A Harvard business school grad paid off $90,000 in student loans in just 7 months. Awesome, or crazy?
Yes that is awesome, and yes, that is crazy.
Do the math and you’ll quickly see that his average monthly payment was just shy of $13,000. He was able to do it because he was budget conscious – crazy budget conscious.
There’s nothing negative about this – he had a goal of paying his loan off in 10 months, he put his plan into action, and he achieved his goal 3 months early.
He also drained his 401k, and cut so many corners that I have to wonder how feasible this is for the average borrower – I’ll get to that. He went so far as to bring his own liquor in a flask to bars (illegal in some states).
Is this realistic for most people?
The Reality Of The Numbers
Now, lets come back to reality. This guy brings in $74k after taxes. Most of my clients are lucky to gross that. He has two roommates. Many of my clients have roommates, but I call them children. He also had a 401k, that he drained!
Granted interest rates aren’t that great, but until he returns every penny back to his 401k, he hasn’t broken even.
The Role Of The Student Loan Lawyer In Paying The Debt
The real goal of a student loan lawyer is to make sure people know ALL of their options so they can decide what is best for them. Most just want to survive without their student loans controlling how they live.
Though paying off the student loans so quickly did save a chunk of change in interest, the borrower in the story could have saved over $12,000 a month if he were on the income based payment plan.
You see – interest is the time value of money. Question is, will he have made back that $40k that he saved by spending $13,000 for seven months? Will he recoup his full value of 401k by avoiding the $750 student loan bill he would have had if he hadn’t paid off his loan quickly?
The Reality Of Paying Your Student Loan Debt
Anyone who can afford a $13,000 a month payment will never be a client – they can afford their loan and then some. Most of my clients are lucky if they can afford $1,000 or even $500 a month for their student loan bill.
Some might say my clients need to learn to be more frugal. Truth be told, they tend to be quite frugal – many don’t even have credit card debt. What they need is truth about their options – options to get out of default, and options to stay out of default.
Would you ever advise a client to BYOB to a bar so they could pay their mortgage off in under two years? Probably not. So why would you advise that same client to rush to pay their student loan. Surviving a student loan is just like surviving a mortgage. Both are investments for the future. Get affordable payments and the client can benefit more greatly from their investment. Let’s get real, let’s get educated, and let’s start helping the average borrower who can’t get the truth from the student loan industry.
And if a guy walks into your office who can afford $13,000 a month for his student loans, ask him if he has money left over to buy you a drink.
Image credit: swanksalot
Hi. I was one of those young moms raised in poverty looking for a way to break the circle of social dependency and become someone of great knowledge and an icon for my ever so economically failing small ghost town. My first college was a trade school (Utica School Of Commerce) in a near by town and upon registering I can only remember the school personnel anxiously putting documents in front of me and a pen in my hand and advising me what a great choice I was making and how the government is “offering” this great loan “opportunity” and I wont have to worry about paying the school and I will get a check. well come on know, your telling someone who barely knew what a $20 bill looked like that they are getting a big check and well, it goes without saying, I didnt have many questions as to why or who. With the 4th child on its way and working a full time job I unfortunately didn’t make it through my entire 2 year therfor leaving myself being a non graduate with a huge dept. I do remember several weeks of not having to scamper to the store for diapers in the mid of the night for a few weeks as i had stocked up on diapers and I do remember purchasing my first television set. Other then that most of the money went to books and supplies so I guess I cant unfairly judge my young unreasonable spending habits on using up the money but I can however wonder how many younger generation money eager kids the schools push the loans off on without warning them of how their lives will be destroyed by the time they reach 40 unless they give priority to these student loans. It wasn’t until my last child left home and I wanted to start a career that i realized just how serious this matter is. I have tried so many different places begging for help in trying to find me a realistic payment plan and everyone ends up the same. First asking if I can pay it in full. Um ok. A loan that was 7000 is now like 50000 and your asking if i can pay it off? ok, next. Well, option 2. Can I afford 1000 a month? Would I be asking for help if i could? Probably not. Anyway, ive taken enough of your time with my babaling so I will close with a plea for help. I was reading your page and honestly, It was the closest thing that has brought me to hope in finding a solution to this problem In…. well, forever.
Someone from my office will contact you.
I have been fighting to get me tax offset refund returned since Feb 2013. I wasn’t ever notified that this offset was going to take place! I had just put myself back in good standing with the loans..so I was shocked to see it occur. Plus, I was later approved to have it returned but instead they applied it to my consolidation! I’m currently in a financial hardship! Need lawyer or help asap!
The tax refund intercept is valid until you receive notice that the default is fixed. Perhaps you filed your taxes before the default status was removed. Someone from my office will contact you.
I’ve filed my taxes and got them took by Art Institute of Charlotte because I didn’t pay but I haven’t heard any thing from them since August of 2013 I told them I was having Hardship. I’m really hurt now because my job has ended I’m being evicted and no money….
