Student loan payoff strategy - check out the new SAVE plan & Fresh Start - WEBINAR LINK ADDED 9/15

[LuvOrlando]

Clock on interest starts ticking again on September 1, I hope everyone on the hook is doing ok. I am aware it is a big issue for people.

We were lucky to save from 2020 - now, which was earmarked for the Parent Plus loans resuming.
Took a giant chunk out of the principal today with lump sum payment carving out the biggest interest groups first & intend to throw money towards it as often as possible.

We know other families doing the same thing and I'm wondering what other strategies are out there. For a while I considered to refinance but now it seems the interest we have of the leftover groups is less than the market rate so no need, or at least so it appears. By keeping the bits in groups as is we can carve out individual group chunks to reduce monthly obligations which doesn't happen with a consolidation.

I am hoping we all hear about how much was paid back from the summer through October when payments fully resume. The more money people can pay back, the more cash there is in the banking system to ease borrowing for those who need to borrow for homes, cars etc so I am super hopeful things go well. With any luck loan and mortgage costs and availability might just loosen up a bit, feeling hopeful.

Hope everyone is able to get through ok.

 

[LuvOrlando]

Some info, there is a new SAVE plan that can help lower payments
https://studentaid.gov/announcements-events/save-plan

Explained:
https://www.washingtonpost.com/business/2023/08/30/save-student-loan-plan-income/

"You can sign up at studentaid.gov/SAVE. The Education Department is hosting a free webinar on Sept. 14 from 7 p.m. to 8 p.m. Eastern time. There will be an opportunity to ask questions. Go to Eventbrite.com and search for “Repayment 101: Get Help with Your Federal Student Loans.” "

 

[Robbie Cottam]

Student loan plan:
1, write a check,
2. mail the checkin,
3. repeat once a month

 

[leebee]

DD graduated from grad school in May, so I believe she has a 6 month grace period on her loans, including her undergrad loans- although I am not sure if interest will start to accrue on her grad loans, as they are unsubsidized. The deal was that we'd pay the undergrad loans and she'll pay the grad school loans. I'm tempted to pull the money that's owed on her undergrad loans (about $5K) from our home equity loan; it has a lower interest rate than any of her undergrad loans. We'll then repay the HELOC and she can worry about her grad school loans on her own. She borrowed $25K so it should be about $250 a month. I had wanted to keep paying her undergrad loans during the covid "shutdown" but it was impossible to find the toggle that would let me keep paying; the site was full of "you don't have to do this" stuff but very little for those of us who wanted to continue to live up to our responsibilities.

I am not quite sure that I understand how the SAVE plan will work. If you aren't paying the principle, won't that just extend the number of years that you have to pay on the loan, even without unpaid interest being capitalized? Also is there anyplace that shows an example of this, of how the program would work over time, starting with initial loan amount, monthly payment/breakdown, what it saves you, etc.?

 

[Southernmiss]

Our son had $83,000 in loans for his PharmD. He paid $30,000 on them a month ago.

He's had some good overtime this summer and will continue to throw as much as them as he can.

He is also saving and investing and still living cheaply and seems to be smart with his $.

 

[Keladry84]

I managed to completely pay off all of my loans at the end of 2019, right before Covid. Similar to OP, I had multiple loans with different interest rates, and did not consolidate. I set all of the loans to a graduated plan with the most stretched out repayment plan possible in order to keep the required payments as low as possible. I then paid the minimum amount on the low interest loans, and blasted the high interest ones with double/triple payments. When I started, I was paying over $120 per month just in interest. This strategy took that interest amount down pretty quickly which then let me pay more towards the principle. Once the highest interest loans were paid off, I switched to double/triple paying the next highest until I finally made it out of debt I paid it all off much much earlier than the "planned" payments and saved a ton in interest.

 

[Frwinkley]

DD is a dentist. She's been paying herself every month since the pause (and earning plenty of interest along the way). She only made 4 payments prior to that.

She wrote a check in excess of $150K on Monday. She and her DH were diligent about saving that money. Fortunately for both of them, their jobs were only slightly affected by Covid. She was unable to work for a few months.

