Student loans: feeling the crunch. Suggestions?
September 1, 2015 7:32 AM   Subscribe

I owe $40k in student loans. Not sure of the best way to proceed, so am reaching out for advice. More under the fold.

I have about $40k of (unconsolidated) unsubsidized student loans staring me in the face. The due date for my first payment is September 17th. I think all this is federal; previously through Sallie Mae, but now with Navient. There are two categories: Department of Education; and Federal (both has separate payment total amounts). This is a bit of a complicated situation, so I'll do my best to explain clearly what's happening.

I graduated from college in May 2010, had an one year deferment of my student loans after graduation, then in fall 2011, enrolled as a graduate student, so got an automatic deferment. The program didn't work out for me, so I resigned at the end of the semester. I didn't have a job, so I deferred my loans for about 6 months (showing proof of searching for a job), then again in later 2012 (as I only had a part-time job). In 2013, I deferred my loans again due to financial hardship, but had a job, still. (To be honest, I'm not sure why or how I deferred my loans in 2013, even though I had a full-time job. That part is blurry in my memory.) In December 2013, I left my job, went back on SSI, and deferred due to a financial hardship (showing proof of me getting SSI), and the deferment was for a full year. I did the same thing in September 2014, while still on SSI. The deferment period beginning September 2014 lasted a year (until this September). The original start date of all this (loans) began in September 2006.

This year, however, I got a job in March, a stepping-stone kind of job, that is, then in May, I found a better job that pays about $39k a year (gross income). I was still in the deferment period while finding and beginning both jobs, but now I'm nearing the end of the deferment period.

I'm nervous because even with $39k a year for my current job, after tax deductions/health insurance, TSP, etc., my take-home pay is almost $2000 every month. My rent is ~$650 (including utilities) a month. I'm staring at a $469 expected payment every month for the student loans currently (grand total). I need money for food, other bills, etc.

As this is my first time actually facing the prospect of paying back student loans in 5+ years, I'm facing several options. I would like help wading through those options, because quite frankly, I'm overwhelmed.

Option 1:
As I'm deaf, I'm considered permanently disabled - I could apply for the permanent disability discharge to get my student loans completely discharged.

Caveats: I'm employed full time, and I read somewhere that the disability discharge period has a monitoring period of 3 years where you would have to keep under a certain income limit. That would mean I'd have to quit my current job and remain jobless for the next 3 years or so. I do have SSDI, which is around $900 a month. It's a bit dreadful thinking about quitting my job and sitting around the next 3 years being jobless, but if that means $40k being wiped away, the more the better. Not the best option, but something that I would do in the worst case scenario. I also am not sure if I can go "beyond the ceiling" in my job in terms of a pay increase.

Questions: I was jobless for the full year of 2011, about half of 2012, 2014 in full, then 2 months in 2015. Would those times be counted against the 3-year monitoring period retroactively? Is that even a possibility? Also, could I be mistaken about the 3-year monitoring period? Would just having a note from the doctor/a letter from SSA stating I'm getting benefits from them and that my disability review is within 5-7 years be enough? A bit unclear with this policy.

Option 2:
I'm on SSDI currently (on the 9-month trial period), so I could technically just submit another hardship request, furnishing proof of my SSDI (I can easily provide a letter from ssa.gov proving that I currently get SSDI benefits), throwing this down the road another year.

Caveat: Wouldn't this be "lying" to the loan agency? Do they have a way of knowing I'm working?

Question: I'm on a 6-month probation period at work until November, so that means my job isn't even guaranteed until November passes. Would this help my case?

Option 3:
I could try for the Income Based Payment - have my student loans paid off that way.

Caveats: as my student loans are older than 2014, I read online that it'd take 25 years for the loans to be completely forgiven, as well as a tax penalty.

Questions: as I work at an university, I read somewhere that I might be eligible for a 10-year forgiveness program (people who work at an educational or government institution). How would I go about finding that out? Also, if I'm hit with the tax penalty, approximately how much would I need to pay (percentage-wise)?

