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Consolidating Student Aid Loans - A good idea?

AthenorAthenor Registered User regular
edited March 2012 in Help / Advice Forum
I borrowed my way through College - I wouldn't change that fact, but I probably would have changed what I borrowed. Unfortunately, as time goes on (and the gradient payment amounts increase), it's becoming more and more of a burden on me to pay my student aid. I'm not in that bad of a spot, but I'm basically keeping my head above water, and it is making things like saving for a car a bitch - which causes other expenses, like food, to rise.

So here's my debts:
With the Federal Gov't, I owe $20k/13k/7k, with a monthly payment of $200 - graduated, so it'll go up again at some point in the next few years.
With my personal credit union, I owe just under 6k, with a monthly payment of $131 - this one they want paid off FAST.
With Sallie Mae, I owe 3.5k, with a monthly payment of $55 - This is my oldest loan, from a community college.
With AES/Chase, I owe 3.1k, with a monthly payment of $25 - I think I'm just paying interest on this one, as it never goes down.

So total, that makes in the neighborhood of $400. I make 31k a year (just got a raise), with $570 in rent and about $200 in utilities and $50-70 a month in credit card payments. As I said, not bad, but not great - I spent way too much on food.

I don't know if a consolidation loan is "Right." Part of me is afraid that on some level, I owe these people money and I should tough it out and pay it like a boss. Another part is REALLY afraid of going to a consolidation place and losing my shirt for the rest of my life, or possibly damaging something. But the truth is, I just really have no clue where to start, or if this is the right move for me. I think I've only missed 1 payment in years, which was 10 days late so they called a collections agency on my dad as the cosigner - it was the Chase loan.

What's the best way to proceed? Should I do anything?

fCew0YJ.jpg
Steam & NNID - Athenor // 3DS: 3883-5283-0471

Posts

  • DaenrisDaenris Registered User regular
    You should be able to consolidate all the federal loans into a fixed-interest direct consolidation loan. See here for more info: https://loanconsolidation.ed.gov/AppEntry/apply-online/appindex.jsp

    Private consolidations are much less common and more difficult to qualify for, but luckily the private loans are much smaller in your case. Personally, I'd consolidate the federal loans and pay the minimum payment on them. Then pick the private loan with the highest interest rate and pay as much as you can afford each month, while paying the minimum on the other 2. Once you pay off the highest interest one, just roll that payment on to the next highest interest until it's gone, and repeat. Once all the private loans are gone, then you can worry about paying more than the minimum on your consolidation loan.

    You should not feel at all bad about consolidating loans. It's a program offered by the government to try to make payments more affordable. If it gives you a lower interest rate, you absolutely should do it.

  • AthenorAthenor Registered User regular
    Daenris wrote: »
    You should be able to consolidate all the federal loans into a fixed-interest direct consolidation loan. See here for more info: https://loanconsolidation.ed.gov/AppEntry/apply-online/appindex.jsp

    Private consolidations are much less common and more difficult to qualify for, but luckily the private loans are much smaller in your case. Personally, I'd consolidate the federal loans and pay the minimum payment on them. Then pick the private loan with the highest interest rate and pay as much as you can afford each month, while paying the minimum on the other 2. Once you pay off the highest interest one, just roll that payment on to the next highest interest until it's gone, and repeat. Once all the private loans are gone, then you can worry about paying more than the minimum on your consolidation loan.

    You should not feel at all bad about consolidating loans. It's a program offered by the government to try to make payments more affordable. If it gives you a lower interest rate, you absolutely should do it.

    Makes sense. I'm trying to do that with my credit cards. My total CC debt is about 1,200; I'm trying to pay that down by $100 a paycheck. It just seems like so much money.

    fCew0YJ.jpg
    Steam & NNID - Athenor // 3DS: 3883-5283-0471
  • noir_bloodnoir_blood Registered User regular
    I know you didn't ask for this, but it seems like taking another look at your spending habits might help.

    From your post, it seems like you should have a pretty good amount left over once bills are out of the way. Maybe you're omitting some other finances, but it still feels like you should be able to save up a couple of bucks a month.

