Any other ideas?

strickland8052 · March 2014

It sounds like you and H need to sit down together and figure out what your and his priorities are. Is it paying off your student loans, trying to decrease the amount of SL debt that H has, saving for an emergency fund, or saving for a home down payment, or all of those at once? The good news is that you are at an advantage of having extremely low living expenses and about $3500 a month to put towards one (if not all) of those goals. Honestly, I think you should spread that $3500 over all of those different priorities. If you put all $3500 into your student loans, then you will have nothing in a few years, but more SL debt for H, possibly some unpaid medical debt (if you don't get health insurance) and a small dent in your massive student loan debt. If you divide it out, then you can easily have a down payment, an emergency fund, less debt for H, and less debt for yourself. Also I think it is a little crazy to stress out about one debt, while leaving yourself completely susceptible to other types of debt. By saving for an emergency fund and buying health insurance and paying some of H's tuition outright, you can protect yourself from building up even more debt later. It kind of sounds like you want this SL debt paid off ASAP, and it just isn't going to happen. You might as well live your life normally and accept that it will be a part of your life for a long time. Accepting this will also probably help your marriage, because you may find that H is more enthusiastic about saving for other goals. Finally, I agree with PP that you and H each deserve some fun money, maybe about $50 each a month. Give your self more wiggle room is more realistic, and you'll be more likely to succeed in your monthly budget goals. Good luck!

smerka · March 2014

The penalty for not having insurance for the first year is not $75. It's $95 per person or 1% of your income whichever is greater. You are correct in calculating that the penalty is still less than $275 per month. According to a big article in the Chicago Tribune this morning, the next enrollment period isn't until November so it's not like you can just buy insurance through the exchange any time.

strickland8052 · March 2014

OH! Also, if you have to pay $126,000 in 20 years by doing IBR, then you can build that by just saving $500 a month between now and then. That money could build a lot of interest between now and then, plus you would have access to it if you were to have some kind of serious emergency. If you put that $500 a month into just paying extra then you will ruin your opportunity to use IBR, plus you can't get that money back if you run into an emergency, which would push you to just take on more debt.

brij2006 · March 2014

So I'm going to touch on a few subjects that were brought up.

1. Definitely get health insurance. Due to your income for a family of 2, you are better off not going through the marketplace, as you will not receive any assistance. So just Google an "independent insurance agent" in your area and they can get you set up with the best option. Going through an agency gives you a lot more options since the Marketplace has a limited amount of companies and plans.
Yes, the fee is only $95 or 1% of your income this year. But 1 bad car accident where you can't call an 800 number and get insurance while you're in the ambulance, can easily bankrupt you or put you into further debt. It's just not worth it.

2. I would keep the current life insurance coverages. Those aren't too bad of prices for that amount of coverage.

3. Put together a very strict budget (with a little fun money in it) and knock out the student loans. The IBR and SL forgiveness may be enticing. But in the end you have to remember that you will be having a $2,000 - $4,000 (assuming if your income goes up and you may no longer qualify for IBR or the payments increase as your income does) per month for 25 years going toward SL's. If you are 25 now, then you will be 50 before they're gone. And at 50, you will have to pay taxes on the amount they forgave.

So think of it this way. How much could $2,500 a month change your lifestyle? Think of it as though you're looking at a job that pays $2,500 more per month and how much that would help in your budget. Getting rid of a student loan payment like that would definitely impact many people's lives.

** This is coming from a couple who had $100k in student loan debt 5 years ago (on a 15 year repayment plan). We kept saying things like, "we'll start a family when our student loans are gone, we can afford a really nice car when we don't have our student loan payment, we'll do X or go to Y when we don't have our student loan payment." Here we are 5 years later and are finally buckling down so we can get rid of them and actually make those things happen. It may take you a while to do this, but you'll thank yourself later.

4. You are going to want to throw more money at these. Get a part time job, or have your H work while he finishes school. Put together a spreadsheet on how much extra you need to bring in to be able to have these gone in 5 years. See what that number comes out to be and what you need to do to make it happen. Yes it's going to suck and you'll have no "life." But the stress that much debt creates and your income not matching it, can create a lot of stress on a relationship. It may feel fine now, but 3 years from now when you're wanting to start a family or your H is wanting to go back to school, then it won't be fine.