I’m also a single parent on a low budget in housing. I withdrew from school because it became to expensive. How can you get ahead in life when you try and even going to school cost you too much money?? I’ve lost everything now because of this and no one can help me
School should be affordable – that’s a given. You should shop around for a school that can really get you the aid you need, like a community college. If it’s a for-profit school, say no.
The school did not take your tax refund – they don’t have the ability to do that. If your refund was taken, it was because you’ve defaulted on a Federal student loan (or maybe you owe back taxes, but I’m not a tax attorney). You need to see what is going on with your loans.
Hello. I graduated in 2010 and decided to move back to my home country in Peru. I only make about $1200 a month and have a monthly payment of $842 of my student loans. I have 3 private and 1 fed. These loans are eating me alive. I can hardly make a payment each month and its only the interest that Im paying so it already grew out and now I owe about 92k I dont know what to do, the interest just wont go down, and I cant consolidate. Ill probably die still owing this loan.
You can get a payment plan for Federal loans based on your income. For private, they need to come after you to enforce the debt. Are you planning on returning to the states?
I started paying on my student loans biweekly last month (December, 2013) and I just found out that the US Department of Education is taking my income tax refund. I was never notified by the US Department of Education that they were offsetting my student loans nor was I ever given the opportunity to appeal this offset or to supply documentation as to why this offset would be a financial hardship for my family. Also, my original student loan debt was $25,000 and now the US Department of Education indicates my loan amount is in excess of $75,000…how is that even possible? They will not give me any documentation to show me how the loans have reached that amount. Any help would be greatly appreciated. Thank you in advance.
How did you find out your taxes would be taken?
It is possible for a loan to grow that much if it has been in default or deferment for a few years.
Is there any way to get that amount down? Mine were under $20,000 and now over $54.000. Or is that just how it is? I have been told that US Dept of Ed only allows 36 months of forebearance. When did this take place? As when I was younger I kept putting it off because how can you afford any sort of payments making $9 per hour? So I had a lot more than 36 months of forebearance. No one tells you anything about what will happen years from now. They just want the interest to incur so they collect more. Not fair!
Yes, this is how it is. You win by getting on an income driven repayment.
But if only 36 months are allowed of hardship forebeance how was I able to have more than 36 months? Did this rule just go into affect?
! i am behind on my student loans. they take my tax return every year. i have a 6 month old son and a 4 year old daughter if i claim them on my taxes will i get their half of the return ? or will my student loan agency take the entire return? thank you
If you are in default, your entire tax refund is at risk. Get your loans out of default.
A related question – my daughter defaulted on her student loan (less than $2000 – I would have paid that for her but I have my own financial mess at the moment). Does this mean whomever claims her as a dependent, eve if they are not a cosigner on the loan, will lose that portion of the refund or only if she files herself?
Claiming your daughter on your taxes will not affect your refund for HER defaulted loan.
I didnt know i had a past debt that would come up when i did my taxes with my wife. i have recieved a letter yet but when i call to check on my refund it says that my refund is still the whole 4099.00 , but that they could take it. Is it to late for me to do anthing to keep our refund from being used to pay that back? We are supposed to be moving out of my grandparents house and we were using our refund to get a appartment . please help
If you’ve already filed your taxes, keep your fingers crossed. I never trust the system that says your taxes will or will not be taken. Hope they aren’t this year. You should get your loans out of default to make sure you don’t have to worry about this again next year.
I recently tried to go to school and my financial aid was denied. I didn’t know my previous loan was in default until then. I called in December for a payment plan and it won’t be out of default until six months. I made a little money working before I went to school and i called the 800 number to see if I my taxes would be taken and the debt is on there so it will/can be taken. I don’t know what to do because i want to file but i feel that they will take the little money I’d get even if I’m on a payment plan. What should i do
If you are in default, your federal tax refund is in jeopardy. Wait until you are out of default before filing for a refund. BTW, you are eligible for more financial aid after making just 6 payments, but it takes 9 payments to get out of default.
Hi! I used the IRS2go app to track my refund this year and it had stated that the IRS will be taking a portion of my refund to pay for an outstanding student loan balance. However, I had received ALL of my federal and state refunds. Will the IRS still take that money? Or were they supposed to intercept it before it went into my bank account?
If it’s already in your account, you’re lucky. Take the next 12 months and get your loans out of default, or you’ll be asking me this question again next year.
Wow I hope I get that lucky too, and I filed in Jan 31 and still don’t have my refund from federal or state so that person is lucky again to have their return back
Hi. Ill try to make this quick. I had student loans go into default back in 2008. Income tax refunds went to Board of education till 2012. May 2012 I get a letter from the Board of education stating that my student loans have been paid off. I file my taxes and I receive my refund. June 2012 I get a letter stating that my student loan debt has been sold to some collection agency. I send them the letter I receive stating I paid off the loans. No response from them only an automated service. I call the IRS to check for liens or anything I owe they say I am in the clear and that it was a scam (collection agency). I file my taxes and my refund is taken by “student loans.” How is that possible If i have proof that my loans were paid off? Why get my refund 1 year but not the next? I had not taken out any new student loans.
You need to look at your loans and make sure you didn’t have more than one. Go to http://www.NSLDS.ed.gov to verify.
