reeneejune
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Post by reeneejune on May 31, 2011 15:18:05 GMT -5
Here's my situation:
I'm 27, I'm planning to go back to college in the next 1-2 years. I estimate that it will take me about 2-3 years to complete my bachelor's degree and another 2 for my master's degree. I have a reasonably decent job right now, and I immediately started contributing to the company 401K when I became eligible. I'm contributing 8% and the company is matching 3%. The current balance is ~$3,000 including the company match. I don't currently have any other savings. After completing my education, I estimate that I'll be making about $30,000/year in a stable field (demand is expected to grow quite a bit over the next 10-20 years).
Vesting: I'm currently 33% vested in the company match for my 401K. If I continue working for the company through August 2012, I'll be 67% vested and if I continue through August 2013 I'll be 100% vested.
Dollars and cents: I'm currently contributing about $150 per month to the 401K.
So, my overall question is: do I keep contributing to the 401K or do I reduce my contribution and instead save up for college?
Some scenarios I've been tossing around: - Reduce 401K contribution to 4% (2% company match), save 4% toward EF/college savings.
- Stop contributing to 401K altogether and save 8-10% for EF/college.
- Increase 401K contribution to 20% and cash it out once I'm fully vested and stop working for the company, use the money to help pay for college.
Are there some options I'm not considering? I don't really have a lot of free income right now to play with aside from what I'm already sending to the 401k, that last option would be a bit of a stretch. Can you tell I'm a little clueless right now? LOL. I'll take any suggestions, but please be gentle with me.
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salserabarby
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Post by salserabarby on May 31, 2011 15:59:58 GMT -5
- Increase 401K contribution to 20% and cash it out once I'm fully vested and stop working for the company, use the money to help pay for college. I think this wouldn't be the best option. When you cash out a 401(k) before you are 59 1/2 years old, you will be penalized by the IRS and also you will have to pay taxes on it. All in all, it is estimated that about 40% of your 401(K) will be reduced. The math: 3% of $3000 = $90 company match x 33% vested = $29.70 + $2910 (your portion of the 401(k)) = $2939.70 x 40% = $1,175.88. This is the amount of cash you'll be left with after penalties and taxes. There are a couple of things to consider. How much will college cost you? I ask because $30,000 a year is not really a great paying job. If you are going to pay $20,000 in school and end up making $30,000, the cost benefit is not worth going. The one bit of advice I can give you is DO NOT get into student loans. I was one of those people taking out student loans without realizing the impact of it in the end. If I had to do it all over again I would have saved up and cashflowed my school.
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Deleted
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Post by Deleted on May 31, 2011 16:24:55 GMT -5
I think 401k withdrawals are almost always a bad idea, so I would take that one off the table for certain.
How passionate are you about your chosen field? Not to be cynical, but $30,000 per year isn't a whole lot of money for someone with a master's degree. I work in a relatively low-paying field. I get a lot of job satisfaction from my work, but there were a lot of lean years (it is not a coincidence that I joined WIRR). So if it is your calling, by all means, go for it. But I would try to limit any borrowing you have to do to get there.
Could you get a job at your local college? You may be eligible for tuition remission if you do, which would make even a lame position a bit more appealing. (They also tend to have generous retirement packages)
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reeneejune
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Post by reeneejune on May 31, 2011 18:03:11 GMT -5
I'm looking to get a master's in Social work, and that number I threw out for estimated yearly salary was the result of about 30 seconds of research on the Oregon Employment department website looking at option positions in that field. Am I passionate about it? Yes, very much so. Do I realize that I won't ever get rich that way? Yup. Doesn't bother me. And believe me, I'm fully aware of the trap of student loans, and I fully intend to avoid them like the plague. Though any student loans I take out would be eligible for forgiveness after 10 years in my field.
I didn't figure cashing out the 401K was going to be a good option, I guess I thought there was a small chance that the education tax credits would somehow balance the taxes owed on the money.
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Deleted
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Post by Deleted on May 31, 2011 18:35:44 GMT -5
Are you sure the 401k is the best for you, past the match I mean? Would a Roth be better? If you are taking the saver's credit I cannot believe you are paying very much in taxes. Other than that I might drop from 11% to 10% and save the 1% towards college. I would also look into scholarships since you are older.
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spruby
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Post by spruby on May 31, 2011 19:00:34 GMT -5
I work with pensions - so I can get passionate about this but:
No no no on cashing out the 401k.
Important rule for retirement/college - you can borrow for college you can't borrow for retirement.
Put enough in your 401(k) for the full company match (free money/instant return!).
Then start funding your EF - 3 to 6 months living expenses.
Start saving for school.
