Recently, we sat down with the 2011 GreenPath Clients of the Year, Dawn and David VanDyke, from Buchanan, Michigan, to discuss how they are coping with their own student loan debt.
“David and I paid off our rotating credit card debt almost two years ago,” said Dawn. “We still have school loans and a home equity loan with a very high interest rate that we are now tackling.”
In 2011, the VanDykes began to include husband David’s PhD school loans in their monthly expenses. Adding that payment has meant they have found it necessary to readjust their budget, which they have learned is an important part of money management.
“Every month we sit down and figure out exactly where our weekly checks are going, and most importantly, how much extra money we have to throw at our student loan debt and our home equity loan,” she remarked.
In order to maximize the amount they can save towards their new debts, the VanDykes have compiled these tips:
• Shop sales. This may seem obvious, but the VanDykes plan their weekly menus according to what food is on sale at their local grocery store. Additionally they make a grocery list and stick to it.
• Check thrift stores and garage sales first. “If we need a new coffee pot or our vacuum is on the fritz, we check used stores before paying retail,” said David. “Sometimes we find great buys, other times we end up paying full price.”
• When eating out, order water. “Buying pop at a restaurant can add over six dollars to the bill for our family of three,” says Dawn. They also limit eating meals out to once a week.
• Pack lunches for work. Sometimes, the VanDykes might eat out with co-workers on a Friday, but otherwise they brown bag it and really save money.
• Take some time to research best deals. “We saved money by switching to a local insurance company,” said David. “When we travel we always take time to compare airlines, hotels and car rentals, to find the best deal. It takes a bit more time but it’s worth the effort.”
• Don’t be afraid to ask companies for discounts or lower fees. The VanDykes are both teachers and have found many places that offer educators’ discounts. Also, their gym offers a reduced fee through their workplace.
• See if your service providers can offer any discounts. Do you really need all the services you pay for monthly? For example, if you rarely text, do you need an unlimited texting plan?
• Keep an emergency fund. The VanDykes set aside $1,000 for emergencies, eliminating the need to keep a credit card for ‘emergencies.’ “We do not have any credit cards. Debit cards work just the same and we even earn cash back through our credit union,” said Dawn. “If we borrow from the emergencies fund it gets paid back as quickly as possible, just like a credit card payment minus interest.” They added if you feel the need to have a credit card, ask the company for a reduced limit to avoid temptations.
The VanDykes, with the help of GreenPath Debt Solutions, paid off more than $40,000 in debt in a little over four years, through a GreenPath debt management program. As they next tackle their student loans and home equity loans, they are able to apply money savings lessons learned while working with GreenPath.
Where to turn to for assistance with student loan debt?
There is a new federal program called Income Based Repayment (IBR) that adjusts your monthly student loan payment relative to your current income level and family size. Also, there is a provision that if you are working as a teacher, at a non-profit, or as a public service employee, you could be eligible for the loan to be forgiven in full after 10 years of qualified payments. Learn more at http://www.ibrinfo.org/.
Stafford Loans have a specific program for teachers, in which up to $17,500 in principal and interest can be forgiven after five years of teaching in a low-income area or other districts that meet specific requirements. A call to your student loan lender can help you find out if you are eligible for this.
Since not all student loans participate in IBR or loan forgiveness, you could certainly ask your lender about a graduated payment. Graduated payments result in a lower payment for a pre-determined amount of time, but the payments will eventually increase. This could make sense if you felt something will change in your financial situation. Make sure to ask the lender in advance what your payment will be when it increases, because it will be necessary to have the income to meet this payment further down the road.
If you’re experiencing a short-term hardship, it could make sense to contact your lender about a deferment or forbearance plan. This could mean that your lender will not require payments for a period of time. Make sure to ask your lender if it will continue to charge interest, or if the interest will be stopped during this hardship.