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Bring on the debt!

August 22nd, 2007 at 01:33 am

Argh, school loans are so hard. Actually the loans itself isn't difficult, it's just that my personal situation that is making it so complicated.

I currently have accepted all the loans they will give me. (For the year: $8,500 subsidized, $16,700 unsub.) As of this moment DH and I have a "profit" of roughly 1,000 a month, which we have been using to pay off our cars and put towards our Roths. If life were simple this would mean that we would only need to take out $12,000 worth of loans each year to cover tuition.

However, life isn't that simple for us. Starting in November DH will be moving. So we will suddenly have two sets of rent and utilities to pay for. I will be downsizing to a smaller apartment to save money, but our finances will still change. Exactly how much, we don't know. And from prior experience it will be a couple of months after the move before things settle down and we can get an accurate picture of our spending habits.

To give you some more background the student loan will be at 6.8%, my car loan is at 5.99% and DH's car loan is at 3.59%. We currently have a decent amount of money in cash (earning 5.0%) between our EF and down payment funds. In theory we could pay for a year of school flat out--but then we'd be broke.

With so much up in the air this is what I'm thinking:
*Take all of the student loans they'll give me for Fall term.
*Pay off the interest each month.
*After paying tuition any extra money will be put in our savings account (5%).
*Try to have us only live off of DH's paycheck and not touch the loan money.
*Adjust and see if less money can be taken out for Spring term.

From there things get a little more murky.
*Should we continue to put our monthly "profit" towards our cars and retirement?
*Should that money instead be diverted towards the student loan?
*Should I even hold onto that extra loan money or should we use our EF/Down payment money to cover any potential gap?

Any insight or opinions would be greatly appreciated. I'm a little surprised I'm having a hard time with this. I think it's because the completely fiscally responsible thing (avoid all debt like the plague and pay it off ASAP) is in conflict with the plans we had (pay off the cars early, save for retirement, and take out loans for school expenses).

6 Responses to “Bring on the debt!”

  1. Danaan Says:

    What I am unable to understand is why you're taking a loan at 6.8% to pay loans at 5.99% and 3.59% or to put into a saving account at 5%. It's a loss right off the bat. Does your ROTH out performs the interest rate on your loan? If not, then you shouldn't get yourself further into debt and that a big DEBT not "profit" of any kind. Just borrow enough to cover only your tuition. Are you working right now? If not then consider taking on part time jobs to meed any further financial needs.

  2. LuckyRobin Says:

    Have you tried searching for grants or scholarships available to family members or dependants of people in the armed forces? I remember reading awhile back that more of these were becoming available, especially to people whose family member was on active duty.

  3. ktmarvels Says:

    Danaan-

    I'm not taking out the student loans (the one at 6.8%) to pay off my other loans. I am going to take out the full amount they'll give me this term and stick it in my 5% checking account though. I'm hoping not to actually have to use that money, but I'd also rather be able to have it incase the need arises. I don't want to not take out the loans and then have our household expenses increase more than we expect and run through our downpayment and emergency funds.

    Also the "profit" I'm refering to is the current 1000/month that DH have been saving which will end in Novemeber and we have been using to pay off our cars early. I was asking if we should take that 2000 and put it to our debts as planned or if I should save it and put towards my student loan too.

    Sorry, I know all of this is confusing. I feel like I'm juggling three balls (2 car loans and 1 household expenses)and a fourth and fifth (2nd household and student loans) of unknown size are going to be added.

  4. Connie Says:

    Any chance you can do most of your classes online & do the 'attendance mandatory' classes in Maine for a year so you can go with him & not have to put out the money for doubles?

  5. SicilyYoder Says:

    I remember the student loans, and I didn't even make it to pharmacy school-decided to become a celebrity instead, but I remember how expensive nursing stuff was when I wa sin school. The day I got pinned after graduating, I cried, for it was a long, hard path.

  6. Ralph Says:

    I feel your pain - I'm just now having to take out a loan for my daughter's spring semester. I can't decide how to handle the payments. It seems like private student loans are less flexible than other loans in that they try to make you decide ahead of time how you will pay - either defer all payments until 6 months after graduation, pay interest only, or make regular payments. So I wonder if you choose the safest as far as being able to make payments, deferring, if they will still let you make payments. I guess I need to call them.

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