Paying off a student loan

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amother

Fri, Mar 08 2024, 10:48 am

Is it worth paying off a bank student loan (25k left) with 14.5 percent interest if that will basically deplete all your savings . This is a loan my husbs parents look out before we got married when he went to college, promised to pay it. They were paying bh until they deferred on the payments recently (didn’t tell us) , messed up my husbands credit score etc. etc. and now he just wants to pay it off cuz he’s so upset.
-The only savings we have is from before we got married, and using it for this would basically empty it. I just don’t know what to do.

amother

Red

Fri, Mar 08 2024, 11:11 am

Is it worth for you to start from scratch with savings versus paying the interest?

amother

Fri, Mar 08 2024, 11:21 am

Idk this is what I’m asking. I’m just upset about the whole situation. If my husbands score didn’t drop over 100 plus points he wouldn’t be so worked up about paying it off now. I want to make sure were making the right decision and not doing anything on impulse

amother

Seashell

Fri, Mar 08 2024, 11:22 am

Is there an organization that can help you? Something like Angels of debt.
Are you eligible for forgiveness or restructuring?

amother

Fri, Mar 08 2024, 11:24 am

This was a private student loan taken out from a bank. His parents had a very bad credit score so this was only what they could get approved for. (My husb didn’t have a score at tht time) I don’t think his type of loan is eligible for forgiveness because it’s private no? Anyone know maybe an organization that can help? I have no experience with this.

justforfun87

Fri, Mar 08 2024, 11:29 am

That is a very high interest rate and unfortunately it is a private loan which leaves you limited options. What are your jobs now? Are you paying tuition yet? How long would it take you to save that 25k again?

amother

Silver

Fri, Mar 08 2024, 11:30 am

amother Seashell wrote:

Is there an organization that can help you? Something like Angels of debt.
Are you eligible for forgiveness or restructuring?

That will hurt his credit more

OP if the goal is to restore his credit, you can just keep making payments on time and it will help it go back up. The scores dropped because of the missed payments, not the loan itself, although there’s nothing that can be done about that now and it will take years for those missed payments to come off his credit..

It will help his credit to pay them off as well, but probably not by that much that it will boost it by that much that it’s worth depleting your savings. If the concern for paying it off was to avoid paying interest, then it would make sense to pay it off but even still I would be wary about paying off the whole thing and leaving nothing for savings in case you need emergency funds at some point. Maybe pay off a big portion to lower the interest your paying while also leaving a cushion for rainy day in case necessary

In the meantime set payments to autopay so you don’t accidentally miss any, and you can also do other things to boost his credit besides. I had a not so similar situation where my credit was destroyed by a parent without my knowledge, and it took work but BH I was able to get it back to a great score. If you are not in a time crunch (like buying a house in the next few months) I would hold off on paying them off completely

stillnewlywed

Fri, Mar 08 2024, 11:31 am

I would 100% pay it off today. The rate is so high it's only costing you more money every day the more you have it. You'll much quicker be able to save it up again than to pay it off.

amother

Iris

Fri, Mar 08 2024, 12:01 pm

Op first off, I feel you! My husband came into marriage with debt I didn’t know about and I felt so upset and betrayed. Your situation is less awful because your husband didn’t hide debt from you but still, the feeling of debt you didn’t anticipate is choking and disorienting, especially when it comes with a high interest rate.

I don’t know that you should be mad at his parents. It was very, very kind of them to offer to pay. They clearly can’t afford it easily being that their credit score is low and they have stopped paying. I would try to switch to appreciating their kindness up until now. Most parents don’t offer to pay for their kid’s college in the first place. The blow to your husband’s credit score really is very upsetting though.

The interest is so high on this student loan that you really need to do something. Are you familiar with 0% interest credit cards? Some credit cards give you a period of 12-18 months after getting the card to make purchases and be charged 0% interest on those purchases. You just need to make minimum payments on the card each month. Set it to be paid automatically because if you miss one payment, the 0% interest rate ends.

After the 0% interest time period ends, the usual credit card interest rate kicks in which is 20-30 percent. The way to get around paying that interest is to switch the balance to a different card with a 0% interest balance before the first card’s 0% interest period ends.

This way, you can pay the loans off more slowly without clearing out all your savings at one. Pay more than the minimum payment each month, decide how much you can afford to pay each month.

Your husband might not get approved for a card being that his credit score got lowered so you might have to put the card on your name. That’s what I had to do. Sad

It’s better than letting the debt just keep growing at a high interest rate, that could end up drowning you.

