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re: Paying off debts - Emergency fund necessary?
Posted on 10/5/15 at 11:27 am to TDsngumbo
Posted on 10/5/15 at 11:27 am to TDsngumbo
quote:
When I graduated, Sallie Mae told me I had 10 years to pay my loan back. I planned for as such and paid it off in 6. I didn't take out a loan for every little thing and paid for some college on my own. I doubled down on my loan repayment after graduation and paid it off early.
I never deferred. I never missed a payment. I never asked them for any special treatment, even when I went a few months without a job about 4 years ago.
I majored in History and make a shitty salary because of it. If I can do it with my salary, anyone can do it in 10 years or less. Especially with most any other degree out there. No excuses for those who take longer than 10 years to pay off their student loans.
This had nothing to do with anything.
Please don't derail the thread.
This post was edited on 10/5/15 at 11:29 am
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Posted on 10/5/15 at 2:58 pm to lsufan1971
Ok, a few things. I graduated in 2011. So I have not been paying on student loans for a long time. I didn't go to school until later in life. My husband has been paying on some for a while but he got his Masters so some are not as old as others, the ones he has left are mostly from when he got the Masters.
I do know about the loan forgiveness programs but I do not qualify until the end of next year, I am eligible for up to $17,500 in forgiveness but I don't know exactly how that works. I have an appointment to meet with someone tomorrow about that.
My husband does have a Roth that he has been paying on for 8 years or so, so that is there.
I do know about the loan forgiveness programs but I do not qualify until the end of next year, I am eligible for up to $17,500 in forgiveness but I don't know exactly how that works. I have an appointment to meet with someone tomorrow about that.
My husband does have a Roth that he has been paying on for 8 years or so, so that is there.
This post was edited on 10/5/15 at 2:59 pm
Posted on 10/5/15 at 2:59 pm to BigB0882
If you were paying off credit card debt I would recommend not bothering with an emergency fund because you can always charge it back up if you have to. But since you don't that's a different matter.
Posted on 10/5/15 at 3:01 pm to swanny297
quote:
Dang - I'm in the wrong field if you can set aside 100k in 2 years....
I make crap but the husband is higher up and makes decent money. We also are budgeting very very strictly. Have cut every extra cost possible. It is shocking how much you can save when you figure out what is truly necessary and what is not.
Posted on 10/5/15 at 3:02 pm to SG_Geaux
quote:
quote:
The mortgage is not our focus as we intend to sell and move to a nicer house not long after getting out of debt.
So you are working on getting out of debt so you can take on more debt?
There is nothing inherently wrong with mortgage debt, especially at today's rates.
For that matter there's nothing wrong with debt at all provided you are borrowing in order to invest in something with a better return. Education, housing, etc. often qualify if you do it right. Great fortunes are built by using other people's money.
Posted on 10/5/15 at 4:07 pm to foshizzle
Strangely the OP came here with a theory about using a CC instead of setting aside cash. Only one person said anything close to suggesting it was a good idea and she got an immediate response saying that's what we will do.
OP was your mind made up already and you're just looking for someone to tell you that it's okay? Because using a credit card is a bad idea. I also think it's a personal challenge for you to set aside the Emergency Fund then leave it be while you are paying off debt.
Seems like a weird thread where most are telling you to not use a CC and the one person who said they did you agree with them. It's a bad idea IMO.
OP was your mind made up already and you're just looking for someone to tell you that it's okay? Because using a credit card is a bad idea. I also think it's a personal challenge for you to set aside the Emergency Fund then leave it be while you are paying off debt.
Seems like a weird thread where most are telling you to not use a CC and the one person who said they did you agree with them. It's a bad idea IMO.
Posted on 10/5/15 at 5:57 pm to BigB0882
quote:
Is it insane to think of that as our emergency fund?
No, especially if you are young and have stable jobs. If something bad happens, just quit paying the debt off as aggressively redirect that money as your emergency fund
This post was edited on 10/5/15 at 6:03 pm
Posted on 10/5/15 at 6:47 pm to BigB0882
quote:
It is shocking how much you can save when you figure out what is truly necessary and what is not.
Very true. I unexpectedly lost a job in 2003. Was not financially prepared at all. I immediately cut ALL unnecessary expenses, started unemployment, and 12 weeks later when I got my current job, I had saved 1500 in 12 weeks, just by adjusting my lifestyle.
