Question

Opinions needed about my school loan. I'm near debt free. Single mom/income. I have a small savings account. I have life insurance, a trust with my house in it for kiddo, and have a solid mortgage with equity. I have an older car (2005) that's still going strong but showing age. I send my kiddo to private school (non negotiable). From experience, I think its sooo important to have a robust savings. I don't have that yet. I also have an old $26k school loan. It feels like a nag. I also know from experience that underwriters are pretty forgiving about school loans being on your credit. It would be neat to pay the school loan off some day and get that monkey off my report. It has about zero effect on my finances. I barely pay on it now but enough to keep it in good standing or defer it because I resent it. It came from a defunct school and I dont use it. It's not eligible for forgiveness because it's not in violation bit should be. If I were to really make an impact, I'd personally feel like I would need to pay minimum of $500 a month. Besides it being a financial and moral obligation to pay it would you: 1. Pay minimums forever and pump up the savings account? 2. Pay it off for 60 months and treat it as if I had a car loan? And then essentially be debt free by the time kiddo is 10yrs old barring any surprises? I will need another car in those 5 years. 3. Is there a known option for a settlement if I paid, say $15k today? I get that the non paid would be taxable as income. It's a Government loan. 4. Other. please explain.  

Answer 1

If you can swing 3, I’d go that route then start saving for a new car for when your 2005 car dies

Comments

@find501 do you know of a settlement option? Do they do that? I'm not in default.  

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@find501 also, I would have to save for the settlement. I don't actually have $15k, but I can work my butt off if this was an option. It's just a figure that I came up. woth knowing how default settlements work.  

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@giddy if you’re not in default, they probably won’t. To my understanding, when collection companies buy debt they’re willing to settle for say nickels on the dollar because they bought it for pennies on the dollar

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@find501 wow. You would think they would want to sell it to me for more if offered. Lol.  

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@giddy ooo gotcha! Okay so then I change my answer lol, 2 unless you’re willing to let it go to collections. Unfortunately, the bank will see it as debt you pulled so you owe it back and if you have the means to keep it current then in their eyes you can keep paying minimums for forever

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@find501 no. Definitely dont want to ruin my hard work and let it default. That's the worst, a night might mare.  

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Thank you for the feedback, btw.  

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@giddy gotcha! Using hypothetical numbers, I’d split any extra like 60% to that loan, and 40% to save for a new car for when yours eventually dies so both goals are in mind

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@find501 oh, I like that.  

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@giddy happy to help! I have a car and one CC left and right now I’m happy to kinda just coast along but I’ll probably seriously tackle the cc by end of summer just to be done with the CC debt and my car long story short I’m trading it in knowing I’ll more than likely be rolling over negative equity but ‍♀️ live and learn

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@find501 totally. For the first in a long time, I feel like I can actually enjoy my money. Hence the small savings and establishing a trust. Now, to give my money into this final loan is so arduous. Just feels like I'm about to embark back on a zero savings situation only to barely see movement on a large loan unless I pay large chunks.  

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@giddy I was blessed to not have to deal with student loans but from what I’ve seen on this page, they seem like a nightmare!  

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@find501 it's my only financial regret. I hope to never let me kid get into that situation. It was an online school. My then husband had to help me pass because just transcribing the algebra formulas in a word doc for example was so tedious. Failing meant loosing $800 on one class and maybe even the semester. So very stupid and expensive. Their sales people are incredible and so many lies. It's such an old loan that proving the lies would be a full time job if not impossible to find transcripts of the enrollment and conversations at this point. Live and learn. Fortunately, the loan hasn't really grown too much from interest over that many years.  

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@giddy that’s good!  

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@giddy For government loans, there is really no way to negotiate down the amount owed, with very few exceptions like proving school fraud. Government loans aren't sold to collection agencies, for pennies on the dollar, so the company is happy to setlle for less than full amount, because the government can do things like garnish wages or income tax refunds if it wants to get aggressive. Generally, only private loans will do loan settlements or forgiveness. If you have the loan forgiven, its treated like income and you have to pay taxes - so you would owe taxes on 26, 000 (so pretend your tax bracket is 22%, you would owe $5720 in taxes)

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@highjack I would love to pay the income taxes and have it written off. Lol. In reality, I get what you are saying. I just drew out a plan for it. If I am super aggressive, I can have it all. A savings or cash flow a nice used car. And pay off the school loan in 3 years. I came this far. literally the depths of hell to this in under 5 years. So this should fly by.