Other questions I have:

a) I believe my parents have a college fund saved up for me, about ~$10k or so (need to find out the amount and/or if this fund even still is there). Despite how awkward it may be, I could ask them if they could use that money to pay off the loan amount monthly, using whether payment option, then go from there. Would that be something you would recommend?
b) Should I consolidate my loans? All of them are at 6.8%, not sure of the benefits or the best way. Yes, I tried googling this, but got some conflicting answers.
c) Is there any other way you know of to discharge student loans? I know they can't be discharged in bankruptcy, but there must be a way.

I think I've got all my questions covered. Sorry if it's so much! I actually kept throwing off this question because just the thought of typing all this overwhelmed me, but time is tight, so I need to get going. The whole process is so overwhelming for me, and I really dread the prospect of having to pay loans for the next 20-25 years. To add insult to injury, all those loans are actually for the dorms/food, which wasn't even that good - my main regret is that I didn't live off-campus during my undergraduate years. (My vocational rehabilitation counselor paid off my tuition and books.)

I would really, really, really appreciate your insight and help on this. Of course, if anyone has questions, please feel free to ask. If anyone has other ideas that I didn't think of, or any other workarounds, that would also be great. Many thanks for your time, and hope I've explained everything clearly enough!
posted by dubious_dude to Work & Money (23 answers total) 4 users marked this as a favorite
 
My answer to b) would be "Why haven't you consolidated already?" I consolidated my loans ($40K) ten years ago and went on the income-based 25-year repayment plan, which dropped them from $500/month to about $250/month. I've since paid them off (got married in 2012 and my husband helped me throw money at them), but that eased the burden considerably, and I managed to pay about 2/3 of the total in that 7 years myself.
posted by telophase at 7:48 AM on September 1, 2015 [4 favorites]


Here is what I did, at least until I can find a higher paying job (working on it):

Consolidated my loans under one lender. Make sure it is a lender that won't force you to forfeit the benefits granted under federal loans, such as forbearance and deferment while in school. I use Great Lakes and they are pretty fantastic, customer service wise.

Calculated what I would have paid under Income Based Repayment (still a financial burden).

Enrolled in a repayment plan that spread my payments out across a longer period of time (25 years being the max I believe). I currently pay less than $300 on about the same loan amount. I barely make a dent in anything other than interest but I am not in deferment and that's all that matters currently.

To answer c) Not really. Permanent disability that shows your inability to work for the rest of your life or dying I think are the only way to have it completely discharged. If you work for a public or government institution and make payments consistently under the Income Based Repayment plan for 10 years your loans can be forgiven, but you also have to pay taxes on the final amount that is discharged.
posted by Young Kullervo at 7:49 AM on September 1, 2015


Take a deep breath. You are going to be okay.
As someone with, uh, heroic amounts of student loan debt, I say look into the Income Based Repayment. It made my monthly payment 10% of what it should be.
After you do that, definitely peek at the Public Service Forgiveness, because IBR payment plans qualify according to studentloans.gov.
posted by Lemmy Caution at 7:50 AM on September 1, 2015


I'm nervous because even with $39k a year for my current job, after tax deductions/health insurance, TSP, etc., my take-home pay is almost $2000 every month. My rent is ~$650 (including utilities) a month. I'm staring at a $469 expected payment every month for the student loans currently (grand total). I need money for food, other bills, etc.

I have a similar income, similar rent payment, and similar wad of bills to pay (just in credit/loan/student loan debt), and I do just fine. It's not ideal, but you can afford food and phone, internet, probably medication if you have insurance, etc. So, for now, don't be nervous.

My boyfriend and I are on income-based repayment because frankly there's no freakin' way we're going to be paying these off any time soon at our income level. Can you get a better paying job? Do you see that in your future? We're both on track in careers where we will eventually have much more income, and will try to nuke our student loans from space then. Until then, on the income-based repayment plan, our monthly payments are very very manageable and honestly if I'm making this payment for 25 years, I don't really mind.

