What to do with Student Loan Debt
Author: LisaMarisa
Posted: Tue Jan 18, 2005 4:31 pm
Post subject: What to do with Student Loan Debt
I currently owe about $63K in student loan debt. I am locked in a 8.25% which too high . I have a good FICO score of 688 at last check a year ago but it should be the 700s by now. My question is I am I going to be refinancing mortgage in March. Is it a good idea to roll my student loan debt into my mortgage? Or is it possible to refinance with another student loan consoldation company (someone other than SallieMae-that's who I am currently with) to get a better interest rate? Any help you can give me is greatly appreciated.
Author: Consumercity
Posted: Tue Jan 18, 2005 5:54 pm
Post subject: What to do with Student Loan Debt
Are your loans already consolidated? If not, getting them consolidated would most likely get a lower interest rate. I would check to see what the lowest rate is and compare it to the interest rate on the mortgage. But beware of emails and websites of companies you've never heard of (they could be phishing scams). You could check with the BBB to see how long they've been in business.
If your loans are already consolidated, you can't re-consolidate. I would see if the mortgage lender would pay the loan and add it to your principal at a lower interest rate.
Author: Andri
Posted: Tue Jan 18, 2005 6:39 pm
Post subject: What to do with Student Loan Debt
If you have already consolidated your student loans, I think the only reason you could "re-consolidate" would be if you had additional student loans that are not already in your current consolidated loan, such as graduate loans or a spouses loans. Even then, when I consolidated my loans and my husbands, our rates ended up being the weighted average of the rates on our old loans, so if your rate is already locked in (fixed), consolidation may not provide you with any lower interest. The monthly savings advertised by SL consolidators is almost always the result of spreading the loan out over 15-25 years from the standard 10.
If you have had a perfect payment history on your student loans, don't forget to check Sallie Mae's incentives for paying on time. Last I checked they offered .25% off for autopay, and on DH loans they offered 1% off after 4 years of perfect payments. The deal used ot be 2% off, so if you have had your loans for a while, you might qualify for that. Even if you don't find anything it might pay to give them a call to see if you qualify for any incentives or if there is anyway you can lower your rate but keep the loan with them. Since your rate is so high (actually at the highest rate allowed), they might be willing to work with you rather than lose the loan.
If Sallie Mae won't work with you it might be in your best interest to refinance the debt using a mortgage or other laon, but don't forget that keeping the loans as student loans have some benefits that you will lose if you combine them with other debt or refinance outside of the student loan system. Only you can determine if the benefits are of enough value to outweigh higher interest. The main benefits I can remember right now are:
-- available deferrments for hardship, certain voluneer service (PeaceCorp, etc) and other situations that are generally much more generous and easier to get then deferrments by other creditors
-- ability to deduct interest paid on SL from taxable income even if you don't itemize ("above the line deduction") - You can itemize mortgage interest, but this is only useful if you have enough itemized deductions to exceed the standard deduction
-- Student loans are forgiven if you die or are permanently disabled, so they are one less thing to worry about should anything happen to you, especially if you are disabled.
Author: LisaMarisa
Posted: Wed Jan 19, 2005 10:15 am
Post subject: What to do with Student Loan Debt
Consumercity & Andri,
Thank you so much for the great advice. I have already consolidated my student loans back in 1999, hence the super high interest rate. I knew that once I consolidated my student loans with SallieMae that I could not re-consolidate again with the SallieMae. But I apparently I can never re-consolidate my student loans ever again. I am locked in forever.
I have been paying faithfully and never late for the past 4 years. However, I am not making a dent in the principle at all. I do not have any credit card debt. The only debt I have is my mortgage and my student loan. My student loan debt irks me because I cannot decrease my balance at all. It is as if I am throwing a pebble in the ocean trying to fill it up.
I am going to look at the numbers. But thus far deducting the interest paid for the student loans every tax time has not seemed worth while because all of my payments have been going towards the interest which keeps acrueing and the balance keeps growing. This interest rate is killing me. I would increase my student loan payments to go towards the principle but my budget just will not allow it.
As far as some the benefits of student loan debt, I did come across this yesterday. According, to consumer guru Clark Howard and his website www.clarkhoward.com
"Erase your student loan debt - December 21, 2004
There is a special student loan forgiveness program out there for people who want to become teachers. There are a few requirements and hoops to jump through, but the Taxpayer Protection Act will make some future teachers very happy if the President signs it into law. Congress has already passed the bill. Under the program, a teacher can erase up to $17,500 in student loan debt. Applicants have to teach specific courses, including math, science or special education. Applicants also have to be “highly qualified” and teach in less desirable school districts in order to be eligible. Many teachers may already meet all of those criteria and not even know it. The traditional amount of forgiveness was $5,000. Now it’s $17,000. So, that is a huge improvement. Learn about it here: ed.gov. The idea of wiping out student debt is not a fantasy anymore!"