 

[LuvOrlando]

DD graduated from grad school in May, so I believe she has a 6 month grace period on her loans, including her undergrad loans- although I am not sure if interest will start to accrue on her grad loans, as they are unsubsidized. The deal was that we'd pay the undergrad loans and she'll pay the grad school loans. I'm tempted to pull the money that's owed on her undergrad loans (about $5K) from our home equity loan; it has a lower interest rate than any of her undergrad loans. We'll then repay the HELOC and she can worry about her grad school loans on her own. She borrowed $25K so it should be about $250 a month. I had wanted to keep paying her undergrad loans during the covid "shutdown" but it was impossible to find the toggle that would let me keep paying; the site was full of "you don't have to do this" stuff but very little for those of us who wanted to continue to live up to our responsibilities.

I am not quite sure that I understand how the SAVE plan will work. If you aren't paying the principle, won't that just extend the number of years that you have to pay on the loan, even without unpaid interest being capitalized? Also is there anyplace that shows an example of this, of how the program would work over time, starting with initial loan amount, monthly payment/breakdown, what it saves you, etc.?

I think the Home Equity is a fantastic idea, seems you are very much like we have been with helping our kids get ahead as much as we can manage. I took out a Home Equity when my kids started college as a buffer for random costs, and it' a good thing too. There were a few odd occurrences that kicked up during the college years including times when the 529 or loans just wouldn't work properly on time threatening my kids financial status so the Home Equity functioned as a sort of bridge loanish sort of placeholder to carry things as the paperwork cleared - such a nightmare. We have room on ours now that was intended to absorb some of the loans if necessary but the remaining equity interest changed to ever increasing variable rates so it is just easier to keep ours where it is with the loan servicer. Not using it hurts nothing, it actually helps our credit scores so it will stay open as long as the house stays.

I had a conversation with my kids about student loans recently and reasons for picking up most of it. The way I see it, picking up the tab for most of their education & housing etc is probably the most beneficial thing we can ever do for them in their lifetimes to help them succeed. We aren't trust fund people and now that I learned that Medicare is actually just a loan to be paid after death (that was a shock last year) plus all the inheritance taxes and such I realize that my kids and grandkids could may never get a dime from anything we accumulate. Quite the cold splash of water to be honest, got me rethinking many things. The more I learn the more I understand that picking up their education is probably, quite literally, the only one to one thing parents and grandparents can do for adult kids and grandkids which is why we hope to keep the remaining $ in 529 standing for future grandkids.

 

[LuvOrlando]

Our son had $83,000 in loans for his PharmD. He paid $30,000 on them a month ago.

He's had some good overtime this summer and will continue to throw as much as them as he can.

He is also saving and investing and still living cheaply and seems to be smart with his $.

Thats fantastic!
This newer generation of kids appears to be super comfortable with doing without in order to prioritize finances, not all of them, of course, but there is a certain pragmatism. Seems they all learned a thing or two from watching their families and friends families struggle in the aftermath of the 2008 mess, thank goodness!

 

[LuvOrlando]

I managed to completely pay off all of my loans at the end of 2019, right before Covid. Similar to OP, I had multiple loans with different interest rates, and did not consolidate. I set all of the loans to a graduated plan with the most stretched out repayment plan possible in order to keep the required payments as low as possible. I then paid the minimum amount on the low interest loans, and blasted the high interest ones with double/triple payments. When I started, I was paying over $120 per month just in interest. This strategy took that interest amount down pretty quickly which then let me pay more towards the principle. Once the highest interest loans were paid off, I switched to double/triple paying the next highest until I finally made it out of debt I paid it all off much much earlier than the "planned" payments and saved a ton in interest.

Brilliant! Congratulations!
Your plan was an excellent idea, it is wonderful you were able to put it into practice and get to student loan debt free status, I am starting to suspect this is the new American Dream. We need more financial designers to get to this place.

 

[LuvOrlando]

DD is a dentist. She's been paying herself every month since the pause (and earning plenty of interest along the way). She only made 4 payments prior to that.