As for the 10-year forgiveness plan, you can look at the website. I don't see information about universities, but maybe you can ask someone at work about this? Or get in touch with someone through the website?
posted by easter queen at 7:52 AM on September 1, 2015 [2 favorites]


Nthing income based repayment. You pay based on your income for something like 25yrs and then whatever is left is forgiven.
posted by brevator at 8:04 AM on September 1, 2015


I'm in the public service loan forgiveness program (120 qualified payments, the remaining balance is forgiven and you don't have to pay income tax on it). I consolidated my loans into Direct Loans to take advantage of PSLF. The government has a website with all of the information that you need here. Getting my loans consolidated and 'enrolling' in the program was not hard or time consuming. If your university is a 501(c)(3) non-profit, your work qualifies. Look at the website. It's clear and easy to understand.

If you have questions on this, please PM me. The only advice I have is don't assume anything! Actually find out if something is true or not by looking at the website or calling your loan service. I have friends with a lot of debt who didn't take advantage of this because they assumed they didn't qualify when they did. So now they're making payments they can't afford when they didn't have to.

As an aside, you'll be fine. I have 2x the amount of loans you do and I make a lot less, and I'm fine.
posted by pumpkinlatte at 8:12 AM on September 1, 2015 [5 favorites]


I think you should look into income-based repayment and (eventually, if you keep working at the same university and it's a nonprofit) public service loan forgiveness.

You should do a couple of scenarios--one where you consolidate and one where you don't. Since your loans are all at the same interest rate you won't save any money there, but it might make a difference in terms of lowering your minimum payments and bureaucratic hassle. There are calculators online that can help you figure out if you're going to save money doing this.

Regarding a) your parents' possible college savings, it might be an awkward conversation to have, but when you're talking about sums of this magnitude, it's worth getting all the cards on the table. But be prepared to hear that they ended up needing it for something else, or that they plan to give it to you as a wedding gift or something. I'd open with something like "I seem to recall from speaking with you years ago that you had some college savings for me. Now that I'm getting my ducks in a row to pay back my students loans, I wanted to ask what the status of that is. It's no big deal if you needed that money for something else or if I just misunderstood; I just want to be sure I know the full picture."
posted by The Elusive Architeuthis at 8:21 AM on September 1, 2015


Response by poster: Several follow-on questions.

a) What do you think of options 1 and 2? Nobody seems to have mentioned those two other options.

b) I work at an university, but it's kind of funny that it's a pseudo-federal organization, kind of, because we get exactly the same benefits as the federal government, but I believe it's a for-profit. It's a bit tricky. How should I go about finding out if my university is a 501(c)(3) organization, or at least applicable towards public service (and hence, making me eligible towards the 10 year program)?

c) How should I go about getting my loans consolidated - would this hurt anything at all? Also, how do I get the payment amounts changed to an IBP (if I decide to go that route)?
posted by dubious_dude at 8:51 AM on September 1, 2015


I think if Options 1 and 2 are contingent on you being unable to seek employment, and you can not only seek employment but are gainfully employed, then applying for those discharges is a bad idea.

If I'm misunderstanding the situation and employment is a rocky road for you, then perhaps you can speak with a social worker or someone of that ilk (maybe someone at your university, even, they deal a lot with financial aid)?
posted by easter queen at 8:59 AM on September 1, 2015


If your university is non-profit, you qualify for income driven repayment (of which there are several different programs, including IBR, ICR and PAYE) and Public Service Loan Forgiveness.

Under any income driven repayment plan, your payment is based on a formula that takes the Federal poverty amount into account. There is an income driven repayment calculator here.

Using the IBR program as an example, your monthly payment would be about $267 per month. This isn't that bad on the income you make.

In PSLF, your loan amount (no matter how high) is forgiven after 10 years of payments as a full time employee of a government agency or non-profit. You use an income driven repayment plan (like IBR) and PSLF at the same time. There is currently no tax penalty with the amount forgiven via PSLF.

In this case, if you worked for your current organization for 10 years, never got a raise and the federal poverty amount didn't increase, you'd pay 120 payments of $267 and you'd be completely done.

Note that if you leave non-profit or government work, you no longer get 10 year forgiveness via PSFL. The 10 years (120 payments) as a full time public service employee need not be consecutive. You need to file income statements once per year and keep the forms and documentation.

