My husband and I have alot of debt due to my student loans that are almost 100,000, and then of course we have a mortgage, car payments and the household bills. I feel like we are drowning and our savings is dwindling down fast.
How can we get this under control before we are totally broke?
If your savings are dwindling that tells me that there has been some change in the household income or expenses. At one time you were able to save, and now you can’t.
Having money in savings is great and critical but it is clearly a warning sign of bad things over the horizon if you are spending down your savings without a solution that will stop that need. Otherwise what will happen is you will spend yourself down to broke.
If you are unable to raise income you will have to lower expenses. That might mean moving, downsizing, bankruptcy or some other radical adjustment. Typically among the most expensive bills each month are the mortgage and car payments.
If you have government backed student loans, investigate the new Income Based Repayment (IBR) program that will modify student loan payment.
Income Based Repayment (IBR) is a new repayment plan for the major types of federal loans made to students. Under IBR, your required monthly payment is capped at an amount that is intended to be affordable based on your income and family size.
Any Stafford, Grad PLUS or Consolidation loan made under either the Direct Loan or FFEL program is eligible for repayment under IBR, EXCEPT loans that are currently in default, parent PLUS Loans, or consolidation loans that repaid a parent PLUS Loan. The loans can be new or old, and for any type of education (undergraduate, graduate, professional, job training).
You may enter IBR if your federal student loan debt is high relative to your income and family size. While your lender will perform the calculation to determine your eligibility, you can use the Departments IBR calculator to estimate if you would likely benefit from the IBR plan. It looks at your income, family size, and state of residence to calculate your IBR monthly payment amount. If that amount is lower than the monthly payment under a 10-year standard repayment plan, then you are eligible to repay your loans under IBR. See below for a more detailed description of how IBR eligibility is determined.
The following chart shows the maximum IBR monthly payment amounts for 2009 for a sample range of incomes and family sizes.
|IBR Monthly Payment Amount|
After the initial determination of your eligibility for IBR, your payment may be adjusted each year based on your income and family size, but your required payment will never be more than the standard 10-year payment amount (unless you choose to exit the IBR program).
Under IBR, the amount an eligible borrower would repay each month is based on the borrowers Adjusted Gross Income (AGI) and family size. The annual IBR repayment amount is 15 percent of the difference between the borrowers AGI (or an alternate income amount) and 150 percent of the Department of Health and Human Services Poverty Guidelines, adjusted for family size. That amount is then divided by 12 to get the monthly IBR repayment amount. If that amount is higher than the 10-year standard repayment amount on the borrowers loans, then the borrowers required payment is the standard amount. The repayment amount under a 10-year standard plan is calculated based upon the total amount borrowed and the applicable interest rate applied over 10 years. (Unlike the IBR plan, the repayment amount under a 10-year standard plan is not based on your annual income.)
Example 1 – Based upon the IBR repayment formula a borrower with a family size of one and an AGI of $30,000 would have an IBR calculated payment amount of $172 per month. If this borrower had total student loan debt of $25,000, the calculated monthly repayment amount under a 10-year standard plan with an interest rate of 6.8 percent would be $288. Since the $172 IBR calculated amount is less than the 10-year plan amount of $288, the borrower would be eligible to repay under IBR at a monthly amount of $172. However, if this borrowers total educational loan debt was only $10,000 the 10-year calculated amount would be $115 per month, which is less than the IBR amount of $172. Thus, the borrower would not be eligible for IBR.
Example 2 – A borrower with a family size of four and income of $50,000 would have an IBR calculated monthly payment amount of $212. If this borrower had total student loan debt of $20,000 the calculated monthly repayment amount under a 10-year standard plan with an interest rate of 6.8 percent would be $230. Since the $212 IBR calculated amount is less than the 10-year plan amount of $230, the borrower would be eligible to repay under IBR at a monthly amount of $212. But, if this borrowers total educational debt was $15,000, the 10-year calculated amount would be $173 per month which is less than the IBR amount of $212. This borrower would not be eligible for IBR.
For more information on other repayment plans and calculators, click here.
For more information and to apply for IBR, you should contact the lender or lenders who hold your student loans.