Hi, I have student loans in default and my federal taxes were offset but I never recieved a letter stating they will be taking my income tax money. Do they have to send out a letter by law? If so is there anything I can do?
Yes, by law it must be sent and it probably was. They likely sent it when husband defaulted. That could have been years or months ago.
I only got half of my taxes refund. I am in total default with my student loans. However, claimed forbearance right before filing. I’m pretty certain the missing amount has gone toward my dues but I havent gotten any notice of such. I want to see – absolutely – that THAT is where half of my refund went. How can I make sure of this and, really, this intercepted amount should reduce what I owe, right? So… Why can’t I find a decrease in owed amount or have I gotten anything from the IRS letting me know?
hello, I never received a notice for my taxes to be offset but called the irs and was told I have one on file for defaulted student loan. My question is is there a way to get my loans in a forbearance status before I file my taxes without them still taking my refund?
You cannot have a forbearance once your loan defaults.
My entire tax return was taken this year! I to am a single mom of two boys and going back to school at when I was 32 probably was careless. Shortly after graduation I was in a very bad car accident. I continued to work in my trained profession and I should have followed doctors orders to go on PTD but I’m a stubborn woman. About 2 yrs ago I had to change paths all together. Now that my working days are forever gone, I’m left with a student loan I don’t denie taking out, however I took all proper steps to have them deferred. Was not aware they were in default until 03-03-2014 when I checked on the statice of my refund. The only thing the Department of Education can say is “we sent notification to you, however we received as returned mail.” Even though she correctly verified my name, address, phone number, DOB, and SSN. The collection agency is suppose to send a letter as well, when I called then I had 5 CSRs verify info. Irritated upon the 5 one I asked her if she had sample of my blood too? Here’s my advice ANY time you deal with a state or federal agency always remember to C M A! Cover My A$&. Make copies of your application and what you send them, then send it CERTIFIED MAIL, do a follow up call keep calling once a day after 2:00. Take a business card if possible, write down time, date, and person whom you spoke with and a brief note of conversation. Good luck to all!
HI, I just completed my 9 month rehab program for my student loan in Feb and my loan was transferred to Fed Loan. But today I received a letter from DEPT of Treasury that all of my refund is being sent towards paying down my student loan. I filed my taxes in March. Will I still be able to contest the tax refund interception even after completing the program. I was informed that after completing the program, future tax refunds will not be intercepted. Any thoughts?
How long after I got the letter saying that the Dept. of Ed and the Dept. of the Treasury, will be notified that my loan is out of default do I have to wait to file my taxes so I get the refund? Is there a number I can call to check?
I have private loans that went to collections they keep calling. I only work part time and they said they can’t help me. Can they take my tax refund next yr or garnish my wages? I’m not sure how private student loans work or what I can do?
Private loans cannot take your fed tax refund. They can garnish your wages IF they sue, win, and your state allows wage garnishment.
My name is Traci. I had student loans go into default. We had set up a affordable rehabilitation payment plan of $5 they would charge my employee paycard (debit card) monthly on a certain day. They charged my card before my job had put my pay on the card so my repayment plan was canceled and now they are garnishing my wages. Is there any way I can get out of default without paying the full 16,000 at once.
You should talk to a local consumer attorney. There is likely a violation and you may need to sue to get back the $5 rehab plan.
Last year I was contacted by Immediate Credit Recovery to rehab my student loans. I paid faithfully for the next 8 months and made an extra payment the last month to conclude the rehab program. I was advised by them to wait until I received notice that the loans were out of default and I received a new servicer. In March, all of that occurred and I then sent in my tax forms with the refund to be received on April 4. On April 2nd, I received a notice that my taxes were offset to pay my loans. I called the U.S. Dept of Ed and was told that it takes a week for the payment to show in their computer. I called the following week and was told that yes, they received the money and that yes it was a mistake and that it would take 30 to 60 days for me to receive my money back. Well, in the meantime money has been tight, thankfully my landlord has been patient and taking what ever I could give him. I currently still owe him for this month. 6 weeks ago, my power was shut off for non payment. I had called the number for the Dept of Ed again and was told that no my money had not been sent and that it takes 30 to 90 days for the refund. Again after 60 days, I called again and this time was told that there was a glitch in the system and that my account was still in review and to call back anytime to check on the progress. Two weeks ago, I again called, and this time was told that there wasn’t any glitch and that he didn’t know why that person would say anything, but that the account was still in review and that I would get my money 30 days after the review was done. Well, now I have called my congressman and the response he got was that they were investigating and the investigation would take another 45 days. It is now 5 days past the 90 day deadline, still no check, still no power and my whole paycheck this week is going to my rent. I sent an email to the IG’s office and was called two days later and again we will check into it. I don’t know where to go from here. I need my money. Can you give me any suggestions?
Unfortunately, there is no telling how long this could take. You were given bad advice that you could file once rehabbed. I advise folks to wait at least a month if not more to make sure tax holds are cleared.
I have been getting garnished by a university I went to in the state I live in directly not a student loan, will they be able to take my federal check as well as my state refund check