The other benefit is that if you enroll in PSLF, your loans are serviced by the Federal government and not Navient/Sallie Mae, who are terrible.

tl;dr
1. Enroll in an income driven repayment plan.
2. Find out if your university is government or non-profit. If yes, enroll in PSLF.
posted by cnc at 9:04 AM on September 1, 2015


Clarifying the first paragraph above:
* Qualifying for an income driven repayment plan is purely based on income.
* Qualifying for PSLF is based on working for government or a non-profit.
posted by cnc at 9:15 AM on September 1, 2015


Option 1 is clearly a no-go. Disability forms for discharge of student loans are very clear that, for student loan purposes, disability means total and permanent inability to work at any job. You are working now, and by definition do not meet that standard. In addition, if your doctor did somehow fill out a form saying you were totally and completely disabled by your deafness, the physician would get another form later on asking them to confirm, really and truly, on penalty of falsifying medical documents, that you are unable to work at any job. I think you would have a tough time getting a physician to do that.

I think Option 2 is, as you mention, just kicking it down the road a bit. Spend a few hours now figuring out your options and what you would really need to pay under an income-based repayment plan and you can decide if that's a good idea once you really have the numbers.

The likelihood that your employer is a qualifying nonprofit is high. Most universities are nonprofit entities even if they are private and make more than they spend. They just have a charitable purpose (education) and don't distribute profits to shareholders but put them back into the entity. You can make a first quick check at GuideStar.org. The financial aid office at your current workplace can probably confirm that it's a 501 3(c). The HR department can probably also confirm it.
posted by The Elusive Architeuthis at 9:32 AM on September 1, 2015 [1 favorite]


Response by poster: A few more follow-on questions...thanks for your patience with my threadsitting!

a) The Elusive Architeuthis, when searching for my university at Guidestar.org, it did show up in the list of results, so I assume that means it's covered? I will check with HR/financial aid to make sure, though.

b) So, assuming my university IS covered under PSLF, I'm still a bit unclear of what to do exactly first. Should I consolidate first, then change to IBP, then apply for PSLF, or is there another order to this process? How long does everything take? I don't have long until the 17th starts and my deferment period ends. I'm sorry, it's probably obvious but I'm just so ridiculously dumb with this whole process. Side note: I don't do well with bureaucracy.

c) I tried figuring out my monthly cost, but I can't figure out my AGI. How do I do this? I haven't gotten my tax forms yet for 2015, obviously (W-2, etc). Is there something I'm missing? Gah! Why does this have to be so complex?

d) Looks like option 1 is definitely out. As for option 2, if I do decide to pursue this one, would I be at the risk of getting into trouble for doing this while working?

Thanks!
posted by dubious_dude at 10:29 AM on September 1, 2015


What is the repayment term (time span) for your loans?

By default when you start to repay your student loans you are put on a 10-year repayment plan and your monthly payment amount is appropriately high. If this is this case you can change your repayment term to 15 or 20 years (maybe longer, I don't remember) which will lower your monthly payment. That, and changing to an income based plan will also lower your monthyl payment.

I changed my payment term to 20 years a while back, then made extra payments when I could.
posted by eatcake at 12:01 PM on September 1, 2015 [1 favorite]


b) So, assuming my university IS covered under PSLF

PSLF and IBR go hand-in-hand. Apply for PSLF. I don't know off-hand how long it takes. Weeks not months, I think. They may let you defer (or ask you to defer) while the application process is ongoing. If not, you just pay your regularly scheduled payment that month.

Also note that if you've already made any student loan payments as a member of a qualifying university, those will count toward your 120 payment PSLF forgiveness requirement. (You will have to file an employment certification form.)

However, IBR is not retroactive, as I understand it. If you make a full payment, they won't refund you the difference between that and the lower IBR payment you'll eventually have.

Edited to add: PSLF and IBR do not depend on consolidation. If you'll be in PSLF for 10 years, there's no need to consolidate.
posted by cnc at 12:09 PM on September 1, 2015


c) I tried figuring out my monthly cost, but I can't figure out my AGI.

Use your 2014 AGI.
posted by cnc at 12:10 PM on September 1, 2015


Should I consolidate first, then change to IBP, then apply for PSLF, or is there another order to this process?

