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Posts tagged with: student loan debt

Student Loan Eradication Plan

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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?


Tuition Waivers for Graduate Students

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Has anyone heard about the newly proposed tax plan regarding graduate student tuition waivers? If not, take a sec and read this piece Forbes published, linked here.

In a nutshell, under the new plan, any graduate student who receives a tuition waiver will be taxed on the amount of tuition that was waived. This can amount anywhere from $25-$60k+/year of what would be considered “taxable income” under the new plan. People I know still in graduate school are freaking out, calling friends and family to reach out to legislators, and trying to figure out what this might mean for the future of their educational journey.

I have super mixed feelings on the whole thing.

If you remember my debt journey (if not, read some background here), you know that my own graduate school story was a bit of a mixed bag. The university in southern Florida where I went for my Master’s Degree did NOT offer guaranteed tuition waivers. I ended up paying nearly $50,000 for two years of school tuition, accumulating nearly $70,000 in total debt when including total living expenses.

I had the option to stay for my Ph.D., but opted to move to another university because, in short, we were BROKE! We could not afford to continue living in the super $$$ area of the country paying $$$ for my education.

So we moved to a different university, which did offer tuition waivers in addition to offering paid RA and TA positions (research assistant/teaching assistant). The salary was next-to-nothing, approximately $300/week for the 9-month academic year, but it was WORTH IT because I got to go to school for FREE! I still took out loans to help cover some of my living expenses, but at a much smaller rate compared to my previous 2 years of education.

The problem with the newly proposed tax plan is the mathematics involved. You can’t pay taxes on $25-$60k/year worth of forgiven tuition if you’re only earning $15,000/year. Where would the money come from??? Oh yeah…more loans.

The reason I’m torn is because, fundamentally, I believe in paying for the things we have. For example, my plan is to pay off my student loans ASAP rather than enter into one of the plans that would allow the debt to be forgiven in 10-15 years. First, I don’t want to wait that long to have it gone. Second, I distrust hand-out programs like this (will the forgiveness program still be there in a decade? Will the loans even be forgiven? I’ve read horror stories of it NOT working out for many who were mistakenly entered into the wrong type of loan repayment program. This is a whole other blog post in its own right. Take a second to read this heartbreaking piece on the topic). Third, it was my debt obligation, I promised to repay it, and I want to take care of it.

But I also see student loans as the next big “housing bubble.” I’m not the only one, right? Student loan debt is ballooning at an alarming rate. What is going to happen when all these students default on their loans and are unable to repay them (and/or the debt is forgiven)??? I fear it could lead to another economic crisis. So anything to minimize student loans is a GOOD thing in my eyes. From that perspective, it’s not a good idea to tax the forgiven tuition because it could end up just being more money (paid for on a student loan) that is never repaid in the end.

I’m very glad to now be in the workforce, fully finished with all of my educational pursuits. But I worry not only about my friends who are still graduate students, but about the country in general (for the reason outlined above). This is scary stuff!

What are your thoughts? Should graduate students pay taxes on the amount of graduate tuition that is waived? Or should things remain as they are currently – where universities “forgive” the tuition internally and it is not counted as taxable income? What are other potential implications of the proposed tax plan?


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