Most people have more disposable income than they realize when they put a name to every dollar they spend.
Posted on 10/6/15 at 12:59 pm to GFunk
No, it seemed like a lot of people were focusing on all sorts of aspects other than whether I needed an emergency fund or not. Suddenly the focus went to not buying a new house later and why was I taking so long to pay off student loans. lol It seems like the person who didn't think I needed an emergency fund if I have the CC was very direct in their answer so I was able to notice it and use that advice. My mind wasn't made up, we may still do an emergency fund and then use it at the end to finish paying off the debt if we make it that far without needing the money. I just don't want to delay paying off debt for even another 4 months. When I make up my mind to do something I want to do it now, I am not the most patient person. Another option that has come to me is to use our income tax return as an emergency fund. So we may be without for a few months but will have one in March/April. I am taking everyone's advice and trying to find a happy medium.
I am a he, by the way. Yup, married to a dude.
I am a he, by the way. Yup, married to a dude.
Posted on 10/6/15 at 1:12 pm to BigB0882
RE: student loan forgiveness, the public service loan forgiveness programs are open to anyone working for a nonprofit organization (not just gov't)...which would include most private schools, many hospitals, social service agencies, etc. It is a boon for many who pursue expensive (& extensive) graduate education and work in less lucrative fields. You do have to make 120 payments (10 years' worth), but if you pay the minimum, you can discharge the remaining balances at the end of the term.
More info on public interest loan forgiveness: LINK
An emergency fund--a couple grand--is a worthwhile thing to have. It will provide a little peace of mind, a safety cushion, and it will not dramatically reduce your debt repayment schedule.
More info on public interest loan forgiveness: LINK
An emergency fund--a couple grand--is a worthwhile thing to have. It will provide a little peace of mind, a safety cushion, and it will not dramatically reduce your debt repayment schedule.
Posted on 10/6/15 at 4:05 pm to BigB0882
quote:
I just don't want to delay paying off debt for even another 4 months
If you are going to pay off $100k in 24 months it shouldn't take 4 months to save enough for an emergency fund. Your expected repayment rate is $4,166.66/ month. You don't need $16k in an emergency fund.
quote:
Another option that has come to me is to use our income tax return as an emergency fund.
I think you might could float with CC til then. I wouldn't but YMMV.
I'm not trying to tell you what to do, you should sit down and look at hard numbers. What were you doing with that extra 4 grand a month before now? And can you truly do without it for 2+ years? Good luck and I hope you can accomplish your goals. I'm trying to pay off my student loans ($40kish) and love to hear people overcoming debt.
Posted on 10/6/15 at 6:07 pm to JamalSanders
Good point but I will not be putting $4,000 to debt right away. It is a snowball, if you will. We are starting with about $2000 extra towards debt and then it snowballs as loans are paid off. It is about $4000 total a month to debt but half of that is minimal payments so it can't be set aside at the moment. But still, 4 months of $2000 is a good $8k.
I am not eligible for the debt forgiveness where you pay for 10 years. That is a very tricky thing. My husband called to check that one out and it turns out you have to be on a income payment plan where your payment has been decided by your income and it has to have been like that the entire time. In other words, the only people who benefit from that are people who aren't making enough money to make normal payments. I do qualify for the one that is for Teachers, at least I hope I do. If not we can add a few months onto how long it may take to pay off debts. The school I teach at did not qualify one year so I don't know how that works, it has qualified all other years, though.
I am not eligible for the debt forgiveness where you pay for 10 years. That is a very tricky thing. My husband called to check that one out and it turns out you have to be on a income payment plan where your payment has been decided by your income and it has to have been like that the entire time. In other words, the only people who benefit from that are people who aren't making enough money to make normal payments. I do qualify for the one that is for Teachers, at least I hope I do. If not we can add a few months onto how long it may take to pay off debts. The school I teach at did not qualify one year so I don't know how that works, it has qualified all other years, though.
This post was edited on 10/6/15 at 6:10 pm
Posted on 10/7/15 at 8:50 am to BigB0882
quote:
Good point but I will not be putting $4,000 to debt right away. It is a snowball, if you will. We are starting with about $2000 extra towards debt and then it snowballs as loans are paid off. It is about $4000 total a month to debt but half of that is minimal payments so it can't be set aside at the moment. But still, 4 months of $2000 is a good $8k.
