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    Student Loan advice

    Hi everyone,

    This is my first post but I'm really glad I came across this forum. Here's why. I graduated last Spring but never had to start repaying my loans because I began grad school immediately in the fall. I must admit that I never bothered to review the terms of my student loans (figured I'd deal with it once I had to start paying them) but I just realized that most of them began accruing interest from the moment they were disbursed (they are "unsubsidized"). I am now in deferment until something like 2012 but I would really like to start making payments so that they don't ballon into something unmanageable for me after graduation.

    My question is how do I figure out which loans to pay first and how much to pay? I've searched for spreadsheets online to try to figure this out but haven't found anything helpful. Below is the list of my loans and their respective rates.

    1) $3,393.65 - Subsidized - 3.61%
    2) $4,183.38 - Unsubsidized - 3.61%
    3) $5,792.45 - Unsubsidized - 3.61%
    4) $6,371.72 - Unsubsidized - 3.61%
    5) $3,631.28 - Unsubsidized - 6.8%
    6) $2,222.16 - Subsidized - 6.8%
    7) $2,633.97 - Unsubsidized - 6.8%

    These are all with Sallie Mae in case that makes a difference. Thank you all in advance for any guidance or suggestions you might have to offer.

    #2
    Best general advice would be to pay down the loans with the highest interest rates first. That will minimize the total cost of the loans by allowing as little interest to accrue as possible. As for the manner of doing it, one way that works quite well is to "snowball" them... Make minimum payments on all of them, then select one to funnel all extra funds into. As you finish paying off one loan, you add the payments you were making on that one to the payments for the next one. Basically, focusing on them one at a time. However, in your case, since they're all deferred for now, you can probably just go straight for attacking a single loan, since none of them currently have required payments.
    "Praestantia per minutus" ... "Acta non verba"

    Comment


      #3
      I would start with #7. It is Unsubsidized, 6.8% interest and lowest amount. Then #5 (unsubsidized, 6.8% interest). Then, #2, #3, #4 (unsubsidized, 3.61% interest). I would concentrate on one at a time to get a psychological push from paying one off.

      If you get through all of these before you graduate, keep up the habit by saving the original payments and extra money you have been making so you can earn some interest on the money until 6 months after you graduate. Then make a large payment on subsidized ones when the subsidy runs out.

      Comment


        #4
        Thanks to all of you for your advice. I'll definitely be following your suggestions. I just wanted to clarify that I don't intend to start paying these off immediately because right now I'm focusing on paying off a credit card I have $12k on which has a much higher interest rate than these loans (14.99). However, I wanted to start paying something on these so the interested would keep capitalizing and then in about 7-8 months when I'm done paying off the credit card I could start sending more money to the student loans. What is the minimum you think I should send for now?

        I'm starting to think maybe I should post a more general thread to get advice on what order to pay my debts in since these aren't the only ones I have.

        Comment


          #5
          Originally posted by lennygaudy View Post
          I'm starting to think maybe I should post a more general thread to get advice on what order to pay my debts in since these aren't the only ones I have.
          Yes, please do. Posting a question about just one part of the debt isn't going to get you the appropriate answer. We need to see the big picture.

          Post each debt with balance and rate. Also post income and expense info.
          Steve

          * Despite the high cost of living, it remains very popular.
          * Why should I pay for my daughter's education when she already knows everything?
          * There are no shortcuts to anywhere worth going.

          Comment


            #6
            I would definitely pick the highest rates and unsubsidized loans first, if one was only looking at the student loans.
            My other blog is Your Organized Friend.

            Comment


              #7
              If I were you, I would try to consolidate the loans while still in the deferment period, but AFTER July 1, 2009. I rounded off your totals to $19750 @ 3.61% and $8450 @ 6.8%. Keep in the mind the 3.61% is the current variable rate while in grace/deferment; it will increase to 4.21% when in repayment.

              If you were to consolidate while in your grace period/deferment, your weighted average interest rate would be approx. 4.625%. If you were to consolidate once you are in repayment, your weighted average interest rate would be approx. 5%. So right off the bat, consolidating the loans while in your 6 month grace period OR while in deferment will help you lock in a lower interest rate.

              The reason I say wait until after 7/1/09 is the variable rates will adjust on the day (based on the results of the last 91-day T-Bill auction in May). The rates are currently running about 1.5 - 1.75% LESS than last year.

              You are in a very good position because you have the chance to lock in a very low rate on your loans -- it's highly unlikely rates will stay this low for a long period of time.

              Don't forget, when you consolidate with Direct Loans you get .25% interest rate reduction in repayment if you pay via direct debit from your bank account. I just think consolidating makes things so much easier because your rates wont keep changing each year and you only have one loan to deal with.

