Getting Rid of My Debt: FINALLY some good news (I think)

I called up Navient today – they are the company that has recently taken over my loans from that EVIL BEE-ATCH, Sallie Mae. Have to say, it was nice talking to someone who didn’t sound like she was reading from a script and could actually answer questions. When she heard that I had already been paying my loans for 17 years (and she could see my balances), she said “oh, that makes me feel sick.” I said “trust me, if it makes you feel sick, you have NO IDEA how sad it makes me feel.”

Someone commented last week that they know about “student loans” and they hear about “student loans” but it’s another story to see them. So I need to put down some cold, hard numbers here. In addition to my LAL loan (which is private) and has a current balance of $13,390.70, this is what is sitting there for my federal loans:

BIG DADDY (consists of my federal law school loans):

Loan 1-09: $44,347.24, interest rate of 7.5% (fixed), unsubsidized
Loan 1-10: $30,821.51, interest rate of 7.5% (fixed), subsidized

TOTAL: $75,168.75

SIMMONS (consists of my library science school loans)

Loan 1-07: $9,106.26, interest rate of 1.62% (fixed), subsidized
Loan 1-08: $14,081.79, interest rate of 1.62% (fixed), unsubsidized

TOTAL: $23,188.05

GRAND TOTAL of FEDERAL LOANS: $98,356.80

GRAND TOTAL of ALL LOANS: $111,747.50 (including my LAL of $13,390.70)
Anyone depressed yet?? This is what the loan system has turned into! This is after 17 years of paying on the $75K portion of Big Daddy and the LAL loans, and paying for 10 years of paying on Simmons Loans!!  Ok, I digress and will stop ranting.

So, the good news: next year, when I change my living situation and move (probably south, but definitely someplace warmer), I will apply for what is called and Income Based Repayment or IBR plan. With this plan, I will never have to pay more than 15% of my AGI as long as I keep reapplying for renewal of the status every 12 months.  I know that as a veterinary assistant, my salary might be somewhere in the 20-30K range (and the 30K range is kinda pushing it.) So I asked the Navient person to run some numbers, if I had an AGI of $25K and 20K, respectively. Whereas right now I am paying $538 a month just to keep my loan from growing, my payments would go down to about $93/month and $33/month, respectively.

What’s the catch? You know there had to be one, right? Of course there is. The catch is that the IBR plan will last for 25 years. At the end of the 25 years, whatever amount is not paid off will be forgiven. (There is some question as to whether that amount would then be imputed to you as taxable income for that year or not.)  So if I were to do something like that, it could be conceivable that I could be paying off law school (and Simmons) loans for 42 years. You read that right. 42 years. And that’s if I changed to that plan right now. However, changing to that plan right now would actually raise my monthly payments, likely to something around $700, so if I do switch repayment plans, it’s not going to happen right now. I’d be paying something like $1800 to save myself somewhere around $360 or $1080 (depending on how low my salary is) to end the loan 25 years from today instead of 25 years from next fall.

So here’s where I am at. I don’t love the idea of paying loans for another 25 years, obviously. I’m already 42. Who wants to pay until they are almost entitled to social security and are almost three times the age they were when they first got out of law school? (I was 24.)  However, since I feel like I have paid for these loans already at least twice, I don’t feel too badly about making the government wait and wait and wait to be paid these amounts, and to then be paying  smaller amount overall. I know as a vet assistant, it’s not like my salary is going to drastically change over the years. It’s not like I could ever make it back to the salary I am making right now, I know that for sure. And, since I have learned to live simply, I could maybe afford to save a bit at the same time too, so I’m not living hand to mouth. I still want to be able to save for retirement, even if it’s at a smaller rate per year. And keep away from the credit cards, because those can bury you. Luckily, I don’t have any of that debt right now. And I would hope that working as a vet assistant, I could maybe get a break on vet care for my herd. 🙂

Unfortunately, society just doesn’t place such a huge monetary value on those who care for animals. It’s not like I’d be running a huge investment bank or anything important like that, right? (Don’t even get me started on that kind of rant about executive compensation getting out of hand…again, I digress. Sorry.)

I do still plan on paying off that LAL loan by the time I move. I could pay it off right now – I have enough in savings, but it would definitely put a damper on what I have saved. And it feels good for  me to mentally keep looking at the savings balance I do have and know I’m getting somewhere. Right now, so much of my payment on that loan goes to principal, that my financial advisor suggested I keep hoarding cash and then take a look at things in the spring or summer and decide to pay it off then. That way if anything else happens in the meantime, expected or not, I’m prepared and have some liquidity.

I find it somewhat sad, but this actually seems like good news to me right now.  Any thoughts from any of you? If so, please drop me a note below.

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