school loans..
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| Thu, 12-30-2004 - 11:00pm |
Hi all! My name is Kiya and I am a recovering compulsive spender. :)
Ok, it is no laughing matter. I claimed bankruptcy about 10 months ago and cut up my credit card. I had about $11,000 on that and then almost $4,000 for my car. I know it doesn't sound like a LOT compared to some, but I am a single mom of two who works part-time barely above minimum wage. Of course, when I incurred most of the debt, I was working full-time and making ok money. For a single mom living in rural Maine, that is.
So here I am, with that debt off my shoulders. I was able to keep my car by paying about the $1400 it was worth. I used my income tax return to do that! :) Thank God for earned income credit!
So, that leaves me with one loan. College. It wasn't so bad. It was somewhere around $25,000. Which is ok. I read once that your loan debt should be no higher than your first year salary after graduating and mine was about even. (I worked in mental health before I left for my own mental health!)
The thing is, I couldn't afford over $300 a month paying three different places, because at that time, I had other debt too. Well, now I don't and I WISH I could pay $300/month on $25,000! BUT, I had them consolidated! It was a good idea at time, I guess, because I had SO much debt. But now I owe $42,000! (The have been deferred for the last 1 1/2 years, as I was not working due to mental health issues) So now they are out of deferrment and even though I am barely living above poverty level, I want to tackle them any way I can. My minimum monthly is $166 and that's on a 20 year plan. My oldest is 6 and I would like to pay it off before he starts college.
I make enough to pay our monthly bills and have a BIT left over, but I also have NO savings aside from the $30 in my credit union savings account. Yikes.
I don't really think I have any questions, but has anyone else had school loan debt skyrocket THAT high when they consolidated it? I don't think I really understood what I was agreeing to. There's no way I can change it, huh?
And to think.. all the blood, sweat and tears to graduate college and I am STILL working part-time making barely above minimum wage. Humph.
~Kiya

firstamendment! Hi! :)
The reason they went up so much, as I understand it, is that when you consolidate them into one loan you pick a timeframe to pay it off, depending on how much you think you can pay per month. I picked the lowest payment amount which ended up being a 20-year loan, and they calculate the interest into that.
Actually, I have asked around and no one seems shocked about the rise. The thing is, it's not like I can even try to double up on payments to lower the interest or anything, because even if I won the lottery and paid it off tomorrow, I would STILL have to pay the full $42,000 because that is the consolidated amount!
I will take the paperwork out though and look it all over again in minute detail and call them on Monday to talk about it with someone and see if there is anything I can do. I would even be willing to pay a penalty fee to take them out of consolidation if that is an option! Because the way I look at it now, I could pay my minimum each month plus I usually get about $3,000 each year in income tax and that could be paid off a LOT quicker at $25,000!
Thanks for the response!
~Kiya
It still doesn't make sense. Yes, they figure out the interest based on how long you will be paying and the rate - but they don't add that to the balance! I had around $38k or so in loans when I graduated in 1997. I paid for a couple years and then had them deferred for about three years. I consolidated when I graduated. Then last year I consolidated again to get a better interest rate. My loan balance did not change when I consolidated either time. The payments change, yes, and the amount you will end up paying changes.
Could it be the $42,000 is the total cash it will take to pay over the 20 years? That is different than your balance. The amount you owe today plus all the interest you will incur in the future will be the total you will pay. If you pay it off faster then you will obviously pay a lot less in interest and therefore less in total.