Get Out of Debt Guy

How Can I Repay My Student Loans With Good Income?

Posted June 27, 2014

WRAL Reader Question

Dear Steve,

I am in default with my student loans and am trying to rehabilitate them. My AIG is $109,804. I have $2,285 in monthly expenses and my monthly income before expenses is $5,965. My loans are federal, amount to $81,500 and the interest rate is 2.88%. I also owe about $15,000 in back taxes which I hoped to repay this year and have about $2,000 in upcoming dental work.

I've been following the information about the changes to the student loan rehabilitation program. If I did the math right, under the new program my monthly rehabilitation payments would be $1,157.11. However, that is actually more than what the student loan company offered me today, which was $783. Is it possible that because I make so much money, I am actually better off under the old plan and should start making payments before July 1st? I can't find any information to really explain what to do in situations where the debtor has a high income. All the articles and examples I've seen apply to those with low to middle incomes.


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Dear Katherine,

You are quite right. Most "special" repayment plans are geared towards people who are financially struggling. And even the most attractive plan, the Income Based Repayment (IBR) program is only a temporary fix on a year-by-year basis since people need to qualify over-and-over. If their income goes up they will no longer qualify.

Outside of any target loan forgiveness programs the best approach to dispose of your student loans as quickly and cheaply as possible if you have low rates like you do is to pay them off with the standard ten year repayment plan or even pay them off early.

It seems like the smarter approach is to get current on your loans, make the regular payment, enter into a repayment plan with the IRS, get the dental work done, and continue to save for retirement all at the same time.


Steve Rhode
WRAL Get Out of Debt Guy

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.