Happydance

Fri, Mar 08 2024, 12:04 pm

See if you can get a loan with a better rate to pay off this loan and paying back your loan on time each month will rebuild his credit.

amother

Emerald

Fri, Mar 08 2024, 12:17 pm

Save 2k for emergencies and throw the rest at the debt. You’ll feel so good knowing it’s not on your shoulder anymor

Amarante

Fri, Mar 08 2024, 12:31 pm

You should definitely pay off the loan because it is costing you a lot of money for the interest. That is approximately $3600 per year for that amount - rough calculation.

You should leave some in your emergency savings account and then - before you spend a single penny - put at least the amount of your loan payment in savings to rebuild your savings account.

amother

Fri, Mar 08 2024, 12:32 pm

Thanks everyone for the replies. I won’t go into detail, and his parents are really special ppl, but this is the second time, and the first time I shouldn’t even be saying, but they put a home expense under his name (had too much debt under their name at that time) when he turned 18 that he had zero clue about and after we were married already we randomly got a collections letter for thousandsssss of dollars of bills accumulated over a few years of them never paying, and nothing to do with my husb. My husb could’ve pressed charges for identity theft (we’d never) . We scrambled our savings and paid it off cuz that was the only way to get his credit back. His parents have helped us in the past when they could and we are grateful, but one can’t make up for another, it’s so upsetting.
I was thinking of opening a credit card, but loans need to be paid via bank account only, how would it work??? Anyone know?? I had no idea the interest was thattt high, I looked at some statements and most months the payments were only going towards interest, it’s insane. Also to the person who said be on top of it, we had no access to the account, it was his parents login and they told us they were paying, we thanked them all the time. We only found out about this when my husb got a notification that he credit dropped over 100 plus points. Now we took over the login.

amother

Fri, Mar 08 2024, 12:36 pm

I guess well just pay off the loan with my savings because rn that looks the only way. So hard for me because this is my money I worked so hard for before we got married. This money was never touched. I’m a saver and never spent anything for myself. Now basically Al that money is going for something that has nothing to do with me. This is besides my husband coming into our marriage with other random debt.

amother

Denim

Fri, Mar 08 2024, 12:37 pm

Dh came into marriage with no skills or money. We paid for his whole education while raising little kids and low income. Focus on appreciating the fact that your in laws cared that he should be able to support his wife.

Personally, we hate debt we paid off our student loans before we started saving or spending anything. We are also prepaying our mortgage. It’s a matter of what you feel comfortable with.

funkyfrummom

Fri, Mar 08 2024, 12:45 pm

Deferment alone shouldn't have effected his credit in a bad way.... so I assume it came out of deferment and payments were missed?

I would make regular monthly payments on it so that you can build your husband's credit back up. In other words use it to your advantage.

Later, if you wanted to pay it off you could... but don't deplete savings to do it. Always make sure you have an adequate safety net/emergency fund.

Last edited by funkyfrummom on Fri, Mar 08 2024, 12:46 pm; edited 1 time in total

amother

Chambray

Fri, Mar 08 2024, 12:46 pm

amother OP wrote:

Totally understandable why its hard for you!

Orchid

Fri, Mar 08 2024, 12:56 pm

amother OP wrote:

When people say use a credit card to pay it off, they mean that you take advantage of a "balance transfer offer," which basically means the credit card pays off the entire loan in full in one go, and then you pay the credit card company instead, using their offer of first year at 0% interest rate. You pay the credit card company directly instead of the private lender, because they assumed the loan. If you get a 0% balance transfer offer, this freezes interest for one full year. Pay the cc loan as much as you can during this year, but definitely do not deplete your savings. Then after the year, normal high credit card rates kick in (over 20%), so either you'll have to continue paying at those super high rates on whatever is left on your principal balance, or possibly hope to get another balance transfer offer with a different credit card company and take advantage of another year's worth of 0%.

Also, since your in-laws seem to have done this several times, is there a concern they could continue to do this? Basically steal your son's identity and social security number and put stuff in his name? I wonder if you can put a fraud alert on his social security number so they can't put random stuff in his name. You would have to do this with all three credit agencies.

amother

Copper

Fri, Mar 08 2024, 1:02 pm

So sorry op!

I'm not a finacial expert but maybe your husband should put a lock on his credit. Just call one of the three big ones like Experian. No one can then open any acounts in his name. Maybe also review all accounts that are open under your husbands name.

amother

Fri, Mar 08 2024, 1:24 pm

@funkyfrummom it was more than 90 days with no payments so it was very bad on his credit. He’s trying to fight it rn. His parents are amazing ppl and I know they didn’t do this on purpose and they never would. Unfortunately they are very bad with spending habits and payments in general. They are also clueless imo to what happens when you don’t pay your bills and think the company just forgets abt it. I hope there’s nothing else, now and for the future I don’t think they would ever put anything on his name after they know what it caused the last time.

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