This may be something worth looking into. Although, I am not a teacher. Therefore, I would have to go back to school to become certified which means more student loans which means more student loan debt. It's a catch-22. Ugh, it is a vicious cycle. Although, $17,00.00 is better than nothing at all.
It is comforting and yet little disturbing to know that when I die or if I become disabled that my student loans will be forgiven. That's a huge plus! I hope I never become disabled-- God forbid but if I did that would be huge benefit
Thank you for all your great advice. Have a great day!!
Author: Andri
Posted: Wed Jan 19, 2005 10:51 am
Post subject: What to do with Student Loan Debt
LisaMarisa,
I know how you feel about not paying much towards principle. If you really aren't paying anything at all towards principle then something is really wrong. Your consolidation payments should be set up to eliminate you debt in a given amount of time....with 63K it is probably set for a 30 year repayment. This would mean that in the first few years your won't be putting much at all towards principle, but at least some and that will increase. For instance on the first year of my 72K 30-year mortgage, I put a total of $650 towards principle, which is depressing......
Here is the link to sallie Mae's Consolidation benefits, at the bottom is a link to the FAQ, which includes info on benefits. Unfortunately the site only includes info on rate incentives for loans issued since 7/1/02, but I know they had incentives before that, so it might just be that they don't keep the older rate plans posted. If you consolidated in late 1999, you may have just become eligible recently if the waiting period was 4 years.
If you are not eligible for any rate incentives, and you do go back to school for any reason, I would recommend taking our any additional student loans from any lender *except* sallie mae. Not that I have anything against Sallie Mae, but DH I found out the hard way that if all your SL are with only one company many (if not all) other SL consolidators won't consolidate for you, meaning you can only stay with the company you were with. **I am hoping to remember this advice for anyone who is taking our SL*** Sallie Mae's programs are prettry comparable to others, but we consolidated my loans with a company that offers a 2% reduction after 2 years (it only 1% if you don't live in AZ or FL), but we couldn't get them to consolidate DH and they didn't offer spousal consolidation.
http://www.salliemae.com/manage/borrower_benefit.html
Good Luck!!!
Author: Andri
Posted: Wed Jan 19, 2005 12:53 pm
Post subject: What to do with Student Loan Debt
I forgot one of the other important benefits of keeping your loans as SL.
If you return to school (at least half time i think), whether or not you take out additional loans, while you are in school any subsidized loans you have will again have the interest subsidized by the government -- meaning while your previous loans will continue to accrue interest, the gov't will cover the interest on the subsidized loans. Also, all of your SL loans go into deferrment while you are in school, so you aren't "required" to make payments, however you can choose to do so - and might want to if possible, since interest is accruing on unsubsidized loans.
So if you are seriously thinking about returning to school, this would be another potential reason to not refinance the SL, especially if you have a high % of subsidized loans. Even without subsidized loans, the automatice defferment might make the difference between being able to afford to go back to school or not.
Author: LisaMarisa
Posted: Wed Jan 19, 2005 2:27 pm
Post subject: What to do with Student Loan Debt
Andri,
Thanks for the adivce and the SallieMae link. I registered and I was able to get detailed look at all of my account information. Since SallieMae doesn't send out any type of statements only coupon booklettes. And the detailed information I saw was absolutely horrifying !! And reconfirmed the fact that all of my payments for the past 4 years have done absolutely nothing and my balance has continued to swell over the years to the current 63K payoff amount. Their choice of repayment plans left something to be desired spread out over the next 25years:
Plan Type Estimated MPA Total Repayment
(monthly payment amt.)
Income Sensitive $88.92 $159,090.36
MAX-2
$431.64 $150,512.70
Extended Repayment - 2 years interest only *
$431.64 $150,512.70
MAX-4
$431.64 $154,116.77
Extended Repayment - 4 years interest only *
$431.64 $154,116.77
Extended Repayment - Level *
$495.01 $148,370.02
Maybe it's just me but this seems CRAZY payout over $150K over the next 25 years. Additionally, my budget will not allow a monthly payment on $400.
I have been looking into the options of Home Equity Loan (HEL) and Home Equity Lines of Credit (HELOC), or Cash Out option to tackle this debt. If continue to stick with SallieMae I will have paid waaayyy too much in interest. I am fairly financial novice. Do you know thing about these types of loans? I have checked bankrate.com and smartmoney.com and they seem like viable and smart financial options.
