Income-based student loan repayment

tm3308

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Jun 13, 2010
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So my family and I are looking at getting me a new vehicle, because the 1990 Riviera that I'm driving is starting to wear down and I'll be driving a lot for work. The problem is that my student loans will kick in with about $324 monthly payments and I'm only making $22,000 at my current job, so adding another $200+ a month in car payments will leave me extremely strapped ($300 or less to cover groceries, gas, etc.; so no saving for retirement or anything else).

I've looked around and seen some stuff about income-based repayment and was wondering if anyone here knows anything about that, whether through personal experience or knowing someone who's gone that route, and would recommend it based on my current situation?
 

CloneinWDSM

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No additional information here. Sorry. All I know is student loans blow. I was looking at mine this past weekend and still have an additional 35k to pay back. Even the minimum payments are draining me over 500 bucks each month.
 

isukendall

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Nov 30, 2006
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You can get income based deferrals, or reductions in payments. You have to prove your income and debt. Call your loan provider, and they can provide you with the options. Depending on what type of a loan you have, it may be a one time thing.

That said, what are your other options? It sucks that you have that payment with your income, for sure. But can you get a cheaper car? Do you have a relative with a beater car that you can buy? Can you move closer to work? Can you live somewhere with cheaper rent? I'd suggest other options other than trying to lower your repayment. It will be a long time to pay them off, but with interest riding, you could make it alot longer if you choose to reduce your payments.

I understand it's not uncommon nowdays for people to come out of college with student loan debt and lower incomes, but how did that happen to you? What was your major? Why the high student loans?
 

CloneinWDSM

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Grad school, I take it?

Lol, I wish I could say that. But sadly no. Poor money management with minimal schollies while in school with bowl trips and lots of booze.

Only worked 15 or so hours a week during school doing intramurals and printing division for ISU so that didnt add up with what I was spending.

4 Year at ISU is rough. I hate when my friends say they don't have any loans because mommy and daddy paid for it.
 

tm3308

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Lol, I wish I could say that. But sadly no. Poor money management with minimal schollies while in school with bowl trips and lots of booze.

Only worked 15 or so hours a week during school doing intramurals and printing division for ISU so that didnt add up with what I was spending.

4 Year at ISU is rough. I hate when my friends say they don't have any loans because mommy and daddy paid for it.

Damn. I never took any bowl or spring break trips in five years, but I also didn't have much for scholarships (I had one through my high school my second, third and fourth years because it's only good for students from Wayne County who attend Iowa and I was the only one from 2009 until this year.). Ended up with about 38k to pay back (interest included). I might just end up making reduced payments for awhile, but I'm leery of backloading my payments when I'm not sure that I'll be making a lot more money in 5 years than I am right now.
 
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Dopey

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Lol, I wish I could say that. But sadly no. Poor money management with minimal schollies while in school with bowl trips and lots of booze.

Only worked 15 or so hours a week during school doing intramurals and printing division for ISU so that didnt add up with what I was spending.

4 Year at ISU is rough. I hate when my friends say they don't have any loans because mommy and daddy paid for it.


That doesn't explain the $22k yearly salary. Damn. Good luck.
 

State43

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I would defer loan payments till you are financially better. They will usually work with you on anything. I deferred mine for 2 years due to terrible paying jobs.
 

abe2010

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That said, what are your other options? It sucks that you have that payment with your income, for sure. But can you get a cheaper car? Do you have a relative with a beater car that you can buy? Can you move closer to work? Can you live somewhere with cheaper rent? I'd suggest other options other than trying to lower your repayment. It will be a long time to pay them off, but with interest riding, you could make it alot longer if you choose to reduce your payments.

This, you can find a car that will get you around and be reliable for many years for around $5k. Better to save up and just outright buy the car than go into more debt for a new car.
 

Switch

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$22,500...
I'm not sure what you do but that is just over $10 an hour. I would look for a different job. I have a buddy who works retail at US Cell making $12/hr plus commission and he clears $60k/ yr. The other side is to cut all expenses as mentioned before. Don't add to your problems by getting a car with a large note.
 
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Cpech56

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Get a different job. I dont know what your degree is in but I know for a fact there are jobs out there that pay $15-$20 an hour starting out. Get a part time job, fedex or ups need package handlers. Work from 5-8am making $13 an hour amd get benefits. In order to have nice things there are sacrifices one must make. It sounds like you just need to buck up and broaden your horizons a bit. There is money to be made my friend. Its hard work and sacrifices that set you apart.
 

Bigman38

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I had to do this shortly after I graduated. Call your loan company and they should detail out all of your available options. I know there are some recent laws that should give you some pretty reasonable options. If you don't plan on having more income in the next couple I would advise against deferment, it's easier to get into good spending habits now instead of having to downsize when the bills start coming in.
 

Al_4_State

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Buy a cheaper car.

