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Hi Fools,

I have one year left of Grad School and will have around 45k in student load debt - I will be finished in January 2016. Currently I make random payments when I feel like it - nothing consistent or significant.

Below is what I just pulled from my lenders website - some are subsidized and most are not.

It is really frustrating that some of these loans are accruing interest and I want to know what my best plan of attack is.

1. Are there any options to consolidate these loans to one lender and get a competitive fixed interest rate? My credit score is in the high 7's....or any options that will help minimize my interest charges.

As always you all are life savers!


Direct Loan - Sub
1-01 $5,581.41 4.5% $0.00 02/06/2016

Direct Loan- Unsub
1-02 $4,829.22 6.8% $0.00 02/06/2016

Direct Loan- Unsub
1-03 $8,870.93 6.8% $0.00 02/06/2016

Direct Loan- Unsub
1-04 $5,110.78 6.8% $0.00 02/06/2016

Direct Loan- Unsub
1-05 $4,169.90 6.8% $0.00 02/06/2016

Direct Loan- Unsub
1-06 $14,983.24 5.41% $0.00
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Forgive me - are any of these fixed rate or do they all current;y float?
Will you be taking on more loans for the last year or are you potentially eligible?

In my last year of grad school, I took a sub loan and used it to cover expenses while I paid off an unsub loan with less favorable terms.

You'll need to talk with your lender(s) to get an idea of the options available to you. At one time, if all loans were from a single lender, they got first crack at your consolidation. Some repayment plan options (e.g. very extended) may require you consolidate a minimum amount (e.g. 30k)

You might also want to look at running a "debt snowball" with extended repayment plans on the loans you are putting off, and making larger payments on the ones you want to kill sooner. There is probably a trade-off here, but you might be able to assert more control on cash flow.
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Thank you for the response danbobtx!

All the rates are fixed.

Yeah, I think I will take on one more loan of around 5k.

Ok, so I will contact my current provider and see what they can do. I am glad to know there are at least some options. It sounds like I would be foolish to just leave it as is considering the high interest rates.

Would you recommend throwing any additional money I have at these student loans to save interest? I can possible scrape up $100-$200 per month depending on the month....
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Currently I make random payments when I feel like it - nothing consistent or significant.

Below is what I just pulled from my lenders website - some are subsidized and most are not.

It is really frustrating that some of these loans are accruing interest and I want to know what my best plan of attack is.


Actually, looks like only 1 is subsidized and the other 5 are not.

Currently, the unsubsidized loans are accruing $197.83/month in interest at a 6.25% interest rate. Add in another $5k unsubsidized loan at 5.41%, and the monthly interest cost will increase to $220.37 at a 6.15% interest rate.

If you are frustrated by seeing the interest accrue, is there any way that you can pay $225/month until you are required to make payments? At least that way, the interest won't be accruing.

If you consolidate, you need to find out if you will lose the subsidy on the subsidized loan. If so, I would wait until the subsidy runs out to consolidate.

You also need to see if your weighted interest rate will increase if you consolidate. It used to be that they would round up to the next 1/8%. If that's the case, you will end up paying more to have convenience of only making one payment. So you will need to decide if that annoyance of having to pay multiple loans is worth saving the extra money.

AJ
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Thanks AJ - I need to find a way to make payments each month, I will make it happen that is absurd these loans accrue that much interest monthly...

I have around 90k in unused credit lines through 4-5 different credit cards...is there a way to do balance transfers for 0% for a 12-18 months and use the check to pay these balances off and then just pay card within promotional period?

Also - I assume banks/credit unions would not be interested in giving me a fixed rate loan on student loans?
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I have around 90k in unused credit lines through 4-5 different credit cards...is there a way to do balance transfers for 0% for a 12-18 months and use the check to pay these balances off and then just pay card within promotional period?

Yes, that can be done. You can usually have the credit card deposit money directly in your bank account, which you can then use to pay the student loan off/down. Or you can have the credit card make a payment directly to the student loan.

However, you need to calculate what the BT fees will cost, and how that would compare to the amount of interest you would have paid if you had just paid the same payment to the loan instead of doing the BT. Let's say that you felt you could pay $425/month toward a 12 month 0% credit card offer, and in the fine print, it says that there is a 4% BT fee. So, you have the credit card company pay off loan #2 ($4,829.22 @ 6.8%, plus a little more interest - we'll say that you have them pay $4900 to the student loan company). Add in the 4% BT fee ($196), and you owe the credit card company $5,096. So, if you are paying it off in 12 payments, you would make 11 payments of $425.67 and your last payment would be $425.63 - for a total of $5096.

If instead, you just started sending the $424.67/month toward the student loan, you would make 11 payments of $424.67 and the last payment would only need to be $410.54, for a total of $5,081.91. That's $14.09 less than the BT fee cost you.

