Home Nurse salary Money Talk (Q&A): loan consolidation, store credit cards, social security benefits

Money Talk (Q&A): loan consolidation, store credit cards, social security benefits

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Dear Liz: I have $105,000 in medical school loans with an interest rate of 2.875%. I have another federal loan consolidated at 6%. I make $180,000 in the private sector and I love my job.

Should I consolidate everything, try to get a job in the public sector and apply for loan forgiveness after 10 years paying as little as possible? Or should I speed up my loan repayments?

I would be able to pay almost the full amount after 10 years. I am also trying to save for a house in a high cost area. I have about $110,000 in savings and stock.

Answer: Why would you turn your life upside down to get help you don’t need?

Federal income-tested loan forgiveness and repayment programs are for those struggling to pay their student debt. By the way, these programs are only available for federal student loans.

The low interest rate on your medical school loans indicates that they are private student loans, which would not qualify for relief programs or a federal consolidation loan, for that matter.

So the question is whether you should repay your loans over time or try to pay them off as quickly as possible.

A slower repayment schedule could allow you to buy a home sooner and save more for retirement, two worthy goals. Repaying faster could lower the overall cost of debt and make you less vulnerable to rate hikes, since interest rates on private student loans are typically variable.

There’s no one right answer, but it’s a good question to discuss with a paid financial planner who can assess your overall financial situation and explain your options.

Liz Pulliam Weston

Dear Liz: My spouse signed up for a store credit card to get a discount on a major purchase. Since she has no great incentive to maintain a line of credit there, is there an easy way to terminate that account without affecting our credit scores, given that we might apply for a mortgage in a near future?

If not, is it essential that we maintain a certain frequency of use on this account?

Answer: First, let’s correct a popular misconception that marriage somehow combines your credit records. Assuming she applied for the card in her name alone, this account will not appear on your credit report and will not affect your scores.

If you apply for a mortgage together, however, his scores could affect the interest rate and terms you get. Opening and closing accounts can hurt, so it’s best to avoid both when looking for a large loan.

Issuers vary in their policies for closing inactive accounts, so it is difficult to predict the volume of activity that would prevent the card from being closed. Generally, however, a small charge every two to three months is enough to keep an account open.

Questions?

Send them to Liz Weston, 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at

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Distributed by No More Red Inc.

Dear Liz: I started my social security benefits at 66 and am now 70. I was married for 23 years and have not remarried.

When I ask about spousal benefits, I am told that my own monthly benefit is too high to get benefits based on my ex’s work history. My monthly benefit is only $1,509, my 401(k) has plummeted, and I’m surviving with less and less part-time work available.

I was further told that I can apply once my ex has passed away and then my income will not matter. Could this be correct? What is the exact limit for obtaining spousal benefits?

Answer: Many people misunderstand how spousal benefits work and think they can get an extra check on top of their own retirement benefit. That’s not quite how it works.

Essentially, Social Security compares the amount of your retirement benefit with what you would get as a spouse or divorced spouse and gives you the higher of the two. Spousal benefits are up to half of what your spouse or ex receives.

If your ex’s benefit is $2,000 per month, for example, your spouse’s benefit could be $1,000, which is less than what you currently receive. If your ex dies, however, you can claim a survivor benefit equal to what he received — in this example, $2,000 per month.

— Liz Pulliam Weston