Posted: Tue Jan 18, 2005 4:31 pm
Post subject: What to do with Student Loan Debt
I currently owe about $63K in student loan debt. I am locked in a 8.25% which too high . I have a good FICO score of 688 at last check a year ago but it should be the 700s by now. My question is I am I going to be refinancing mortgage in March. Is it a good idea to roll my student loan debt into my mortgage? Or is it possible to refinance with another student loan consoldation company (someone other than SallieMae-that's who I am currently with) to get a better interest rate? Any help you can give me is greatly appreciated.
Author: Consumercity
Posted: Tue Jan 18, 2005 5:54 pm
Post subject: What to do with Student Loan Debt
Are your loans already consolidated? If not, getting them consolidated would most likely get a lower interest rate. I would check to see what the lowest rate is and compare it to the interest rate on the mortgage. But beware of emails and websites of companies you've never heard of (they could be phishing scams). You could check with the BBB to see how long they've been in business.
If your loans are already consolidated, you can't re-consolidate. I would see if the mortgage lender would pay the loan and add it to your principal at a lower interest rate.
Author: Andri
Posted: Tue Jan 18, 2005 6:39 pm
Post subject: What to do with Student Loan Debt
If you have already consolidated your student loans, I think the only reason you could "re-consolidate" would be if you had additional student loans that are not already in your current consolidated loan, such as graduate loans or a spouses loans. Even then, when I consolidated my loans and my husbands, our rates ended up being the weighted average of the rates on our old loans, so if your rate is already locked in (fixed), consolidation may not provide you with any lower interest. The monthly savings advertised by SL consolidators is almost always the result of spreading the loan out over 15-25 years from the standard 10.
If you have had a perfect payment history on your student loans, don't forget to check Sallie Mae's incentives for paying on time. Last I checked they offered .25% off for autopay, and on DH loans they offered 1% off after 4 years of perfect payments. The deal used ot be 2% off, so if you have had your loans for a while, you might qualify for that. Even if you don't find anything it might pay to give them a call to see if you qualify for any incentives or if there is anyway you can lower your rate but keep the loan with them. Since your rate is so high (actually at the highest rate allowed), they might be willing to work with you rather than lose the loan.
If Sallie Mae won't work with you it might be in your best interest to refinance the debt using a mortgage or other laon, but don't forget that keeping the loans as student loans have some benefits that you will lose if you combine them with other debt or refinance outside of the student loan system. Only you can determine if the benefits are of enough value to outweigh higher interest. The main benefits I can remember right now are:
-- available deferrments for hardship, certain voluneer service (PeaceCorp, etc) and other situations that are generally much more generous and easier to get then deferrments by other creditors
-- ability to deduct interest paid on SL from taxable income even if you don't itemize ("above the line deduction") - You can itemize mortgage interest, but this is only useful if you have enough itemized deductions to exceed the standard deduction
-- Student loans are forgiven if you die or are permanently disabled, so they are one less thing to worry about should anything happen to you, especially if you are disabled.
Author: LisaMarisa
Posted: Wed Jan 19, 2005 10:15 am
Post subject: What to do with Student Loan Debt
Consumercity & Andri,
Thank you so much for the great advice. I have already consolidated my student loans back in 1999, hence the super high interest rate. I knew that once I consolidated my student loans with SallieMae that I could not re-consolidate again with the SallieMae. But I apparently I can never re-consolidate my student loans ever again. I am locked in forever.
I have been paying faithfully and never late for the past 4 years. However, I am not making a dent in the principle at all. I do not have any credit card debt. The only debt I have is my mortgage and my student loan. My student loan debt irks me because I cannot decrease my balance at all. It is as if I am throwing a pebble in the ocean trying to fill it up.
I am going to look at the numbers. But thus far deducting the interest paid for the student loans every tax time has not seemed worth while because all of my payments have been going towards the interest which keeps acrueing and the balance keeps growing. This interest rate is killing me. I would increase my student loan payments to go towards the principle but my budget just will not allow it.
As far as some the benefits of student loan debt, I did come across this yesterday. According, to consumer guru Clark Howard and his website www.clarkhoward.com
"Erase your student loan debt - December 21, 2004
There is a special student loan forgiveness program out there for people who want to become teachers. There are a few requirements and hoops to jump through, but the Taxpayer Protection Act will make some future teachers very happy if the President signs it into law. Congress has already passed the bill. Under the program, a teacher can erase up to $17,500 in student loan debt. Applicants have to teach specific courses, including math, science or special education. Applicants also have to be “highly qualified” and teach in less desirable school districts in order to be eligible. Many teachers may already meet all of those criteria and not even know it. The traditional amount of forgiveness was $5,000. Now it’s $17,000. So, that is a huge improvement. Learn about it here: ed.gov. The idea of wiping out student debt is not a fantasy anymore!"