StashaT12 · March 2014

Thanks again to everyone's comments. Update here - H is still looking for a PT pharmacy tech job. It turns out my work reimburses me for up to 2400/year of my health insurance premium. So that means I would be covered, but H is not. We have decided to sign up for health insurance. I'm sure you're all relieved ;-) I spoke to my employer today about projected salary for my second year. They said that I will be on production (remember I'm salary now), and that if I follow the pattern for the last few associates, I should be making at least 120,000 my second year. So maybe IBR makes sense for this first year, even though I will likely make larger payments. My first year, IBR would be 750/month (15% gross income) + whatever I can put toward it. My second year, that goes up to 1500/month.

hoffse · March 2014

IBR might be fine, but just remember that you have to average $2500/month to pay it off in 25 years. Or you'll owe income tax. To pay it off in less than 25 years you need to average more than $2500/month.

The good news is you're going to get a big raise once you are a second year. $120K is good money - you should see about $6,000-$6,500/month after taxes (depending on your state).

But you still have a ton of debt - effectively a mortgage - that you want gone quickly.

The goal is really to be able to live life with this debt, while still paying it off aggressively. I sympathize - H and I both have a ton of student loan debt. We could pay it off faster if we didn't take a big trip once a year or if we did 15% retirement (we do 20%). But those other things are important to us, and they actually help give us motivation to stay on track with our loans. When you are in it for the long haul, and the end is nowhere in sight, then you need to accommodate other life goals. So let's talk about other life goals for when you are a second year:

1) You cannot reasonably delay retirement until your debt is gone. As soon as your income goes up, start saving 15% every month for the next 35 years and investing it. Your future hypothetical children will thank you when you are not a financial burden to them in your old age.

2) You can't reasonably expect to live with only $1,000 in savings until this debt is gone. You're going to be living with this debt for years, even if you do pay aggressively. $1,000 in your emergency fund is fine for a relatively short-term debt plan, but it's not sustainable for the amount of time we're talking about here. Your e-fund can start small, but it should be something you continue to work on slowly throughout all of this.

3) Your marriage probably won't tolerate a decade (or more) of living with your inlaws. Not to mention, your inlaws really do deserve to have their space back. At some point you should consider moving out and renting an apartment or small house. Something very affordable. Please don't add a mortgage until your other debt is under control, but moving out will probably improve everybody's quality of life. Bonus: when you rent it's your landlord's responsibility to fix stuff when it breaks.

I'm saying all of this as a fellow person who has a crapton of debt. You do learn to live with it, but you have to balance your debt-paydown-mode with your quality of life. I suggest making your auto-pay on your loans $2500 since that's what you need to average to pay it off in 25 years. If an emergency happens you, can cancel auto-pay one month and do your minimum under IBR.

Also make it your goal to pay more than your $2500/month auto pay so that it's gone in less than 25 years. You can probably afford to throw an extra $1,000/month to your loans most months, especially when your H finds a job. That would pretty much cut your repayment term in half.

But whatever you do needs to be sustainable, and you can't put everything on hold for the next decade while you're working on this.

Mom987 · March 2014

Pre-ex doesn't apply, but what happens if you both get in a car wreck with no insurance on 3/26, overnight in the hospital, etc. and the insurance you sign up for isn't in effect until 4/1-5/1? Doesn't do much good IMO. It doesn't go retro unless it's a group plan in some cases.

KatieCutie05 · March 2014

Make sure you pay atleast interest only. 750 on IBR will not cover interest only! You will look back in a year and owe even more money then you do now! Trust me just dont do it. Pay as much as you can right now. Then when you double your income- don't increase your standard of living and get atleast that smaller loan paid off... with an extra 60k a year you can easily do that quick! But start now! Don't put it off just because you will make more in a year - because other wise you will owe more in a year.

Start with the goal to pay off 112k and pay interest only on the other. You can afford to pay 3k now - sign up for a larger payment plan where your atleast paying interest only. You can easily get that knocked out it just a few years on you and DH's income when you live with your inlaws

Any other ideas?

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