and medical bills), I would treat them all basically the same, and I’d be inclined to work smallest total to largest.

    Until 10/28/14, you have an extra $630 each month to pay down debt after you pay your minimums (that’s assuming you stick to the $1500 per month payoff budget). That gives your roughly 5 months of this extra $630. You can knock out Wells Fargo in this amount of time, with a little wiggle room.

    Once 10/28/14 hits and you have to increase your payment to ACS loans, you have basically 3 months before your monthly payments for all debts, assuming no new ones are paid off, goes to $1768, which is more than you are currently budgeting.

    In those three months (Nov, Dec, Jan), you will have an extra $538 each month to pay toward debt. You can almost get rid of your BOA debt by then (maybe totally, depending on how fast you pay off Wells Fargo), and I would be inclined to pay that one off so that your remaining debt would just be CarMax and the student loans. At that point though, assuming your BOA is paid off, your total repayment is still $1733, which is more than you’ve budgeted.

    So, you either need to increase the amount you have in your budget to put toward debt, or you need to reduce the amount you’re paying by reducing the interest you’re paying. It appears that consolidating your loans won’t help reduce the interest rate, and you’re not likely to get a lower rate for your car loan.

    So, I would consider taking out a lower interest loan from a bank/credit union to put toward the loan. I probably wouldn’t bother unless the rate was lower than 5% or so though.
    Alternately, could you ask for income-based repayment options for your loans?

    I think you’re well on your way to wipe out Wells Fargo and BOA, but that $737/month payment eats up such a huge portion of that monthly budget line.

  • Reply KLM |

    Adding:
    I would NOT put student loans on a credit card. Too much can happen that makes it hard to completely pay off the total, and then the massive interest rate may apply to the original amount you put on the card, not the remaining amount. I think those offers get more people in trouble than they help.
    And, don’t worry too much about your credit score right now. The best way to help it is to just pay down your debts. Don’t stress over a month or two when it is lower than it could be if you did XYZ manuevering. This is a marathon, not a sprint.

  • Reply Walnut |

    See! I told you you were going to get the credit card debt paid off this summer! You thought I was crazy!

    Are any of the student loans subsidized or are they all accruing interest right now? I think you pay off Wells Fargo, the two smaller Sallie Mae’s, BOA and then CarMax. I cringe at the cash outflows, so use your momentum and motivation right now to knock out as many small balances as possible.

    I would be watching for refinance rates on the vehicle. There’s no harm in pricing out the rates and if it doesn’t make sense at the end of the day, just don’t refinance.

    If you pay off the two smaller student loans, you won’t need to consolidate. After all, your mission is to pay these off faster, rather than extending your payment terms. Have you checked for ways to reduce the rates on the student loans? I recall getting .25% rate reduction for setting up an autopay. There may have been some other opportunities to take an additional .25% off as well.

    • Reply Ashley |

      I know, Walnut! I was calculating based on our “normal” monthly payment (not including the huge snowball payments we were able to apply toward the balance). It’s very exciting stuff! Also, you’re right regarding a small savings for setting up auto-pay. I won’t be able to do this until deferment ends, but plan to at that time.

  • Reply Alexandra |

    I would knock out WF, BofA, then the smaller Sallie Mae loans – mainly because I’d get rid of credit card debt first, but also because the psychological boost will be helpful as you’re making progress this year before your student loans kick in. I also would NOT pay off a student loan with a credit card. You have more flexibility with a student loan (forbearance) vs. a credit card. Keep up the momentum, and don’t focus too much on your credit score.

    • Reply DC - Kate |

      I agree with Alexandra. Once those credit cards are gone, look to a credit union to refinance the Carmax. The last time we looked at doing a used car loan through ours (last summer, but then we decided just to pay cash), the rate was under 3%. I’m sure you could drop it at least 2 points.

  • Reply Mary from SC |

    I would stick to your original plan of getting rid of all credit card debt first. I understand your thought process on the interest rates but you are kicking that credit card debt so it will be out of the way soon enough. Please please don’t use a credit card to refinance student loans. Right now, if your husband, heaven forbid, had any loss of income, you could get a forbearance. Credit card lenders are not so accommodating. I think you have said visuals work well for you so perhaps you can design something to help laser focus on the debt order. Now would be a good time to start calling around and doing some leg work on refinancing. Rates vary and before you start having your credit report pulled, know the bank or credit union best suited for your needs.

  • Reply TPol |

    I would get rid of the highest interest rate loan a.s.a.p.
    BTW, I loved your post. It clearly shows how determined and focused you are. Absolutely great job!

  • Reply Shoeaholicnomore |

    I’d get rid of the WF then the BOA. While it’s not ideal to pay interest, at least student loan interest is a deduction on your tax return…

    • Reply Ashley |

      True. I have to say I think I’m leaning this way currently. The whole “personal satisfaction” of being credit card debt-free is very tempting!

