Student loans: the more you can pay at once, the better
(Read article summary)Student loan bills reach six figures for one married couple, who wonder if they should throw as much money at the loan as possible or stick to the payment plan. Student loans are question 6 in this week's mailbag.
What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Back to school dilemma
2. Precautions before romantic trip
3. Pool membership dilemma
4. Favorite vegetable garden plants
5. Telling a story to kids
6. Handling massive student loans
7. Spending and saving focus
8. Is having another child hard?
9. Useful IRA tips for education
10. To refinance or not?
When school is in session, my work day begins when the kids leave and more or less ends when they return home.
This is a good thing in that it gives me a set period of quiet time in which to work, which mostly means writing.
This is a bad thing in that it puts a cap on things when I’m in a writing groove. There are days where, if I did not have such an end cap, I’d write until midnight.
In the end, the good outweighs the bad. I’d far rather prepare a snack for my children when they get home than continue to work.
Q1: Back to school dilemma
I am in a position to go back to school for a post-graduate degree using my husband’s GI bill. This could not have come at a better time for a variety of reasons, which I won’t go into here. We are truly fortunate – and here is my dilemma, as I do not want to squander this opportunity:
Do I go back and get the most bang for my buck and get a law degree/MBA or something along those lines, even though neither one of those areas really float my boat (that I know of!), though I think I would be fairly good at either?
Do I totally go the other way and just go back and get say, a degree in music, or theater, or French – all of which totally excite me, but are less….practical, in terms of ROI?
I suspect the answer lies somewhere in between, but I am at a loss as to how to objectively assess my skills/interests/talents moving forward. Do you know of any online assessment tools/books/resources for 40-year old wannabe grad students looking for a subject to study? One that will both be practical with regard to longevity (what if, god forbid, I become a single parent to my son and have to support him on my own) but also tap into my talents and interests (“if you love your job, you’ll never work a day in your life” type idea)?
- Augie
There are a lot of skill assessment tools online, such as this one from iSeek, that can help point you in a solid direction when it comes to pairing your skills with a worthwhile and potentially lucrative career. If you want more, the best book I’ve found for digging into one’s career path is What Color Is Your Parachute? by Richard Nelson Bolles.
I think the best option for you is, as you mentioned, somewhere between the two. I don’t think it’s a good idea to go into a field that you have no interest in whatsoever, because unless you’re exceptionally gifted, you’re not going to make a strong career out of it. From what I’ve seen, most people can make it in a field with natural talent or a lot of passion and drive, and people who really succeed tend to have both. If you don’t have either… it can be pretty tough.
Dig into the assessments above and see if you can find a career that excites you (at least a little) and earns a good income, too. I’m a firm believer that there’s something out there like this for everyone.
Q2: Precautions before romantic trip
Next month, I’m going to fly to Boston to meet a guy I met on a discussion forum. We’ve been talking for months and our relationship has moved to the point where we’re going to meet. I’m really excited!
In that excitement, though, is a little bit of worry. In all honesty, I’ve never met the guy and I don’t know for certain what will happen when I go. Do you know of any financial precautions I should take?
- Jill
A friend of mine did this a few years back. I’ll tell you what I told her.
First and foremost, never go anywhere without your cell phone – and don’t go anywhere without letting someone you know at home know where you’re going. If you need a moment, go to the restroom before you leave to go anywhere and send a text to a close friend letting them know where you’re going. This is a safety precaution, nothing more, nothing less. If the guy seems stressed out about this, then there’s a big red flag for you. He should understand the situation you’re in and, if anything, encourage you to do this. The more info you can share with people at home, the better.
Before you leave, make sure several of your friends have your flights, the address of the hotel you’re staying at, the address of the person you’re going to visit, and info on any other locations you’re sure you’re going to go to – restaurants and so on.
Also, if I were you, I’d try to live on cash as much as possible and leave my credit and debit cards in a separate secure place. If the guy is a good guy, this will work fine. If the guy is just trying to scam you or something, your cards would be a good target. I also wouldn’t take any excessive pieces of personal identification. A driver’s license will probably be needed for the trip, but things like a Social Security card are probably best left at home (or better yet, in a safe deposit box at a bank).
This might seem to lean toward paranoia, but the entire reason for doing it is to keep you as safe as possible. If you do this and things turn out well, it won’t have a negative impact on your trip. If you do this and things go bad, you’ll be incredibly glad you took these steps.
Q3: Pool membership dilemma
A couple of years ago we moved into a new house that we love and don’t plan on moving. This past June our daughter was born. Recently we’ve discussed the community pool that is only 2-3 blocks from our house. The pool is open Labor Day to Memorial day and costs $400/year for a family membership. There is a lifetime membership that costs $4,000. It seems to us that the lifetime membership is the better option but we’re unsure whether to do it now, or wait until our daughter would enjoy the pool more.
- Will
Before I spent any of that money, I’d want to know everything about the pool. Is it crowded during the times you’d want to use it? Is there always a lifeguard on duty (for that kind of money, the answer needs to be yes)? Are there times when the pool is closed? Does the fee include swimming lessons for your daughter? Would you use the pool right now, with your daughter being less than a year old?
The real question is whether that pool provides enough value for your family at a rate of $400 a year. If it does not, then I wouldn’t get either membership.