This may be something worth looking into. Although, I am not a teacher. Therefore, I would have to go back to school to become certified which means more student loans which means more student loan debt. It's a catch-22. Ugh, it is a vicious cycle. Although, $17,00.00 is better than nothing at all.
It is comforting and yet little disturbing to know that when I die or if I become disabled that my student loans will be forgiven. That's a huge plus! I hope I never become disabled-- God forbid but if I did that would be huge benefit
Thank you for all your great advice. Have a great day!!
Author: Andri
Posted: Wed Jan 19, 2005 10:51 am
Post subject: What to do with Student Loan Debt
LisaMarisa,
I know how you feel about not paying much towards principle. If you really aren't paying anything at all towards principle then something is really wrong. Your consolidation payments should be set up to eliminate you debt in a given amount of time....with 63K it is probably set for a 30 year repayment. This would mean that in the first few years your won't be putting much at all towards principle, but at least some and that will increase. For instance on the first year of my 72K 30-year mortgage, I put a total of $650 towards principle, which is depressing......
Here is the link to sallie Mae's Consolidation benefits, at the bottom is a link to the FAQ, which includes info on benefits. Unfortunately the site only includes info on rate incentives for loans issued since 7/1/02, but I know they had incentives before that, so it might just be that they don't keep the older rate plans posted. If you consolidated in late 1999, you may have just become eligible recently if the waiting period was 4 years.
If you are not eligible for any rate incentives, and you do go back to school for any reason, I would recommend taking our any additional student loans from any lender *except* sallie mae. Not that I have anything against Sallie Mae, but DH I found out the hard way that if all your SL are with only one company many (if not all) other SL consolidators won't consolidate for you, meaning you can only stay with the company you were with. **I am hoping to remember this advice for anyone who is taking our SL*** Sallie Mae's programs are prettry comparable to others, but we consolidated my loans with a company that offers a 2% reduction after 2 years (it only 1% if you don't live in AZ or FL), but we couldn't get them to consolidate DH and they didn't offer spousal consolidation.
http://www.salliemae.com/manage/borrower_benefit.html
Good Luck!!!
Author: Andri
Posted: Wed Jan 19, 2005 12:53 pm
Post subject: What to do with Student Loan Debt
I forgot one of the other important benefits of keeping your loans as SL.
If you return to school (at least half time i think), whether or not you take out additional loans, while you are in school any subsidized loans you have will again have the interest subsidized by the government -- meaning while your previous loans will continue to accrue interest, the gov't will cover the interest on the subsidized loans. Also, all of your SL loans go into deferrment while you are in school, so you aren't "required" to make payments, however you can choose to do so - and might want to if possible, since interest is accruing on unsubsidized loans.
So if you are seriously thinking about returning to school, this would be another potential reason to not refinance the SL, especially if you have a high % of subsidized loans. Even without subsidized loans, the automatice defferment might make the difference between being able to afford to go back to school or not.
Author: LisaMarisa
Posted: Wed Jan 19, 2005 2:27 pm
Post subject: What to do with Student Loan Debt
Andri,
Thanks for the adivce and the SallieMae link. I registered and I was able to get detailed look at all of my account information. Since SallieMae doesn't send out any type of statements only coupon booklettes. And the detailed information I saw was absolutely horrifying !! And reconfirmed the fact that all of my payments for the past 4 years have done absolutely nothing and my balance has continued to swell over the years to the current 63K payoff amount. Their choice of repayment plans left something to be desired spread out over the next 25years:
Plan Type Estimated MPA Total Repayment
(monthly payment amt.)
Income Sensitive $88.92 $159,090.36
MAX-2
$431.64 $150,512.70
Extended Repayment - 2 years interest only *
$431.64 $150,512.70
MAX-4
$431.64 $154,116.77
Extended Repayment - 4 years interest only *
$431.64 $154,116.77
Extended Repayment - Level *
$495.01 $148,370.02
Maybe it's just me but this seems CRAZY payout over $150K over the next 25 years. Additionally, my budget will not allow a monthly payment on $400.
I have been looking into the options of Home Equity Loan (HEL) and Home Equity Lines of Credit (HELOC), or Cash Out option to tackle this debt. If continue to stick with SallieMae I will have paid waaayyy too much in interest. I am fairly financial novice. Do you know thing about these types of loans? I have checked bankrate.com and smartmoney.com and they seem like viable and smart financial options.
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