:::: MENU ::::

Browsing posts in: Debt

Debt CON-solidation


I’m not a big fan of debt consolidation. I like how Dave Ramsey refers to it as “Debt CON-solidation” because it’s typically some type of scam to make more money. But this is essentially what I’m considering now. Let me back up to explain….

I’ve taken some flak in the past for not entering the Public Service Loan Forgiveness (PSLF) program, for which I qualify. My thought and rationale was two-fold:

  • I want to pay off my debts ASAP! The loan forgiveness period requires 10-years of on-time payments. I want my loans to be gone WAY before that!!!
  • I distrust the service. Simple as that. Who’s to say it won’t be cancelled or eliminated by the time a decade rolls around? This is the first year that people were supposed to qualify for loan forgiveness and I’ve read all kinds of horror stories of people who ended up screwed over for one reason or another. Not to mention, I owe the money so I’d like to pay it back. On a moral level, I feel an obligation for taking out these loans and I want to repay them myself.

So that’s the reason why I haven’t – to this point – ever tried to enter into a PSLF program. But I’ve got to be honest here. We are drowning under high monthly payments. Between the money we owe the IRS, our new credit card debt, student loan debt, and our normal household bills – we have so much outflow that keeping up with my $550/month Navient payments has become a real burden. Like….I don’t know if we can do it. You can’t squeeze blood from a turnip. We just don’t have the money!

I’ve been working and working on our household budget and it’s just a total mess still. So I decided it might be worth looking into the PSLF program a bit more thoroughly.

I called Navient (my loan-holder) and did a bunch of additional research on studentloans.gov. Even though I’m currently in an income driven repayment plan, the way the PSLF program is designed, it requires all loans to be consolidated into a single loan. Why? I don’t know. Makes no sense to me. I was told that’s the rule from an employee at Navient and verified from studentloans.gov (side note: there is an exception – I was told I wouldn’t have to consolidate if I chose to move to a 10-year fixed repayment plan. BUT….I don’t get why anyone would do that because the PSLF doesn’t kick in until 10-years after on-time payments. SOOOOO, if I’m in a 10-year repayment plan….then at the end of 10 years there’s nothing left to be forgiven because everything has already been paid. Someone please clarify if this is wrong. This is what Navient told me and it blew my mind. I still don’t get how that makes any sense. Not to mention, a 10-year plan would put my payment over $900/month, so that’s not really an option for us right now).

So I decided to check out the application and just gather information. Here’s what I discovered.

If I consolidate my loans to a single loan that qualifies for PSLF….

  • My monthly payment will lower by about $100-150/month, depending on the type of repayment plan I select.
  • My interest rate will increase from 5.55% and 6.55% (current APRs) to 6.88% (consolidated)

I intend to stay in academia, so I don’t think there’s any reason to worry about moving jobs outside a field that would disqualify me for PSLF. BUT, if I enter into the consolidation and end up getting our finances under control and want to pay off my debts in full, I’ll end up paying hundreds (thousands??) extra due to the higher interest rate and lower monthly payments.

I don’t know what I think.

The idea of relying on this program still leaves a bad taste in my mouth. Not to mention, if any debt is discharged, I know I’ll owe taxes on the amount that is forgiven (so there’s still a “catch” after all that). BUT, it’s really appealing to me to have a lower monthly rate locked in and know that I’ll be DONE in, at an absolute maximum, 10 years total. I know that’s still a very long time and I want to be debt-free well before that….but it gives a permanent and definitive “END” date that I haven’t had up to this point.

Is anyone else participating in a PSLF program (or a similar loan-forgiveness program)? What are your experiences like? What are your thoughts on these trade-offs between a lower monthly payment and higher overall interest rate? What would you do if you were in my shoes?

Credit Card #1 is GONE!


Nice start to the month! I’ve paid off my first credit card since our relapse of going back into credit card debt.

I’m planning to do a modified snowball method, and CC1 (Home Depot) was our lowest balance card. I set the payment for a few days before the end of February. And when I logged in to check things out this morning, it looks like all has cleared and our new balance is $0.00!

After my last payment of $277.98, I can officially say that Home Depot is OFF our debt list and we can move on to our next target.

Right now, our next target is our Bank of America credit card, on which we owe just under $2,000. But at some point, we’ll likely have to change focuses to our Citibank card (which was actually a balance transfer of a student loan to get it away from Navient and lock in a 0% interest rate). The Citibank card is due in full by October of this year, so although it’s been on the back-burner (again – due to the 0% APR), we’ll have to pick up payments here soon so that it’s knocked out by the due date.

Baby steps, right?

At any rate, I’m glad to have one less monthly debt on our list.

Have you recently paid off a debt? What’s a current debt you’re working on tackling?