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flo's avatar

What is a good formula for paying back student debt?

Asked by flo (7514 points ) February 23rd, 2012

What is a reasonable length of time to be done paying it back if you start working immediately after graduation, and nothing unforeseen like sickness, death etc. occurs. Let’s say you start to earn $70,000. And you owe $80,000.

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18 Answers

Judi's avatar

Live frugally, don’t assume any new debt, and pay it off as fast as you can. Highest interest first.

CaptainHarley's avatar

Do without until you’re free, then only pay cash. If you don’t have enough cash, save until you do.

tranquilsea's avatar

@Judi is right. Live as frugally as possible with little splurges here and there so you don’t feel deprived. Then pay off the highest interest debt first in as big a monthly payment as you can manage. Even better: pay those debts twice a month to pay them off faster. Any extra money you come across: slap it on the debt.

Bellatrix's avatar

Really, it is the same principle for reducing any debt. Spend less, pay off more. Does your government take payments out of your pay when you reach a certain level of income?

Here, when you start earning a certain amount of money your employer starts to take an amount out of your pay. You can still end up owing money at the end of the year. I had two jobs and paid 48% tax on my second job but it worked well because at the end of the year the refund on overpaid tax always covered any shortfall in my study debt. I paid it off in just a few years. You can make voluntary payments too.

sliceswiththings's avatar

I chose the graduated option. I pay something like $200 a month for the first couple of years, but it really only covers interest, it’s terrible. I chose this plan so I don’t have to find a serious high-paying job for the first few years. After that, I’m going to be paying more per month, but it’ll speed things up. It’s still going to take 10 years. Work on paying off the ones with the highest interest first. Paying student loans really sucks. The interest is crazy. My loans are almost doubling because of interest. I honestly try not to think about it, my payments are automatically withdrawn from my bank account. Every once in a while when I check my bank balance I remember those payments, and have a couple fewer lattes to save money till I forget again ;(

Seaofclouds's avatar

I took the plan that gives me the lowest required payment at this time. I pay that every month on time and then send in an additional payment that states directly on the payment that it is to go to the principle only. I pay extra every month to the principle and plan to continue doing this until they are paid off.

wundayatta's avatar

We paid back our debts in less than ten years. We didn’t have the debts you have 20 years ago, but we also didn’t have the income you are anticipating. We paid off those college debts and we paid off a couple of cars and we paid off a house and then bought a car for cash in the time since then. And I’m just starting to make what play to start at. What is your field? Maybe I should change.

But it shouldn’t take long to pay off your debts at that income. Unless, of course, you like to spend a lot of money. We don’t like to spend money on much of anything. Except maybe the house and the car.

Ron_C's avatar

I really hate the idea that a student is essentially a bond-servant working to pay off university debt. This is the only “civilized” country where that can happen. Most modern or advanced country provide low or no cost advanced education to students that maintain a good grade average. Personally, I think you should hold off paying college loans until this country comes to its senses.

Bellatrix's avatar

Tertiary students in Australia end up with a debt at the end of their studies @Ron_C and a very similar system to the one operating in Australia has been introduced in the UK. Do you remember the riots in the last year or so? Of course, perhaps you don’t consider the UK and Australia to be ‘civilised’ countries.

It would be great if students could enjoy the free education of the past, but I think those days are long gone and wishing them back will not stop the interest charged on student loans continuing to increase their debt.

flo's avatar

@Ron_C
Students don’t have to get into that much into debt if they don’t want to. They can postpone it till they earn enough working full time. They can work partime like a lot of them do. Or they can choose to spend their money on cigarettes, bars, trendy clothes, the latest gadgets and on and on and then complain that they are burdened with that much debt.

And how about they get their free education from the countries you mentioned and go elsewhere to work? How fair is that to the society that gave them free education?

So, the question is what is your formula so they don’t become as you put it “essentially a bond-servant working to pay off university debt”

sliceswiththings's avatar

@flo We can’t complain about being burdened with debt if we don’t spend money on cigarettes, bars, trendy clothes, and gadgets?

CaptainHarley's avatar

Anyone can complain about anything, but to be able to complain with justification you should have external forces working against you.

flo's avatar

@sliceswiththings Would you like to give an example of what you are referring to?
And I hope you read @CaptainHarley‘s response.

flo's avatar

@sliceswiththings maybe you missed the detail part of my OP? ”...and nothing unforeseen like sickness, death etc…

flo's avatar

@Bellatrix and @wundayatta re. your questions, I am not a student, just an interesting topic for me.

Ron_C's avatar

@flo I don’t see why a student has to go into debt to pay for his/her education. If I was king, I would give well performing high school students a position in our state college. I would also have more teaching professors and fewer “teaching assistants’ in class. The university system is so screwed up that professors teach based on the books they’ve written. That’s one of the reasons that many text books cost more than $100 or close to $200 and are more a tribute to vanity with little educational merit.

wundayatta's avatar

@flo Let my try again. What fields can you start out making 70K fresh out of college? That seems like an awfully high starting salary for a bachelors degree. Or is that some other currency besides American dollars?

flo's avatar

@Ron_C I already showed how generally, students don’t need to go into debt, and how about other people who answered? They also showed how.
And if you were king, and you gave the positions would the cost be coming out of your personal wealth? If so no problem. But the middle class shouldn’t be saddled with the cost when the student can start paying it off at least after starting a job.
(Edit to Add) I didn’t mention the scholarships full or partial. People who would rather not pay can study harder to earn those schoarships.

@wundayatta I was actually giving out a random numbers. I didn’t mention bachelors degree. So, you can change the numbers to whatever is more likely. But the basic message is live frugally, which I agree with.

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