Too many student loans, how to save?

[xukristen05]

I am completely lost with the best use of my money. I am 26, making $44,000. I would like to start saving for a house and building up an emergency fund and retirement fund but I am too overwhelmed by my student loans.

Each month I pay $750 towards my student loans (total loans = $70,000+). I do not want to consolidate unless I have to so that I can pay the majority of the loans off in 10 years. Even if I consolidate the rest of my loans, my monthly payments would only be lowered by $200, but the length of the loan would be extended to 30 years, which does not seem worth the extra money to me.

I do not have any credit card debt and my car will be paid off in 4 months, giving me an extra $200 a month. So far I contribute $50 a paycheck to my 403b and $100 a month to a money market account. I know I should be saving more but I do not know the best use of my available funds.

In the next 5 years I would like to have a family so I know that I need to have a substantial savings account, plus saving money for a house, and my retirement fund. Any advice would be greatly appreciated because I feel like whatever I do I will never get ahead even though I have a good income because of these student loans....

[Caoineag]

When you consolidate your loans, you get to pick the repayment period. I consolidated and chose the 10 year payoff. It also lowered my interest rate a lot. You might want to check with your main loan provider to see if they will consolidate all your loans into one and lower your rate. That's what I did (I chose Direct Service because they had most of my loans).

[markusk]

Seems to me you are asking at least 2 different questions:
1. Loan consolidation
2. Budgeting

In terms of the loans, need more info, but in general consolidation may be an option. I am assuming the amount listed as your loan ("total loans = $70,000+") has multiple sources and interest rates. Are they all federal or are some of them private? What is the interest rate on each (fixed/variable)?

If you do consolidate, what is the new interest rate?

I consolidated mine many years ago and is working out for me. Was able to consolidate all the federal loans to a fixed 3.5% (30 years). Was NOT able to consolidate a private (3rd party) loan with a variable interest rate (at one point was >8%, but now is 2.75%). I currently have the funds to pay off the private loan but since the interest is low, will hold off paying it off for now.

[DRILLINDK]

I feel like I'm a self-educated pro on student loans. I'm roughly 225k in student loan debt. I've called several financial institutions and loan companies withing the last 6 months and no one is consolidating loans, except Direct Loans. Even with them, they will only take the average interest rate of all of your loans. So, the only advantage to consolidating your loans is for the convenience of having one loan payment.

What I have done, is to go to a respected local bank, explain my situation and tell them I want to apply for a loan to pay off some of my higher interest rate student loans. They were able to give me 100k @ 5.9% which allowed me to pay off ALL of my high interest loans that were at interest rate ranging from 6.7-8.75%.

Another trick is to apply for automatic debit payment on your loans. Most loan companies will give you another -.25% (lower) of a interest rate.

Hope this helps.

[zetta]

Even if I consolidate the rest of my loans, my monthly payments would only be lowered by $200, but the length of the loan would be extended to 30 years, which does not seem worth the extra money to me.

Just because the length of the loan is extended to 30 years does not mean you have to take that long to pay it off. As long as the interest rate is lower than your current rate and the fees for consolidating are not too high, you can save money by taking a 30 year loan and making payments high enough to pay it off in 10 or 15 years.

If you'll post all your loans (balance, interest rate, min payment) and the info about the consolidation (rate, length, min payment) the folks here can help you determine whether it is a good deal or not.

Here's how I would prioritize:
1. $1,000 baby emergency fund
2. Emergency fund of 3 months expenses
3. $6,600 year toward retirement (15% of salary)
4. Extra payments toward student loans
5. Save for house downpayment

[TheColonel]

Didn't FedLoans take over all servicing of student loans recently?

[xukristen05]

Here are the specifics for my student loans:

Private Loan: $8,617 @ 3.19%, monthly payment $105.98

Consolidated Federal Loan: $20,457.99 @3%, monthly payment $122.61

Subsidized Stafford: $3,823.83 @ 2.48%
Subsidized Stafford: $15,854.26 @ 6.8%
Unsubsidized Stafford: $2,009.20 @ 6.05%
Unsubsidized Stafford: $20,686.29 @ 6.8%
Monthly Payment for all these is total $517.76

I think I am allowed to re-consolidate my previous loans with my newer stafford loans (my private loan is not elgible)...when I plug it into the consolidation calculator on Great Lakes's website it says that my new monthly bill would be $351.84 at an interest of 5.375% for 30 years.

Does that seem worth it? It is increasing the interest rate of some of my loans and decreasing it on others. I am just concerned that I would be paying way more in the long run.....

[skydivingchic]

Your effective interest rate right now for ALL of the Federal loans (previously consolidated, subsidized and unsubsidized Staffords) is 5.28%, so consolidating over 30 years at 5.375% would not be worth it. You not only extend the term but you also raise your effective interest rate.

The effective interest rate on the the subsidized and unsubsidized Staffords without the previously consolidated loans is 6.37%. So if you could get a consolidation loan for just those at 5.375% or lower, it might be worth it. You would need to run the amortization tables accounting for how much extra (if any) you are willing to pay each month and how much the consolidation would cost you.

[Caoineag]

Okay, so the payments on the loans are a cash flow problem and you can't consolidate. You have a 2k loan at 6.05% that you could pay extra on. Once its gone, you could take all that money and throw it at the 15k at 6.8. Once that gone, start working on the 20k at 6.8%. The rest are cheap enough that you would be better saving your money for retirement, but these 3 are nasty interest rates for student loans.

You really didn't list any budget info so it makes it hard to make recommendations but my number one recommendations is to get your monthly bills lower. You already have enough monthly income going towards these loans so you want everything else monthly to be as low as you can go. You need extra money going to those loans if you don't want them sucking up all your income for the next 10 years.

[zetta]

Can you consolidate just the loans that are over 6%?

[ea1776]

Originally Posted by DRILLINDK

What I have done, is to go to a respected local bank, explain my situation and tell them I want to apply for a loan to pay off some of my higher interest rate student loans. They were able to give me 100k @ 5.9% which allowed me to pay off ALL of my high interest loans that were at interest rate ranging from 6.7-8.75%.

One thing to consider here is, don't you get a tax deduction for having a student loan? Not sure how much you'd get, but that's something to consider too, if you are replacing it with a personal loan. Depending on your bracket, the interest rate you pay on a student loan is smaller than a personal loan with the same rate, due to tax deduction.

[DRILLINDK]

Originally Posted by ea1776

One thing to consider here is, don't you get a tax deduction for having a student loan? Not sure how much you'd get, but that's something to consider too, if you are replacing it with a personal loan. Depending on your bracket, the interest rate you pay on a student loan is smaller than a personal loan with the same rate, due to tax deduction.

Ya, my dad brought that up to me after I had already gotten the loan. I'll have to wait and see. I really think it's going to be a wash.