Social work is a great field. You will make no money. You know both of these things. Please do not count on the 10 year loan forgiveness - what Congress gives, Congress takes away. Plus you have to pay them for 10 years - perfectly. Plus you can't count on getting a job that qualifies for the program. Governments have been outsourcing social work to non-profits to save money.
Have you talked with some social workers? Agencies? What is the best career path? Options?
If this is your passion - figure out how to do it with no loans. It will take longer but it will be worth it. Oh - look for a combined ba/msw too.
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reeneejune
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Post by reeneejune on May 31, 2011 19:31:40 GMT -5
gin - no, I don't pay a lot in taxes. Frankly I don't have enough money to start an IRA and it would likely take me more than a year to work up to that point. The 401k options they offer are reasonably good (currently with Vanguard, moving to T.Rowe Price in July - lower fees or something like that). And yes, I'll absolutely be going after any and every scholarship and grant I can find. spruby - thanks for the input. I'm well aware that what congress giveth, congress taketh away. The current loan forgiveness program includes both government agencies (federal, state, and local) as well as non-profit organizations. Regardless, I'm going to do my very best to incur as little student debt as possible. I'm not so naive to think I'll make it through with no student loans, but I can sure keep my living expenses low to soften the impact. Oh, and I checked on the combined bachelors/masters, the only university in my state that offers the master's doesn't have a combined option. My other strategy that I forgot to mention earlier is that I plan to take as many required courses as possible through a community college before transferring to a university for my bachelor's. I'll work with an adviser or counselor from both schools to help ensure that I stay on track.
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DVM gone riding
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Post by DVM gone riding on May 31, 2011 20:14:59 GMT -5
so just want to make sure I read that right, You are getting a MASTERS degree to make 30k!! I think you need to pick a different field, sorry that is way to much school for that amount of money
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reeneejune
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Post by reeneejune on May 31, 2011 20:36:51 GMT -5
Thank you for your opinion. That's a lowball starting salary average. I managed to pay off 20K in student loans in less than 10 years making about 15,000 a year average, so I think I'll survive.
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Deleted
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Post by Deleted on Jun 1, 2011 13:52:55 GMT -5
Reenee, how much do you make gross per month?
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DVM gone riding
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Post by DVM gone riding on Jun 1, 2011 15:25:26 GMT -5
sorry Reene I wasn't meaning to put you down, what you are wanting to do is impressive, BUT if you really want to do it do you need the masters. Most of the people I know in Social work don't have one. That said my aunt got hers and always made more then her husband because of it. But she also made more then 30k a year. Then that was before the days of massive budget cuts. My advice would be get the BA work a while see if they will pay for you to go back and get the masters.
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Post by stl76 on Jun 1, 2011 15:36:32 GMT -5
"If you are going to pay $20,000 in school and end up making $30,000, the cost benefit is not worth going."
Not necessarily true. If it will increase her income from 20-25k to 30k, it would be worth going. Because it will be increasing for the rest of her career not just 1 year. But if will cost 50k or something, I'd say not worth it and I'd suggest a better paying career. Have you saked your company if they have tuition reimbursement?
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reeneejune
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Post by reeneejune on Jun 1, 2011 20:05:26 GMT -5
My company does not have tuition reimbursement. I currently work in retail, so no degree needed and thus no urge to get a degree.
Last year I made just shy of $21,000. This year I might hit $22,000. Gross per month is about $1800-1900.
I have done some research on this, and while I can get a job with just a bachelors, a master's opens up many, many more job opportunities in a variety of fields. For example, I could be a LCSW and provide individual and family therapy in a private practice (with minimal oversight by a PhD). I would be better prepared to be a supervisor in a social services setting. I've spoken with a couple of people in the field as well as a few people who are currently in school to ensure that this is the educational path I want to go down.
And to be absolutely honest with all of you, WHAT I'm going to school for isn't the point here. It's the fact that I AM going back to school, and thus need to be financially prepared. Considering the field that I'm interested in, it's even more important that I'm financially prepared when I go back to school. So as much as I'm passionate about the field I've chosen, I had really hoped to get some solid financial advice to help me prepare.
dvm - beginning to work after receiving my bachelors is certainly an option, in fact, I almost favor that as opposed to going straight into a master's degree program. But considering my age and the fact that it isn't my first time at the rodeo so to speak, I have a strong sense of urgency to get in and get it done. One of the options at the university I'd have to attend for my master's is tailored to professionals who are currently working in the field and allows them to continue working while they complete their masters.
;D I'm young enough that the cost to benefit over my working life is still in my favor even though it's not a higher paying field, but I'm old enough that I need to get crackin' if I'm going to see the benefits before I'm old and grey.