So, you need to look at all the costs of the different options you have, and not just assume that because the interest rate is 0% that you will save money by doing a BT.


I assume banks/credit unions would not be interested in giving me a fixed rate loan on student loans?

If they were interested, it would likely only be at a rate higher than your current rate, which would end up costing you more money.

AJ
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If I understand correctly, these are all federal loans.
If you consolidate them as federal loans, and not with a private loan, you maintain the advantages of federal loans -

including the potential for:
income based repayment plans
deferment and forbearance
discharge in the death of the responsible person

I would not consolidate outside of the federal program, and would tend not to use a 0% balance transfer offer on any of them. I might be tempted to use a 1.99% for the life of the balance, but I would be leary of cash flow - does the CC company expect 2% per month, 5% per month or some other payment that would be larger than what you have to pay on the loan?

I would tend to do this - integrated with your retirement planning - run a debt snowball starting with the the highest rate loan. Since you have several loans at the higher rate, start with the smallest first. Keep your 401-K contribution to get the match, but avoid the Roth IRA, unless your wife is not getting retirement savings otherwise. When the loans are paid down or paid off, up the 401-K contribution to catch up.

Your mileage may vary.
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I agree with what danbobtx wrote:
If I understand correctly, these are all federal loans.
If you consolidate them as federal loans, and not with a private loan, you maintain the advantages of federal loans -

including the potential for:
income based repayment plans
deferment and forbearance
discharge in the death of the responsible person

I would not consolidate outside of the federal program, and would tend not to use a 0% balance transfer offer on any of them. I might be tempted to use a 1.99% for the life of the balance, but I would be leary of cash flow - does the CC company expect 2% per month, 5% per month or some other payment that would be larger than what you have to pay on the loan?


Also, one of the advantages of a consolidated loan is that you can have different payment plans. This means that a larger consolidated balance can be repaid over a longer term than an individual one. While this flies in the face of paying less interest and getting your loan paid off earlier, this can give you flexibility if you go thru periods of lower income or transition between grad school and full-time employment.

One question I will ask is whether you have a cash emergency fund built up yet? That could be more important than scraping up an extra $100-200 to pay towards a loan. Having the emergency fund will ensure that you don't need to turn to your credit cards to pay for things (car repairs, etc.).

Also, when I left grad school for full-time employment my budget actually got tighter. I moved to a place with a higher cost of living and had more medical insurance, taxes and other expenses. Add to that the student loan repayments. I was really at the end of the month counting my change for a year or two. This was a surprise considering I was making 3x what I made in grad school. :) Your situation may be very different but I figured I would mention this.
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This is spot on, great points - thank you. I just need to deal with the federal loans, possibly consolidate, and aggressively pay them off.
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@ Retrograde - thanks for the post and reassurance, it makes much more sense now to just keep them as federal loans and pay them off asap.

Yes, we have a emergency fund built up - I am grinding my way through grad school as a non-traditional student at 32, yippee!

Thanks again,
Shawn
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I might be tempted to use a 1.99% for the life of the balance,

Seriously, does any card still offer these?!? Please share!!!

Citi was dumb enough to offer me one about eleven years ago. Paid off my existing card balance, reborrowed everything I had owed and more, and have been making my monthlies ever since... started funneling the difference into savings. I think they curse me under their breaths once a month. (Didn't use it to offset student loan debt, which was already consolidated at a very low rate, but...)

The joy of such a deal would be that you'd get out of the "can't be discharged in bankruptcy" hole that goes with student loans, too :) not that you should be planning a 'strategic bankruptcy' to start off your post-graduate-school life, but it's good to keep options in mind and position accordingly.
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I will say that back in the day, it paid to shop around for who to consolidate with. I got the best incentives from a state-run program (not the state I lived in or studied in, either)-- a permanent 1.25% cut in interest rates, if I remember rightly, after 4 years of payments. The consolidation rate was already around 3%, so... absurdly good rate, locked in for years and years to come.
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Hi Shawn,

These are all great points you've been given. I'll add my little 2 cents too.

My student debt situation is very similar to yours. I finished the grad school in 2012 and now a few years into this pay-off marathon.

It's one thing to build a plan to attack this, but it can be almost torture to stick it through...I tend to update my podcast app with a few Dave Ramsey shows weekly and listen to those to keep motivated and focused. Over time there are so many distractions that will want to get between you and your debt snowball plan.

Also, my interest rates were all equally awful, so I attacked the smaller balances first. Easy victories are motivating...

Keep an eye out for extra ways to come up with cash to throw at your debt. Here's an idea, create an inventory of things around the house, garage, parents basement to sell on amazon and ebay. You'd be surprised where an extra 2K over time can appear from!

You can do this!

Christian
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