She wrote a check in excess of $150K on Monday. She and her DH were diligent about saving that money. Fortunately for both of them, their jobs were only slightly affected by Covid. She was unable to work for a few months.

Outstanding! Congratulations!
As much as she did are they free of it or just took out a big chunk of it? To be a Dr now can run into a quarter of a million in loans easy. So much discipline is demanded at every turn, being a Dr is truly a labor of love now.

 

[Minnesota!]

We have been paying on them since the pause, too...some months the same as were pre-Covid, some months more, some months less.

We threw the full payment that we had been making in 2019 back into our budget for next month, only to be told that with the SAVE plan (which I don't recall applying for?), my payment was going from about $350 a month (for my loans) to $21! YEE HAW. Dh's didn't go down much - like $50. But, instead of $750/month, now we will be "required" to pay about $300/month. Which will come in handy as I have one more semester for kid 1 that I am on the hook for. After that, I will just pay the $750/month to get them paid off sooner. I will take whatever relief I can get.

 

[LuvOrlando]

We have been paying on them since the pause, too...some months the same as were pre-Covid, some months more, some months less.

We threw the full payment that we had been making in 2019 back into our budget for next month, only to be told that with the SAVE plan (which I don't recall applying for?), my payment was going from about $350 a month (for my loans) to $21! YEE HAW. Dh's didn't go down much - like $50. But, instead of $750/month, now we will be "required" to pay about $300/month. Which will come in handy as I have one more semester for kid 1 that I am on the hook for. After that, I will just pay the $750/month to get them paid off sooner. I will take whatever relief I can get.

Oh my goodness Minnesota, what an incredible relief on your budget! Good for you!!!!!!

I think the majority of people out in the US will act same as you and make incredibly responsible decisions with the wiggle room on finances.

Back in the 90s & 2000s we all were in a different mood for spending, thinking the good times would never end and we all spent like it would all always be ok and we could catch up down the road. We all learned though didn't we? Everything changed

 

[luv2cheer92]

I have over $200K. I will qualify for PSLF in a few years, so I will be (and have been) paying the minimum until then. Which will be around $450/month on SAVE. Easily manageable for me.

 

[dvcgirl67]

Our son had $83,000 in loans for his PharmD. He paid $30,000 on them a month ago.

He's had some good overtime this summer and will continue to throw as much as them as he can.

He is also saving and investing and still living cheaply and seems to be smart with his $.

Good for him! I've been hearing some inspiring stories about young docs, pharmacists, dentists using the pause to really pile up cash and take out these loans. That's fantastic!

 

[dvcgirl67]

I have over $200K. I will qualify for PSLF in a few years, so I will be (and have been) paying the minimum until then. Which will be around $450/month on SAVE. Easily manageable for me.

That's great! What is your degree in?

 

[dvcgirl67]

DD is a dentist. She's been paying herself every month since the pause (and earning plenty of interest along the way). She only made 4 payments prior to that.

She wrote a check in excess of $150K on Monday. She and her DH were diligent about saving that money. Fortunately for both of them, their jobs were only slightly affected by Covid. She was unable to work for a few months.

Really smart, and knocking those loans out early is just going to allow her to really start series retirement savings. It's encouraging to hear stories like this. I've read many stories about the student loan debt pause....and the majority used the pause to take on additional debt.

 

[luv2cheer92]

That's great! What is your degree in?

DPT. Doctor of Physical Therapy

 

[dvcgirl67]

DPT. Doctor of Physical Therapy

Good for you! Great career .

 

[Frwinkley]

Really smart, and knocking those loans out early is just going to allow her to really start series retirement savings. It's encouraging to hear stories like this. I've read many stories about the student loan debt pause....and the majority used the pause to take on additional debt.

She and her DH are extremely fortunate. They married young (22), both have lucrative careers, were able to buy a home (at a 2.65% interest rate) and have been saving for retirement. They just had their first child in March and now have a daycare expense. They've cut down on the retirement savings a bit in order to continue hacking away at her student loans.

Not everyone has been that lucky. Yes, they worked hard. Some people simply needed that money to live on.

I wish the government would at least cut the interest payments in half. That would save people a lot of money.