              Comment


                #8
                Originally posted by neguy11 View Post
                If I were you, I would try to consolidate the loans while still in the deferment period, but AFTER July 1, 2009.
                So you think I should consolidate these rather than pay the higher interest ones off first and then move on to the lower interest loans? My plan was to pay off the two unsubsidized loans that are at 6.8% in Oct-Nov. Then I was going to start paying off the 3.61% loans beginning in December.

                Depending on whether or not my company gives annual bonuses early next year, I had these slated to be paid off completely either by April, 2010 (if I get a bonus) or Nov, 2010 (if I don't).

                Comment


                  #9
                  Well if you are going to pay them off so soon, the interest savings would be minimal. But I still like consolidation because it simplifies things -- one loan at a fixed rate, instead of multiple loans at various rates. And if the T-Bill rates stay similar to what they are now, you could probably lock everything in at around 3.5% or less after 7/1/09 (if you payed down the 6.8% rate loans some you could probably lock in lower.) Having a single loan locked in at a low rate would also be helpful "just in case" something happens and you aren't able to pay the loans off in full when you plan to.

                  Generally speaking, I think federal loans are the "least important" debts to pay off, in order of importance. Now, they are important to pay back, because you WILL get garnishments if you don't, but they are much more flexible than credit cards, car loans, and mortgages (IMO).

                  Comment


                    #10
                    Consolidation

                    I realize that neguy11 has said that consolidation is a good option. I just wanted to share my opinion too. Not all SL consolidations are equal. I didn't properly read my consolidation terms and ended up consolidating with a 20 year payoff! STUPID! I find this totally unacceptable that I went for this without fully reading and understanding the terms.

                    It's just my 2 cents, but although it's a pain to be paying off multiple loans with differing rates and sub/unsub, sometimes it's a better option than combining them into one monster loan. I wish I were back on my multiple monthly payments instead of my one 'consolidated' one. If you do decide to consolidate, READ, READ, READ the terms because they won't come out and read them to you. If you don't understand them, get help before you sign anything!

                    BTW, my loans and my consolidation are with Sallie Mae too and I also have a mix of sub/unsub.

                    Comment


                      #11
                      Ease of a single monthly payment aside, locking in a low rate was the primary motivation for me. I held over 6 different stafford sub/unsub loans with variable rates. I consolidated 4 yrs ago and locked @ 2.6%. If I hadn't locked, I'd be stuck with loans in the mid 6% range. With Sallie Mae's loan benefits, I'll be getting a rate reduction in 12 mos for a ridiculous 1.6%.

                      Rates will undoubtedly rise as the consequences of our current economic situation so you'll have to make a decision if you wan't to keep riding the variable train or not. However, as socal has stated, you should always understand the details of any changes you may make to the loans. S/He isn't happy about paying over 20 yrs. My repayment period is 30 yrs but with a 6 figure debt I didn't really have a choice.

                      Comment


                        #12
                        Originally posted by me in socal View Post
                        I realize that neguy11 has said that consolidation is a good option. I just wanted to share my opinion too. Not all SL consolidations are equal. I didn't properly read my consolidation terms and ended up consolidating with a 20 year payoff! STUPID! I find this totally unacceptable that I went for this without fully reading and understanding the terms.
                        Federal consolidation loan repayment terms are mandated by Congress and the FFELP program guidelines, not lenders. You get anywhere from 10-30 years, based on your balance and it's the same at all lenders. But you aren't "locked in" -- there are no prepayment penalties for federal student loans.

                        The repayment term only has an effect on the monthly payment amount, it doesn't change the interest rate. A 10-year repayment term would mean much higher payments and many college graduates can't afford such large payments right away which is why the consolidation loans offer longer terms.

                        If you want to pay your loan off faster you can make larger payments. Of course if you just pay the minimum you'll end up paying a lot more in interest.

                        Comment


                          #13
                          Originally posted by kork13 View Post
                          Best general advice would be to pay down the loans with the highest interest rates first. That will minimize the total cost of the loans by allowing as little interest to accrue as possible. As for the manner of doing it, one way that works quite well is to "snowball" them... Make minimum payments on all of them, then select one to funnel all extra funds into. As you finish paying off one loan, you add the payments you were making on that one to the payments for the next one. Basically, focusing on them one at a time. However, in your case, since they're all deferred for now, you can probably just go straight for attacking a single loan, since none of them currently have required payments.
                          "Best general advice would be to pay down the loans with the highest interest rates first. That will minimize the total cost of the loans by allowing as little interest to accrue as possible." i am agree with you.

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