Do you remember the letter from Economic Slave in Chicago?
He wrote to the Moneyist in July 2018. Here’s his letter in full and my response.
Here’s a short recap of his original problem:
“I’ve known my wife for eight-plus years and I’m happily married with a newborn son. We both make a good living ($100,000 per year), but we pay a significant amount in student loans. I work multiple jobs, and we get some help from my parents and scholarships. My master’s cost three times less than her master’s. She owes over $200,000 in federal student loans and another $20,000 in private student loans (one is at 12%).”
I recommended the National Foundation of Credit Counseling, which helped a couple I interviewed with $125,000 in debt, and I gave them other pieces of advice. Obviously, situations like this are more difficult to handle after the fact (in this case, the wedding). It was a breach of trust, sure, but there was one piece of silver lining: They loved each other and at least his wife’s spending was on her education rather than on lavish consumer purchases.
Don’t miss: Should jewelry only be passed down to female family members?
And so to his update and how they are tackling $480,000 in debt:
Here are excerpts from his update to the Moneyist:
“Our family was left with over $480,000 in debt and that put a serious strain on our marriage. After having a serious talk, we created a crude Microsoft Excel MSFT, +0.03% spreadsheet that had three student loans totaling $240,000, new house appliances that were purchased when we moved, including mortgage, car, monthly credit-card expenses, and hospital bills from our newborn son.
That Excel eventually contained the loan, the loan name, hyperlinks to pay it, due dates, amount due each month, proposed payment plans, total amount owed, interest and any additional notes.
We also broke down our credit-card debt to include recurring payments on the credit card. We asked our bank and online financial services companies for help to refinance some loans, but we did not have any luck. The banks’ advice: “Pay things down as fast as possible.” Not really a revelation to us.
Since the end of July, we paid off all appliances as they had a 0% interest rate for 12 months, but they were still eating into our budget every month. We then paid off a student loan with the highest interest rate (12%) of $13,000.
Also see: This one trick drastically changed borrowers’ approach to their student loans
We revisited the largest student loan, which had $900 in interest every month. We called and spoke with multiple representatives before we could start to get a clear answer. Every time we called about the student loan terms, we got a different answer.
When we talked to the manager/loan officer, whose number is not given out so easily, we reached solutions. We reached this person on the sixth call and spoke with them at length. We had previously been told that my wife’s loans were on deferment. This was incorrect as the loans were placed in forbearance and were accruing interest.
It was also explained to us that the income-based repayment plan was the best option for my wife. However, this income-based repayment plan did not cover the interest that grows on the loans. We took these loans off an income-based repayment plan and put them on a level repayment plan, which carry $900 in interest each month and we pay down about $600 in principal each month.
The large student loan caused us the greatest difficulty. My advice for others out there is to stay the hell away from what we felt were severely under-trained customer service reps. Speak to loan officers and record phone calls.
We are on pace to pay off my wife’s car in the next two months (which will open up $500 a month for other debts) and her smaller student loan of $16,000 by the end of 2019. Although my wife’s car payment has a lower interest rate than her smaller student loan, the extra $500 a month will alleviate a strain (versus the $100 due on the small student loan) and allow us to save a little each month or put towards other bills.
Also see: America’s $1.5 trillion student-loan industry is a ‘failed social experiment’
My wife is still working full time and I’m working effectively two jobs, but in a family business you’re always working. We have reduced our debts to $430,000 in five months and have learned a lot (collectively). The best feeling in the world is deleting lines from that spreadsheet.
Take care and happy New Year.”
Do you have questions about inheritance, tipping, weddings, family feuds, friends or any tricky issues relating to manners and money? Send them to MarketWatch’s Moneyist and please include the state where you live (no full names will be used).
Would you like to sign up to an email alert when a new Moneyist column has been published? If so, click on this link.
Get a daily roundup of the top reads in personal finance delivered to your inbox. Subscribe to MarketWatch's free Personal Finance Daily newsletter. Sign up here.