Tackling Student Loan Debt (help!)

[J.Apple902]

Hello world, recently found this forum and it seems to be fantastic thus far. As the thread suggests, I have some student loans to take care of.

Recently took an entry level positions making a little more than $50k and will have the burden of paying back my student loans in about June of this year. I have 5 total loans, four for around 12k and one for 5k, I believe zero are federal loans. Including interest I believe my total debt is something around $65k or so, maybe $67k.

I know interested rates are at an all time low so now is my time to act. I can provide the individual rates for each loan if needed, but really I need advice on what banks I should be targeting for low interest rate student loan consolidation, or any other strategic path which can be taken.

Thanks!

[dczech09]

I have found consolidation of student loans to be rather difficult. To get the best rates, you generally have to look at home equity loans or lines of credit (which are horrible products in my opinion). I would search online for consolidation options. I know Wells Fargo has options, but I do not know if they are any good.

You're starting out making $50,000 roughly. Depending on your location, that is either a good income or a mediocre income.

Your $65,000 in student loans is a little high; typically you should never have more than one year of income. But regardless, you are stuck with them.

Get on a budget if you have not already. Stay on top of those loan minimum payments. Since most of your loans are about the same amount, I would focus on the higher interest rate loan and pay extra on that while you can.

[pdweaver]

I have found consolidation of student loans to be rather difficult. To get the best rates, you generally have to look at home equity loans or lines of credit (which are horrible products in my opinion). I would search online for consolidation options. I know Wells Fargo has options, but I do not know if they are any good.

You're starting out making $50,000 roughly. Depending on your location, that is either a good income or a mediocre income.

Your $65,000 in student loans is a little high; typically you should never have more than one year of income. But regardless, you are stuck with them.

Get on a budget if you have not already. Stay on top of those loan minimum payments. Since most of your loans are about the same amount, I would focus on the higher interest rate loan and pay extra on that while you can.

Great advice..

Student loans are very difficult to lower the interest. Most places will consolidate but getting a rate lower than 6% is very hard.

As previously stated, creating a budget will be the best way to get out of that debt.

Find out if you like the "snowball method" or paying the loan with the highest rate first. The second option costs less to you, but the snowball method helps mentally. You pay of the smallest loan first. Then use the extra $$ from that pmt and apply it to the next loan.

Whichever way you choose, good luck.

[dczech09]

Find out if you like the "snowball method" or paying the loan with the highest rate first. The second option costs less to you, but the snowball method helps mentally. You pay of the smallest loan first. Then use the extra $$ from that pmt and apply it to the next loan.

Whichever way you choose, good luck.

The snowball method is a good mental method. The problem is that in this situation, it really only points out that paying off that small loan would come first. All of the other loans are so close in value that picking the smaller will really not make a whole heck of a difference. So in that respect it would be best to focus on the higher interest rate loan.

Perhaps kill of the small loan first, then go after the others starting with the higher interest rate.

The nice thing is they are all student loans, so we are not dealing with any autos and what not.

[emanon1501]

Your $65,000 in student loans is a little high; typically you should never have more than one year of income. But regardless, you are stuck with them.

I disagree about that statement. I heard some professionals say that the student loan should not exceed more than two years of income.

Your best bet is to do what others say in regard to creating a budget and stick with it. However, shop around for best deal to consolidate your loans. It’s an investment that will pay off.

[dczech09]

Two years? What professionals say that? And what bank do they work for? Or what university?

Two years of income in student loan debt is excessive. The minimum payments alone would be roughly 20% of one's income (give or take). That on top of other bills is extremely excessive.

I would love to know who says two years of income.

[J.Apple902]

Thanks for the tips so far guys. I really just need tips as to what banks / credit unions I should be targeting and if anyone knows a good financial analyst in Chicago haha

[dczech09]

I thought I would add a few notes here that are important for this topic...

The FinAid website states that they recommend that college debt payments never exceed 10 to 12% of one's income. Now this could be based on gross or net, but lets say gross for arguments sake.

Experts also say that a morgage payment should never exceed 25% of one's income. The same experts advise that one's total debt-to-income ratio not exceed 37%.

So with a mortgage at 25% and a student loan at 10 to 12%, the person in question is at a DTI of 35% to 37%. They are at the max recommended level.

A good rule of thumb with student loans is that a full years' salary would equal 10% DTI. Please note this is not always the case, but it is a good rule of thumb. So you want to stick to one full years' salary at the most. Two years maybe acceptable if you're married and your partner has a low amount of debt, but then again we should not run on such assumptions.

[J.Apple902]

Thanks again guys. So I've learned a few things since the original post, firstly, I investigated private loan consolidation. The lowest rate for this (right now) is around 8%. That is dramatically higher than the existing rates of my loans which are on average 4%. Therefore, I do not think I am going to consolidate. Also, the obvious plan is to simply snowball the highest interest rate first. I have one for 5%, one for 4%, a couple for 3.75%, and then i think even a 2.75% or something crazy low which gets prioritized last.