I'm using income based repayment right now (it was $0/month when I first got out of law school), and will basically see a new amount kick in every year, as my income increases. It delays the amount of time you spend paying on your loans, but I'm also enrolled in a loan forgiveness program based on being a government employee, and it only requires a minimum payment on your income based repayment plan to stay qualified.

But seriously, people waste so much money on their damn cars, its not even funny. In 2007 I bought a $4000 salvage title Dodge Neon. I still drive it. Payments were about $130/month, and I had it repaid in 2010. Since that time, I've spent maybe $500-$600/year on repairs. That would be the equivalent of a $50/month car payment. Most people think "that's not worth it to spend on a car with so little value" but because I'm never going to sell it, I spend FAR less money on my automobile, even with one or two major repairs every year. I can't believe more people haven't figured this out, but I do know that a lot of people dread mechanical issues (and are willing to pay a premium to drive a new car because of it), view cars as some sort of status symbol, or both.
 

CyFan61

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From what I've heard, IBR is a solid option as long as you're very careful about never missing a payment and meticulously tracking and filing your income. I heard that one mistake in either payments or reporting income can get you removed from the program, and then you end up stuck with a larger bill than you anticipated to pay using traditional methods.

If you qualify for IBR, and you know that you will follow each and every requirement of the program for each and every month, then it is probably a good options for you.
 

Cyclonetrombone

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In that route due to working for a non profit here. At 22k I doubt you pay anything but your loans still are not going in default... when I was at 30k it was like $75 a month for 40k in debt. One big thing to remember, is you still are accruing interest and I am sure that interest on 40k is more than $75 a month so while you aren't in deferment (still interest accruing there as well) you're really not getting ahead.

There is a point around 50k where you aren't qualified/it isn't worth it. Some people have talked about how after 20 years on IBR whatever is left is forgiven (taxed as income and forgiven) but I am not so sure on that one. Work in a non profit for 10 years... whatever debt is remaining after 10 years of paying is forgiven, tax free if the program is around in 10 years. (For some reason federal jobs have this same perk but you are usually making enough to have it paid off in 10 years anyway).

Finally, if you have to move money around just to pick up more debt you shouldn't do what you want to do. Go to a used car lot and pick up a 2005 something for 2500, payments will be substantially smaller.
 

IAStubborn

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That doesn't explain the $22k yearly salary. Damn. Good luck.
He is a journalist guys getting his start, so cant blame Iit on the U of I degree ;). As for your loans you have some options like the income defferrment you mentioned. There are others depending on your loan type. I noticed you are writing for the Iowa Sports Connection (or something like that) when you posted the Lazard article. Is that a nonprofit publication? If so you can get the 10 year public service deferment (can't remember exactly the name) that allows a lower income based payment without the interest accruals and if you work 10 years in public service (nonprofit, teaching, government public service etc.) The remainder is waived after 10 years.

Army reserve, part time AmeriCorps or other National Service options are available too that would get you both the defferment and a little more cash and more money to pay off your debts and allow you to keep your job.
 

colbycheese

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I'm a grad student, and my stipend is similar to your income so I know the pain of buying a car while being strapped for cash. I'd recommend looking for a car that is a balance of high-ish miles and relatively new. Do a lot of searching for cars that are reliable over the long run. I'd even recommend talking to the service guys at a dealership. They'll tell you what cars they work on all of the time, and which cars they never see outside of normal oil changes (I recommend Ford Fusions with the 4 cyl. and 5 spd transmission). Also, if you get one that is certified-reused, then you won't have to worry about the potential costs of the car breaking down since the engine and drive train will be warrantied - usually to 100K.

I don't know anything about the income-based repayment of student loans, so I'm no help there. However, one skill I wish I had was being a bartender. If you like the job where you're not getting paid much, I'd recommend you could pick up a second job doing bar tending part-time, which would probably double your income... or at least bring in enough to buy a car.

Edit: if you really don't care about having a new car, but just want a reliable car, an old Ford Taurus is the way to go. I know of dozens of Tauruses that have 200K and have never had any major mechanical issues. Make sure you get the 3.0L v6 (not the DOHC v6). Those cars/motors never quit. My dad uses his as his grocery getter. It has 285K and is still going strong. You could buy one of those for a few thousand dollars and not many miles.
 
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Tri4Cy

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Lol, I wish I could say that. But sadly no. Poor money management with minimal schollies while in school with bowl trips and lots of booze.

Only worked 15 or so hours a week during school doing intramurals and printing division for ISU so that didnt add up with what I was spending.

4 Year at ISU is rough. I hate when my friends say they don't have any loans because mommy and daddy paid for it.

You are not the only one. I may have done the same thing :)
 

MNclone

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You are young. Go get a second job and get rid of your debt. I now way too many people in their 30's that are still saddled with student debt. You don't want to be that guy.
 

erikbj

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get a second job or start looking for a better paying job. $22k / year.......we pay some of our staff more than twice that with HS educations.