  • Reply Amanda |

    I might be in the minority, but after WF, I would put everything I could toward the car. All of the interest rates are so similar, and the payments on the others are so much lower than the car. I get that it won’t be paid off when your deferment ends, but if you’ve gotten ahead by a year, that’s one less really stressful year on the backend. After all, it’s more than half of your largest loan payment…

    • Reply Ashley |

      It really is such a HUGE monthly payment – I’ve thought about just trying to attack it and put the other loans on the back burner for the time being (I could potentially even extend my student loan deferral if I can’t afford the minimum payments)…but I think I would lean more toward this option if I thought it was possible to pay it in full (or very, very close) by the time deferral ends. However, even throwing everything I have at the car, it will take at least 18-24 months so its too much of an overlap with the student loans.

  • Reply Sara |

    Ashley – I feel your pain on this. Back when I had multiple streams of debt, it was hard to figure it out for myself. Soon after I started my debt reduction, I was hit with a sudden job loss. This is hard for everyone, but I’m single and had massive debt, no income, in the middle of the recession, and had to move across country and in with relatives until things stabilized. Based on that experience, I’m now very risk averse.

    So, here’s my two cents: Pay off the less stable debt first. If (God forbid) the worst happens, you’ll be able to put your student loans in forbearance. This is what saved me during my crisis. Not so much with CC companies. Get rid of them ASAP. Not only will you feel a huge relief, that monkey will be off your back forever. Once the CC’s are gone, then I’d nix the license fees and the medical debt. I say this because I’m a big believer in the Dave Ramsey snowball method, and these debts are less money overall. But the psychology of debt was bigger for me than the APR’s. As always, do what works for you.

    Ultimately, no decision will be a bad one, as you’ll be getting rid of debt no matter what.

    • Reply Sara |

      I just read posts above about your largest SL coming due in February. I think it’s a good plan, attacking the smaller student loans after the credit cards. That will free up a lot of cash to go toward your big SL loan.

  • Reply Jeni |

    As far as refinancing your car, PenFed has GREAT rates. I believe it’s 0.99% on cars with less than 100k on them and 1.99% for cars with over 100k. You need to become a “member” which is a one time $25 charge but that’s it. They are (by far) the best non military credit union out there.

  • Reply AT |

    Pay off Wells Fargo and then see how it feels. No sense worrying now about which debt to pay in July when your husband’s income is so variable.

    Any hope on a late job opening for fall semester?

    • Reply Ashley |

      Sigh…no hope of getting a job this Fall. I received my final 2 rejections (it was a slim chance at this stage in the game anyway). So, yeah.

  • Reply Julene |

    No way to moving those student loans to a credit card. In a worst case scenario, should something happen and you pass away, those student loans are forgiven. Also, those 0% interest rates are setup to entice you just so that “when” you fail or trip up, they can be raised and they’ll make a whole lot of money. The credit card companies don’t design them to lose money. Also, paying off the smaller debts first will decrease the number of debts you have an give you more disposable income to attack the student loans. You’re doing great just moving forward!

    • Reply Ashley |

      Thanks! I think another “down-side” to putting the loans on a credit card is it requires me to open a new account (something I’m trying to avoid doing right now is to open new lines of credit). I feel like I could side-step the trap where I don’t pay off in time and get hit with fees and huge interest, but I just don’t know that I’d save enough in the end for it to be worth the trouble. You also make a really great point that the student loans would be forgiven (in the case of untimely death, being that I accrued this debt prior to marriage). However, I live in a joint-property state so if I were to get a new credit card (even in only my name) and ended up dying, my husband would still be financially liable for the debt since we were married at the time the debt was incurred. I should give the caveat that this is my understanding (I am no lawyer, but I think this is correct).

  • Reply Meghan |

    Ashley-

    I have a question for you, you mentioned last week that you are about to get a big paycheck for a recently completed project, is there any chance this check would help you to completely wipe out both WF and BOA? I think I recall it being between $5k-$10k which is right where that CC debt falls…..

    Next I would attack the car debt fiercely for the following reasons:
    -until that debt is paid, if you run into financial trouble the car can be repossessed and then you will be way worse off.
    -if your husbands work truck will need to be replaced next year (I think you mentioned it was on its’ last legs) it would be easier to only have one $500 car payment than two.
    -my experience has been that if you run into financial trouble the student loans can be very forgiving if you call them with a financial repayment plan in place; I once had some unexpected medical bills come in and was in a position where something just had to give, I called, explained the situation and asked for a two-month deferment and had success with the very first person I talked to! It seems that so many people are defaulting on student loans these days that if you earnestly want to repay but are just having a hard time they are much more willing to help. After all, unlike a car they cannot take your education back from you for not paying.

    Cheers,

    Meghan

    • Reply Ashley |

      You make a good point regarding the car risk (repossession if we were to fall behind) versus student loan risk. I don’t want to answer your specific question yet about how much debt I’ll be able to wipe out this month (actually in the middle of writing/editing a post for Friday where this will be addressed, so check for the response there). I also totally understand the 1 $500/month car payment versus two. Yikes – that would be awful! I don’t think financing a work truck is in our plans, though. His current work truck has been great (it is, indeed, on its last leg, but it’s been a reliable vehicle and has withstood pretty serious abuse), and only cost $3000. If we can find another deal like this on a used, reliable work truck that’s the route we plan to go (and pay cash rather than finance). It’s still a big expense – but we would hope to cash-flow rather than taking on more monthly payments.

So, what do you think ?