When I did this, I consolidated and then changed to IBR. Now I'm tallying up the payments. I've had the same job for the whole time so I haven't had much to keep track of the PSLF program. If you ever leave, you need to get some kind of statement that you worked from X to Y dates and the employer is a non-profit or gov't entity. I think there's a way to log your time every year, but I've been told it's not necessary. I should probably check to make sure as I've got 6-figures riding on that...

To clarify, every year your payment has a chance to change. If your income goes up, your payment goes up (it's basically a 15% tax). If, however, you start earning enough money that your payment would be more than it would have been on the regular 10-year repayment plan, you only pay the 10-year repayment amount. So if you're paying $250/month and then get a huge raise (or marry someone with a big income) , you'd pay $469 a month for the rest of your 10 years and the remainder would be forgiven.

It's worth reading through it all. IBRinfo.org was my guide a few years back.
posted by the christopher hundreds at 12:12 PM on September 1, 2015


Do they have a way of knowing I'm working?

Yep, they will know, because your employer is reporting your wages to the government. Unless you get a job where you're paid under the table, they will know.
posted by desjardins at 12:29 PM on September 1, 2015 [1 favorite]


Just do not lie to the government about this kind of thing. You have enough money to live on even if you make the full payment. It is so totally not worth it to lie.
posted by internet fraud detective squad, station number 9 at 1:43 PM on September 1, 2015


When you apply for IBR, you use your most recent tax return, so in this case your 2014 taxes you filed in April.

Also, you can change repayment plans at any time- you may have to make your payment on the 17th, but if you get the paperwork in order your payment will change for the next month.

IBR is not hard to apply for- I think it took me ten minutes through my loan servicer.
posted by MadamM at 10:39 PM on September 1, 2015


Once you sign up for PSLF, all of your loans will be transferred over to FedLoan Servicing (they're the ones who got the contract to administer the PSLF program). Consolidating will not save you money (since your interest rates are all the same), save you hassle (since you'll only be dealing with one servicer anyhow), or lower your minimum (since that's calculated off the total balance and your income, both of which FedLoan will be fully aware of).

When you WILL want to consolidate is if you have federal loans that won't otherwise qualify for PSLF, such as older FFEL loans or Perkins loans. However, while any payments you've already made on existing loans will count towards PSLF, if you consolidate, the consolidation loan is a new loan and the previous payments will not carry over.

What this means:
1. If you have loans that need to be consolidated, do that first and do it soon, so that you aren't making payments on unconsolidated loans that won't count towards PSLF.
2. If you are already making payments, only consolidate non-Direct Loan loans, so that you don't invalidate the payments you've already made. If you're not already making payments, it doesn't much matter one way or the other if you toss everything into one consolidation loan.

Another word of advice, do things ONE STEP AT A TIME. I made the mistake of consolidating and then submitting my income recertification too quickly. They calculated my payments while the consolidation loan was still in limbo and it took ages to sort out. I'm still pissed about the months of PSLF qualifying payments I missed out on because of that. Just be patient and wait for each thing to finish up before initiating a new step. Once you put in the request for consolidation or for IBR, your servicer will likely put your loans in administrative forbearance while the paperwork is being sorted out, so you probably won't be making regular payments for a bit yet anyhow.
posted by yeahlikethat at 12:31 AM on September 2, 2015


Hmmm, I had to consolidate so that I could apply for IBR a few years ago, and I do PSLF too... That's what I was instructed to do when I called the federal dept of education.
posted by leemleem at 1:42 AM on September 2, 2015


The need to consolidate is mostly a matter of timing. Loans taken out before July 2010 were under the Federal Family Education Loan program and must be rolled into a Direct Consolidation Loan to qualify for PSLF. FFEL was replaced by the Direct Loan program on July 1, 2010 and loans taken out after then are all fine for PSLF as they are. You can always consolidate them for other reasons but it's not necessary for PSLF or IBR.

Looking at OP's timeline, he probably has FFEL loans from undergrad that will need to be consolidated and at least one Direct Loan from graduate school. If he has made no payments yet, then it doesn't make a difference if he includes the grad school loans in the consolidation or not.
posted by yeahlikethat at 9:43 AM on September 2, 2015


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