BTW - Today I bought 2 math textbooks for $5 for a little self-directed refresher course before I start taking classes. Because even at community college, I don't care to pay $300 to re-learn stuff I studied in Junior High. Thank goodness for textbooks with many of the answers in the back.
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reeneejune
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Post by reeneejune on Jun 1, 2011 20:33:13 GMT -5
I wanted to mention, I took a quick peek at the US Department of Labor Statistics to get a better estimate of my possible future earnings, and it looks like it would range from $35k a year (the lowest average for one of the occupations I'd be qualified for) to $57k. I think that rather increases the benefit part of the cost vs. benefit argument. I'm looking at numbers for social workers and counselors in the state of Oregon.
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Deleted
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Post by Deleted on Jun 1, 2011 21:02:09 GMT -5
Reenee, your effective federal tax will be something like 6-7%, how much do you need to put in the 401k to get the match?
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chicg
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Post by chicg on Jun 2, 2011 7:53:56 GMT -5
Congrats on picking passion over money. It's not an easy choice, I did it years ago and as mentioned, there were (still are) some lean years but I'm doing alright. My debt was not because I had trouble paying student loans, I got stupid with my personal spending.
Anyhow, DO NOT do a 401K withdrawl. I think it's smart to keep investing in the 401K up to the company match. With the rest, I think I'd split between EF savings, pay as you go to school and take out some loans. I might get slammed for this but if you can get a gov student loan, the rates are low and I think it's important to keep saving for retirement and other things because at 27, you're a little behind in savings. I wouldn't finance all of your degrees but if you took out say $10K total in loans, your payments won't be that high. You wouldn't be obligated to pay back until you finish school and that would give you time to get some savings in place. If loans are used responsibly and you are aware of your payments upon graduation, it's not that bad of an option. What I WOULD NOT do is take out private loans or borrow so much that your loan is larger then your starting salary.
good luck!
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murphath
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Post by murphath on Jun 2, 2011 10:32:15 GMT -5
reeneejune: What do you estimate the cost will be to obtain your bachelor's degree? And then what will the additional cost be for the master's degree? My oldest daughter has a master's degree and was able to finance that by working a p/t job. Most of her classes were in the evening and you don't take as many classes as for a B.A./B.S. degree (and she was in a science field). And she attended a state university---not a private school. Since she didn't have any obligations for anyone except herself, it worked out fine: rented a room, spent frugally, etc.--the typical student lifestyle.
If it were me, I would match the 3% contribution being made by your company and put the remaining % in an account for school. A master's in social work does pay better than $30K a year. You could work at a community college/university as a counselor and make much more than that after 3-4 years. I worked in a counseling office and those counselors made @ $65,000 year for 10 months of work; 6 hrs day. If they work in summer, that's considered "overload" pay. Of course, I'm in California and Oregon may be somewhat different.
Also, I agree with everyone else: do NOT cash in your 401K!!!
Good luck pursuing your goal!
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DVM gone riding
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Post by DVM gone riding on Jun 2, 2011 22:43:29 GMT -5
well I have a lot in SL so I won't fault you in that. I have a friend out right now with her BA in social work, she makes about 22k (I helped her with her taxes) and she has to pay a lot in SL. I say whatever you do do not take ANY private loans, It makes a lot of sense actually to borrow from the government and then put money in a 401k if you are going to get a match, if you aren't I don't know you would have to look at the math carefully, one thing is the SL are int deferred when you are in school.
I would say had to the 401k to get the match, DO NOT borrow from the 401k, have the extra that you are no longer contributing directed to something like smarty pig or ING to save for school.
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reeneejune
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Post by reeneejune on Jun 4, 2011 0:38:24 GMT -5
Just like any field, I'm well aware that there's a wide range of available salaries, depending on what area I choose to specialize in and where I decide to live. For now, I'll use the "lowball" numbers... plan for the worst and hope for the best, right? I have definitely learned that private student loans are . I've also learned the hard way that private colleges are bad for the pocketbook as well ($30,000 and two years worth of worthless classes later). I'm going into this much smarter about my day to day expenses and getting my money's worth out of my tuition. For those who have asked, here are the ball park numbers for cost of going to school. This does NOT take into account any possible financial aid (I haven't received any award letters yet) Community College (core classes if possible) : $1840 (assuming I take 20 credits over two terms, I know I'll need at least one math class and two science classes to meet basic general education requirements; this does NOT include living expenses) State University (2 years) : $44000 (This DOES include living expenses) City University (2 years for Master's program, the only program in the state) : $50,000 (This DOES include living expenses) To clarify, the above tuition estimates are for the entire amount of time I expect to be in college at that school, it's not a one-year price. The two state universities have virtually identical tuition costs, so I'll go with whichever one has a better prep program for the master's degree I want. I'm not willing to move out of state for my master's degree, so I'll have to go to the one university in the state that offers the program. So far the advice that I've gleaned that I feel I can apply is: - Don't borrow or withdraw from the 401k to pay for college. - Keep contributing to the 401k, but only enough to get the full employer match (6% from me, 3% from them) - Minimize costs for school as much as possible - Build an EF with any available funds prior to returning to school - If possible, work through school. I'll definitely continue to work while I take core classes at the local community college, and hopefully pay for those with grants/scholarships/out of pocket. Once I transfer to the university to finish up my bachelor's, I'll evaluate how well I'm doing in school and how comfortable I am with the course load and how flexible my job is willing to be with scheduling.