Gotcha. I've watched my parents pay off $250k over the last 10 or so years. All they are left with now is a mortgage. The snowball works and it works well. I might save for a month or 2 so I would have a little oh shite money and divert $500ish a month to padding your emergency fund until it is sufficient. That way you aren't putting off paying down your debt but you are still working on your emergency fund.
I would absolutely try to not have to rely on a CC for anything.
Posted on 10/7/15 at 3:08 pm to GFunk
quote:
I do have to wonder why you decided to buy a home in an area or place you didn't want to invest a significant amount of time in
Dude, 10 yrs is a LONG time for a starter home.
Posted on 10/7/15 at 3:11 pm to BigB0882
quote:
My husband called to check that one out and it turns out you have to be on a income payment plan where your payment has been decided by your income and it has to have been like that the entire time. In other words, the only people who benefit from that are people who aren't making enough money to make normal payments. I do qualify for the one that is for Teachers, at least I hope I do. If not we can add a few months onto how long it may take to pay off debts. The school I teach at did not qualify one year so I don't know how that works, it has qualified all other years, though.
You absolutely DO NOT need to be in an income-based repayment plan to qualify for the public interest loan forgiveness. You do have to fill out paperwork certifying your nonprofit/govt employment for each year of the 10 year period.
Posted on 10/7/15 at 3:27 pm to hungryone
quote:
You absolutely DO NOT need to be in an income-based repayment plan to qualify for the public interest loan forgiveness. You do have to fill out paperwork certifying your nonprofit/govt employment for each year of the 10 year period.
This is correct. Although, I would say you would want to be under the income based if you were able to lower your payments. From what I've seen, this particular Federal repayment program is best used if you lower you monthly payments to the absolute minimum and ride out the 120 payments. Why pay more if it is all going to be forgiven?
Also, the 120 payments don't have to be consecutive. Just as long as you make 120 payments while employed in a qualifying public sector job (must be full time). And the jobs that qualify are extremely wide.
Posted on 10/7/15 at 9:08 pm to AnonymousTiger
Well then someone lied to my husband. I think the problem is he called whomever has his student loans and I am sure they aren't the most forthcoming with this information.
Edit: Found this online: Qualifying repayment plans include all of the income-driven repayment plans (plans that base your monthly payment on your income) and the 10-year Standard Repayment Plan.
Even though the 10-year Standard Repayment Plan is a qualifying repayment plan for PSLF, you will not receive PSLF unless you make the majority of your 120 qualifying monthly payments under an income-driven repayment plan. If you are in repayment on the 10-year Standard Repayment Plan during the entire time you are working toward PSLF, you will have no remaining balance left to forgive after you have made 120 qualifying PSLF payments. Therefore, if you are seeking PSLF and are not already repaying under an income-driven repayment plan, you should change to an income-driven repayment plan as soon as possible.
So perhaps what they meant was it would only be worth it IF he had been on the income based repayment plan because otherwise his loan will be paid in full after 10 years anyway.
Edit: Found this online: Qualifying repayment plans include all of the income-driven repayment plans (plans that base your monthly payment on your income) and the 10-year Standard Repayment Plan.
Even though the 10-year Standard Repayment Plan is a qualifying repayment plan for PSLF, you will not receive PSLF unless you make the majority of your 120 qualifying monthly payments under an income-driven repayment plan. If you are in repayment on the 10-year Standard Repayment Plan during the entire time you are working toward PSLF, you will have no remaining balance left to forgive after you have made 120 qualifying PSLF payments. Therefore, if you are seeking PSLF and are not already repaying under an income-driven repayment plan, you should change to an income-driven repayment plan as soon as possible.
So perhaps what they meant was it would only be worth it IF he had been on the income based repayment plan because otherwise his loan will be paid in full after 10 years anyway.
This post was edited on 10/7/15 at 9:12 pm
Posted on 10/7/15 at 11:35 pm to BigB0882
quote:
So perhaps what they meant was it would only be worth it IF he had been on the income based repayment plan because otherwise his loan will be paid in full after 10 years anyway.
Right, the loan balance is forgiven in 10 years. If you qualify for income based repayment, it means you won't be paying the amount necessary to pay off the loan in 10 years, and therefore, there would be a balance remaining to forgive. IF this is not the case, there is no point.
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