To anyone drowning in their student loans, hello. Welcome to my world.


We've been doing a lot of math over here lately. My current temporary employment contract is almost up, and it's time to accept a permenant placement. (Or "a real job" according to the curmudgeony old man who failed to give us a house loan). The hospital where I'm working now wants to hire me but isn't able to pay as much as my contract company. None of this is a surprise. You do get paid significantly better for moving across the midwest, living out of boxes in someone's basement, paying a mortgage on your empty house in a different city, and working a high-need position with no job security or training. 

A few months ago, I organized all our debt in a spreadsheet and formed a general repayment plan to pay off the highest interest accounts first. Since then, we sold our first house and paid off the related accounts (that mortgage, appliances, random Lowe's charges from before moving).

That meant that the next highest interest rate on the list was one of my student loans. It's time! Oofta.

In Novemeber, we applied for the government's Income-Based Repayment plan. There are a few different versions of this plan, so look up specific information if you're looking into this. Every year you have to re-qualify by sending in your tax information as well updating your marital status, family size, and amount of loans. Basically, as long as your yearly income is less than your total original loan amount you qualify. Their math formula then computes a reduced payment that it thinks you can manage. After 25 years of this, the government forgives any remaining balance.

The payment amount the government calculated for us was great (about 10% of a standard 10 year repayment amount). However, there were a few reasons this plan was stressing me out.

• First of all, there is no guarantee this program will be around in 25 years. Hello, fiscal cliff.
• In 25 years, I could have children in college and still be paying off my own college loans. WHAT.
• Our payments would be less than the interest accruing, so six figures of student loans at 7ish percent interest x 25 years ... is a very large amount to carry on our credit score. This could prove problematic whenever we buy our next house.
• The real deal breaker: we would have to PAY TAXES on the amount forgiven.

I didn't bother to finish the math. The whole thing just seemed too risky. So while IBR definitely isn't a good long-term plan for us, it does give us flexibility to direct our monthly payments (beyond the reduced amounts) to whichever loan we like.

Here's to my first resolution of 2013: paying off my highest interest student loan this year! It's at 8.25% interest (after a rate reduction for using autopay) and weighs in at $27,125.21.

Why so ambitious? Oh, because that's only about 15% percent of my student loans and we can always start on Jon's when mine are done.

Wait Heather ... aren't you the only one working and your husband is a student and you just bought a house and you have an addiction to sparkly things? Well yes. Consider this a yearly forecast for lots of posts about budgeting :)