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qofcc
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Post by qofcc on Jun 4, 2011 8:16:35 GMT -5
Another option would to try to get a job with tuition reimbursement benefits. Even better, a job where you could use your degree later on. (Maybe a hospital). If you can work while going to school and they will pay your tuition, that could be very helpful. Also, I agree with the poster about putting money in the 401K and taking the government loans. Especially since the repayment would be income based and forgiven over 10 years. Worst case scenario if you took a job that was not eligible for the forgiveness (because it paid more money), you would still have the 401k money.
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973beachbum
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Post by 973beachbum on Jun 4, 2011 13:22:49 GMT -5
Reenee, first off I want to go with everybody else and say DON'T TOUCH THE IRA! My other point is to ask did you check out financial aid? With your income and being over 24 yo you should be eligible for Pell grants etc if you are independent. I would also not refuse Fed SL's out of hand. First Fed unsubsidized SL's don't accrue interest while you are in school. You would have to check but I don't think Fed SL's are allowed to have prepayment penalties either. You could keep the SL money in an interest baring account till your 6 month grace period was over and pay it back lump sum and keep the interest while having had an EF, if you didn't need it to pay for college. Also if you end up as a MSW who works for the state or other public agency it is probable that a large portion of the SL's would be forgiven. My favorite website is finaid.org and here is a couple of links for it. And also remember financial aid is only available for your undergrad. www.finaid.org/otheraid/nontraditional.phtmlwww.finaid.org/loans/publicservice.phtml
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phil5185
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Post by phil5185 on Jun 4, 2011 15:12:56 GMT -5
For now, I'll use the "lowball" numbers... I think $30k is about it. My wife is an RN, the social workers hand off hospital discharge patients to her for home care assistance for a few weeks. She earns about $71,000 (w/o a masters degree) and the social workers (same region obviously) are getting about $30,000. She is like you - has no interest in pay, patient care comes first. But I can tell you - $70,000 provides a way less stressful life than $30,000 when the monthly bills come in. Is there a chance that your interests could lean toward nursing? You are probably closer to an BS RN degree (both in cost and years in school) than you are to a MA in social work.
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DVM gone riding
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Post by DVM gone riding on Jun 4, 2011 18:02:59 GMT -5
Phils point is a good one Reenee AND you could make it work sort of doing what you want--which I assume is helping people better themselves--but it is definitely a different mentality, still if you are working Hosp social work you might as well get paid better.
Beachbum--You can get FINAID for grad school what you can't get are GRANTS--trust me I didn't rack up 80k in SL from the private sector. all 60+k in SL that were grad-school are either staffords or HPLEC loans from my school--which reenee might qualify for I don't know if Social workers get those or just general medical fields.
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murphath
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Post by murphath on Jun 4, 2011 18:14:59 GMT -5
Phil5185: The coursework between social work and nursing is extremely different: human anatomy, physiology, microbiology, biology, chemistry etc.--very, very intensely science related. About the only classes they may have in common are the other g.e. courses and for math, statistics. Having worked at a community college many years, I can tell you that the folks I know going into social work were definitely not nursing degree candidates. And I say that in a nice way--just like I, the daughter of an RN--was a French major. No way I could have gotten through those science classes. Mostly because I had no interest in them nor in becoming a nurse.
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reeneejune
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Post by reeneejune on Jun 4, 2011 18:54:51 GMT -5
I have filled out my FAFSA and I'll be looking into scholarship applications over the next couple of months. The frustrating thing is that until I get the one loan paid off (it was in default and is currently being paid by a garnishment out of my paycheck) I won't get any information on how much aid I'll receive. I assume I'll get a healthy chunk in Pell Grant, etc. but I won't know for sure until November.
