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Posts tagged with: student loan consolidation

Student Loan Eradication Plan


Thanks for your comments on my last post about potentially reconsolidating my student loans in order to qualify for Public Service Loan Forgiveness (PSLF). I read all your comments, thought it over, and decided that ultimately you guys are right (you’re always right!).

It doesn’t make sense to try to fix a short-term problem by making major long-term changes.

I don’t want a higher interest rate. I don’t want to be locked into stringent terms and criteria. I don’t want to feel the stress that the program could disappear or be discontinued and I’d be stuck with this boat-load of debt (even higher at that point, given the higher APR). In fact, when mulling it over, really there were two things about the program that appealed to me most: (1) locking in a lower monthly payment, and (2) having a definitive “end date” for when the student loans would be GONE!

Are lower payments really that important long-term???

As readers pointed out, the monthly payment problem is a short-term thing. Hubs has started working again (albeit part-time – he’s a personal trainer), but his income is already picking up as he’s gaining clients. If he stays at his current place of employment, he will enjoy a nice bump in his hourly rate at the 6-month mark. For new readers, hubs recently returned to school full-time so he can switch careers. In only a few more years he’ll be graduating and entering into the full-time work force again.

Meanwhile, this is our last year of paying for childcare (our twins are in kindergarten and although they’re in a state-funded charter school, the state only subsidizes half-day kindergarten so we still pay out-of-pocket for “full day” kinder.). We will have to get through the Spring semester and summer, but by Fall of next year (and “Fall” starts in early August at their school) we’ll only have childcare expenses for after-care, which is really negligible. We are currently paying about $30-40/week for after-care. That’s practically nothing compared to the full-time care we’ve been paying the past….oh….since they were born! (side note: they did childcare part-time from birth through age 3, and have been full-time from age 4-5. But even at only part-time, childcare from the time they were born up until this year has been our #1 largest monthly expense – even outranking our rent/mortgage).

Definitive Student Loans End Date

I decided to do a little investigating with my student loans in their current repayment plan (we’re in income-driven repayment). The plan is subject-to-change since it’s based on our income, but with things as-is, I figured out the “Paid in Full” date for each of my outstanding student loan balances. I have 7 loans in total, and their current “pain in full” dates range from December 2023 to August 2028! Now, I know that’s a very long ways off…..but remember half of the “pull” for me to do the PSLF was that it guaranteed an “end date” for my student loans. The end date would be 10-years. Well……as it turns out, my student loans are set to be fully paid within 10 years anyway! And that’s if I don’t get crazy and start paying way extra to get them gone sooner!!!

Long Road Ahead

I know the road ahead will be a long one. We still have a LOT of debt to get through. But, for some reason, seeing these end-dates made me feel hopeful. If they’re being projected at 10-years as-is, there’s NO WAY they’ll actually be around that long!  We’ve got probably another tough 2-3-years ahead while hubs is in school. Hopefully we’ll feel a bit of a relief once our childcare costs go down and his income goes up from his personal-training raise. But once he graduates and re-enters full-time employment we should really start making some headway. If I look out another 7-ish years, well, all our personal debts (credit cards, student loans) should be gone and our mortgage will be low enough that we should be able to knock it out easily (we’re already in a 15-year fixed, as is, with 14 to go at this point). I’m 34 now. With a little luck and some hard work, by the time I’m 40 we’ll be totally DEBT-FREE and able to kick fully into savings-mode. It won’t be easy, but it will be worth it!

What’s your Debt-Free date? Are you already debt-free? How long did the journey take you?

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?