Now, if you do decide that the pool has enough value for that $400 a year rate, I would buy a single year and see how it went, particularly if that $400 went toward the $4,000 lifetime membership. At the end of that year, I’d reevaluate my long-term situation as well as the value I got from the pool. I’d also look into additional issues with such a membership, such as whether lifetime memberships are transferable and whether or not the $400 invested in a year’s membership can go toward an annual membership.
Will had another question.
Q4: Favorite vegetable garden plants
We just planted seedlings for our garden a few weeks ago. This got me to thinking, what are the best (cost savings or taste wise) items to plant. Here’s my top 3.
Tomatoes (taste)
Green Beans (taste)
Bell Peppers (cost)
What’s your top 5?
- Will
I agree with those three. They’d be in my top three for reasons much like what you name. They’re all rather easy to grow, too.
On top of those three, I’d add cucumbers. They’re similarly easy to grow and can be eaten in a variety of ways. Our family loves to make what we call “refrigerator pickles,” where we put fresh cucumbers in a vinegar and water solution along with some dill and eat them at our convenience over the next few weeks.
If I had to pick a fifth one, I’d choose strawberries. Again, they’re pretty easy to grow (if we haven’t killed them, they must be easy) and they produce such wonderful fruit late in the summer.
Q5: Telling a story to kids
I read my kids a story every night before bed. Some nights, though, they ask me to tell them a story. I manage to make something up and get through it and they seem happy, but it always seems awful to me. I know you tell your children a lot of stories. Any tips?
- Alan
For starters, I usually include my children (and often myself) as some of the characters in the story. My children love tales where they are the protagonists, perhaps receiving help from a grizzled old mountain man known as Dad along the way. Doing this immediately ties the children into the story.
I also often borrow plots wholesale from movies I’ve seen that perhaps they haven’t seen. I’ve reused pieces of The Princess Bride countless times as a general plot guidance, for example. I don’t completely duplicate the story, but I use enough of it so that I know where the story is going when I start.
As I go along, I constantly allow them to add details. In fact, I usually prompt them for it. “The heroes are passing through the forest when they come upon a very unusual tree…. what’s unusual about the tree, do you think?” They come up with some idea and then I just roll with it. It keeps them engaged throughout the story and often adds flavor I would have never considered.
The end result is usually a memorable bedtime story for the children. They often request that I do this.
Q6: Handling massive student loans
My husband of less than two years has quite a student loan bill that we are going to begin paying back now. You would think by the amount he owes, $110,000 that he was a doctor. But no, this is what happens when you have a terrible paying job for years, go into forbearance on your loans and end up paying $40K+ in capitalized interest alone. I think the original bill for his private college education was about $40K…I’m not totally sure based on the paperwork I have seen.
He went to this private school after serving 2 years active duty in the army and 4 years in the reserves. I don’t really know what kind of government discount or benefit he got from that. I do know that he took every cent of his student loan and used it not just to pay for school but also to pay for books and general living expenses. His career is in communications and he was in an extremely low-paying job for at least 5 years. During that time he was outrunning creditors, car reposessors, etc. and paying back his student loan was not a priority.
Today, 15+ years later, he is finally making good money at his alma mater within the last three years. He began taking classes for a masters degree a couple years ago, which delayed the need to pay back these loans yet again, but now they have become due as he is nearly finished his degree.
We have looked into public loan forgiveness options where he would pay it back 120 times in a row and be forgiven on the loan. The trouble I have with that program is that you make 120 payments and there isn’t much in the way of forgiveness…by my calculations, you pay back the entire loan. They gave him a quote of $1600 per month, which would more than cover the cost plus interest.
The loan is approximately $110,000 at 8.5% interest, and he owes $754 per month. It’s certainly do-able for him/us, but slows down our cash savings. I wondered if you have any suggestions as to ways to get this loan down or if we are stuck? They didn’t offer him a lower interest rate, and I don’t even know where to begin to look to try to find one for a student loan. He actually thinks that there is going to be some miracle plan that will relieve him of this debt, whether that is some sort of grant, something from the military, etc. I don’t know what planet he thinks that will come from, especially if he doesn’t do the legwork to find it.
We got a decent tax return back, about $3,500, and he used $2,000 as a payment towards the principle on the student loan. Do you suggest tossing extra money at this loan as often as possible or sticking to the outlined payments? On one statement it estimated that he’d end up paying $220,000 over the course of this loan with all the interest due!
- Shauna
If you’re stuck with this loan, tossing extra money at it is always going to be a good idea. It will mostly affect you in terms of reducing the length of the loan, but every extra dollar you throw at it will trim a couple of dollars (or more) off of the last payment you make on the loan.
Now, are you stuck with this loan? Probably. I wouldn’t expect a miracle out of the sky to fix it. However, you likely do have at least some options regarding the loan. The first thing I’d look at is loan consolidation. I’m unable to tell if he’s eligible for loan consolidation or not from your email, but if he is, it’s well worth looking into as it will significantly reduce your interest rate. Even if you’re not eligible, you may want to talk to other lenders besides your current lending institution to see if they can make a better offer and take over the loan.
How do you begin looking for these types of offers? The first place I’d check is the financial aid office at his alma mater. Given that he attended there and that he currently works there, I’m pretty sure they’ll be able to offer some suggestions for his situation and perhaps find you guys a better lending institution to work with.
Shauna had a second question.