As for Nursing vs. Social Work they are entirely different fields. I'm just not cut out to be a nurse. I'm much better with the mental aspects of people than the physical ailments, if that makes any sense. My passion lies in the direction of helping people move out of poverty and into a self-sustaining lifestyle (education, job, self-supporting, etc.) and I've also got a passion for helping the family members of inmates (my brother is currently in prison).
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reeneejune
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Post by reeneejune on Jun 4, 2011 18:56:31 GMT -5
oh and phil - I'm a lot farther away from a nursing degree than a social work degree... my first two years of college I didn't take ANY math or science classes. At all. None.
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Post by Deleted on Jun 4, 2011 19:10:22 GMT -5
Reenee, first off I want to go with everybody else and say DON'T TOUCH THE IRA! My other point is to ask did you check out financial aid? With your income and being over 24 yo you should be eligible for Pell grants etc if you are independent. I would also not refuse Fed SL's out of hand. First Fed unsubsidized SL's don't accrue interest while you are in school. You would have to check but I don't think Fed SL's are allowed to have prepayment penalties either. You could keep the SL money in an interest baring account till your 6 month grace period was over and pay it back lump sum and keep the interest while having had an EF, if you didn't need it to pay for college. Also if you end up as a MSW who works for the state or other public agency it is probable that a large portion of the SL's would be forgiven. My favorite website is finaid.org and here is a couple of links for it. And also remember financial aid is only available for your undergrad. www.finaid.org/otheraid/nontraditional.phtmlwww.finaid.org/loans/publicservice.phtmlUntrue, unsubsidized student loans earn interest during school, subsidized student loans do not.
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phil5185
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Post by phil5185 on Jun 4, 2011 19:27:20 GMT -5
I can tell you that the folks I know going into social work were definitely not nursing degree candidates. And I say that in a nice way--just like I, the daughter of an RN--was a French major. No way I could have gotten through those science classes. I don't think the differences in courses is 'easy/hard' - it is more Dependant on how your brain is wired. For me, math/science are easy A's but I doubt that I could pass a French course, I had trouble with tenth grade Latin.
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973beachbum
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Post by 973beachbum on Jun 4, 2011 19:49:45 GMT -5
Reenee, first off I want to go with everybody else and say DON'T TOUCH THE IRA! My other point is to ask did you check out financial aid? With your income and being over 24 yo you should be eligible for Pell grants etc if you are independent. I would also not refuse Fed SL's out of hand. First Fed unsubsidized SL's don't accrue interest while you are in school. You would have to check but I don't think Fed SL's are allowed to have prepayment penalties either. You could keep the SL money in an interest baring account till your 6 month grace period was over and pay it back lump sum and keep the interest while having had an EF, if you didn't need it to pay for college. Also if you end up as a MSW who works for the state or other public agency it is probable that a large portion of the SL's would be forgiven. My favorite website is finaid.org and here is a couple of links for it. And also remember financial aid is only available for your undergrad. www.finaid.org/otheraid/nontraditional.phtmlwww.finaid.org/loans/publicservice.phtmlUntrue, unsubsidized student loans earn interest during school, subsidized student loans do not. Sorry I wrote it backwards, obviously I meant subsidized don't accrue interest. Reenee is there a way to work with a counselor from the SL company to find out what needs to be done to bring the loan current? If a person has a delinquent SL I know they can't get another I didn't know about the fed grants but that makes sense. With that said i think maybe your best idea is to try and get two jobs or work as many hours as you can for a year and get that old SL paid off as much as possible so it is brought up to date. A small EF wouldn't hurt either. The point of college is to better your life and adding more debt is going to just add more stress to what will be an already stressful thing. FYI my DH went back to college for the first time at 35 to become an engineer. He now has a masters in engineering and teaches P/T at the CC he started at. Trust me 27 isn't old. ;D
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reeneejune
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Post by reeneejune on Jun 4, 2011 23:39:42 GMT -5
beachbum - When a student loan goes into default, the borrower has two options: a) pay all the back payment in one lump sum to get current or b) go into a rehabilitation program that requires 6-12 monthly payments before the loan is given a "new start". Once they start garnishing, option a goes away. And I'm less than 6 months away from having the darn thing paid off through garnishment alone, so rehabilitation doesn't make much sense right now. I will call them and see if there are any other options I'm not aware of, but I doubt it. I don't know if I made this clear enough or not, but the whole reason I'm looking at going back to school is because that old loan will be paid off soon. With the nature of my full time job, working part time somewhere else just isn't an option. Even if it would get me cheaper/free tuition. I'm pretty comfortable/secure where I'm at and I'm not willing to change jobs at this late date on the off chance I might get tuition benefits.
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