For day three of Fixing Terri’s Finances, she and I sit down and talk about the burden of the student loan debt she is dealing with. The first step is to find out exactly how much she owed. Do you know exactly how much debt you owe at this exact moment? Most people don’t. And neither did Terri. It turns out in Terri’s case, we were looking at over $100,000 owed for a bachelor’s and master’s degree. I’ll give you a moment to recover.
When we both saw the $100,000 total, Terri admitted she didn’t even know how or when the amount got so high. She, like many people, picked a college and decided to get a master’s because it’s what everyone did. Plus, she thought she’d be able to earn more with a master’s degree. The cost of it all stacked up behind the scenes.
As of today, Terri is making about $50,000 a year at a job in her field of study. Given the amount she’s making and the amount she owes in student loans, Terri needs to come to terms with the reality of a long, arduous debt payoff timeline. She’s in for a long student loan journey.
Thankfully, we discovered her employment in public service qualifies her for a federal student loan forgiveness program. To be a part of this program she needs to make minimum payments on your loans for the next 10 years. If she does this, all her remaining student loan debt will be forgiven.
As for her other debts, Terri needs to put the income from her second job as an adjunct professor toward paying those down as soon as possible. Having extra income from a second job is awesome. But if you don’t use it properly, it can easily get absorbed into your lifestyle. Teri needs to give her second job a job. Meaning, she needs to put all her second income toward her other debts. Download today’s Fix Your Finances worksheet and start making progress on your debt today.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.
I came across this blog and just read about Terri and her student loan debt. I too have student loan debt, of around $50k. I have already started working with a company that helps with forgiveness. I also have a 1st and 2nd mortgage. I have some investments and have been wondering if I should start chunking down the 2nd mortgage ($60K at a variable rate currently 4.25%). I hesitate to turn the loan into a fixed rate b/c I probably can’t afford the payments since paying the student loans too. My thought process is that if I pay down the 2nd mortgage, I am investing the $$ back into my home (real estate). Does this make sense?? I’m not sure what my investments are yielding interest wise, but from your section on that, I’m guessing 7% may be accurate. Please let me know what makes sense.