SL Questions

[Deleted]

It's that time.....time to start paying on my student loans.

I need to call and work out a payment plan but I'm curious on MM's thoughts. I'm not sure which is the best option and will obviously chose the one I can afford but this is the only place where I "know" people who have dealt with this before.

My SLs are all federal. Do I consolidate them into one large loan? Do I do a repayment plan of 15 years over standard 10 yr plan? Do I go based off income? Or defer/forbearance based on my income?

Help. Any and all advice about SLs will be helpful.

[Deleted]

I consolidated my federal loans to lock them in at a low interest rate. When I graduated that was a no-brainer (my bank account was earning 5% interest, and my gov't loans were locked at 2.8%), but I would defer to others on what is smart now.

I think you should talk to your lender about their suggested payment plans before worrying too much about what to do. I think mine were on a payment plan of more than 15 years, but I could be wrong. I wouldn't defer or forebear unless you really can't afford the payments -- you'll end up paying back more, and having the loans hanging over your head for longer. Since you think that your income is very healthy for you right now, I'd start attacking the loans now.

And remember, you can always make extra/bigger payments than necessary if you realize that you have extra money and it makes sense to pay them off quicker than your payment plan requires. I paid my private loans (something like $70,000) off as quickly as possible because of the ridiculously high rate they were at, and I'm happy about that. But I've also paid way more than I needed to on my 2.8% government loans and to be honest, I have some regrets there. While it is nice to see that there's only a small amount left, it maybe would have been more MM to invest the money and earn more than 2.8% on it. But, you live and learn and I do like looking at the small balance much more than I liked looking at a large balance. At any rate, the strategy that makes the most sense will depend on interest rates on the loans, interest rates in general (which are hard to predict), and your financial circumstances (also kind of hard to predict).

[simpsongal]

Ditto OP - how many loans do you have and what are the approximate balances? You can consolidate with Federal Direct but there's no savings in it - in fact, I think they charge a slight premium on your interest.

Sometimes it's nice to have separate accounts rather than a massive balance because you can do the snowball approach. That is - you focus on paying down more manageable debts to get the 'snowball rolling' on your debt paydown. For instance, if you have $15K in SLs - a $3K, $5K, and $7K loan -- you would focus on the $3K loan.

[Deleted]

It's an embarrassingly high amount considering I only have a BS. So I'm going to refrain from sharing at this point because I know it will bite me in the ass later when I post about Vegas/getting a tattoo/shopping spree, etc.

Since purchasing a car I can't afford the current monthly payment (at 10 years). This will change in another 6 months when I refi the car.

My SLs are through FedLoan or UHEAA (state specific).

V, I don't think my income is healthy enough right now to attack my SLs. Especially since I'm in a higher tax bracket than I was the last 8 years. And it will change once I move out of state.

I do like the idea of snowballing because it's a lot of $1-3k and a few $5k loans.

I just need to make the phone call. But ugh, it makes me nervous. It's just so much money.

[Deleted]

Carrots, that's what I'm thinking of doing. Basing it off income now, throwing everything I can at it, advance in my career financially a bit, and go back to the standard payment plan.

[kaylie]

Bliss - are you in a teaching/non-profit/government job? If so there is loan forgiveness after a certain number of years for the federal loans. It's something Obama passed so you might want to look into that if it might be an option.

[Deleted]

Oct 17, 2012 14:18:37 GMT -5 kaylie said:

Bliss - are you in a teaching/non-profit/government job? If so there is loan forgiveness after a certain number of years for the federal loans. It's something Obama passed so you might want to look into that if it might be an option.

I'm not currently in those fields. However, I do want to end up in non-profits. So maybe eventually I'll get loan forgiveness but that's a few years out I'd imagine.

[Deleted]

The problem with not paying your SLs now is that there's always going to be a new reason to push them off. As it is, you *just* bought a new car and are unable to pay - that's what most people would consider an expected expense. What happens if your health fails or there's an unplanned emergency? Be careful about setting yourself up to always play catch up.

[kershnic]

In general, it's best to pay them as aggressively as you can. I don't know what your rate is, but the days of the low 2-3% interest where you're better off investing are gone. I only have grad loans, but all grad loans these days are at 6.8% or higher. I pay an automatically deducted amount for the 10 year repayment and an additional payment each month. Do not count on future eligibility for loan forgiveness, because there are way too many rules to follow and possibilities for change to risk banking on it.