    Sounds like maybe you're eating out too much? I didn't start seeing a change on how much I could save up a month until I started to cut back on fast food, as well as made a weekly grocery list and budget.

    Spoiler:
  • AthenorAthenor Registered User regular
    noir_blood wrote: »
    I know you didn't ask for this, but it seems like taking another look at your spending habits might help.

    From your post, it seems like you should have a pretty good amount left over once bills are out of the way. Maybe you're omitting some other finances, but it still feels like you should be able to save up a couple of bucks a month.

    Sounds like maybe you're eating out too much? I didn't start seeing a change on how much I could save up a month until I started to cut back on fast food, as well as made a weekly grocery list and budget.

    Oh, I know that is where my problem is - you are absolutely right. The problem, I find, is that when I do go out grocery shopping, it's usually about $120 for a week or two, mostly because I don't know how to cook. But what gets worse is that without a car, and with no easy to reach grocery stores on my route, I find myself eating out a LOT, especially Subway. The weeks I can get to a store my finances go way down.

    I just am looking for any place I can cut back to get a car without.. well.. dying. I probably don't need as much food as I do, but I haven't been very successful at reigning in that spending.

    fCew0YJ.jpg
    Steam & NNID - Athenor // 3DS: 3883-5283-0471
  • VanguardVanguard The system was breaking down. Registered User, __BANNED USERS regular
    Yeah, it's all about spending habits. I would start by getting some recipes for breakfast, lunch, and dinner.

    You can make a better, healthier sandwich than anything subway will give you.

    Breakfast is really easy. A single egg loaded with veggies goes a long way (nearly two weeks worth of breakfast in one carton!).

    I'm a little more picky about dinner since that's usually the time I can actually cook something. Start simple. Chili, pasta, salads are all really easy and delicious.

  • DeebaserDeebaser Lead Frog Rammer Fake Board GamerRegistered User regular
    Get rid of that Chase loan ASAP. You will be paying that off for decades if you're just giving them $25 a month. Shoot for $100, but no less than $75.

    I see $200 in utilities. Do you have cable? Ditch it for Netflix. Put that towards Chase.

    Stop eating at subway. Learn how to cook rice and beans. It's dirt cheap and hearty fare. Make yourself a meal and make a $7 payment to your loan.

    Create a mint.com account. Make it a goddamn game. I jumped for joy the day my mint.com net worth went positive.


  • EsseeEssee The pinkest of hair. Victoria, BCRegistered User regular
    Deebaser wrote: »
    I see $200 in utilities. Do you have cable? Ditch it for Netflix. Put that towards Chase.

    Similarly, if you have a high cell phone bill, go take a look at Virgin Mobile's plans. Only downside is you pretty much need to grab the phone from the company, but depending on your needs their cheap phones cost $10 or $20 (depending on whether they've marked down the cheapest phone recently). If you grab a non-smart phone, you can actually keep your service alive for $20 every 3 months (assuming you don't call enough to spend that $20-- but if you do you can add more money), which is insanely low. Their cheapest smartphone plan is $35, which I think is also relatively cheap from what I've heard (don't need one yet since I have the internet, honestly). I've seen some people pay like $70/month for cell phone service because it's the cheapest they can get from their provider. Crazy stuff.

  • SniperGuySniperGuy Also known as Dohaeris Registered User, ClubPA regular
    Related question, having just recently graduated and foolishly allowing my parents to manage most of the money aspects of my education, how do I go about getting information on exactly what my loans are and from who, as well as my options?

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  • DeebaserDeebaser Lead Frog Rammer Fake Board GamerRegistered User regular
    edited March 2012
    SniperGuy wrote: »
    Related question, having just recently graduated and foolishly allowing my parents to manage most of the money aspects of my education, how do I go about getting information on exactly what my loans are and from who, as well as my options?

    Go to annualcreditreport.com and find out who you owe money to.
    Then go to their website and find out what your options are.

    Deebaser on
  • DaenrisDaenris Registered User regular
    Deebaser wrote: »
    SniperGuy wrote: »
    Related question, having just recently graduated and foolishly allowing my parents to manage most of the money aspects of my education, how do I go about getting information on exactly what my loans are and from who, as well as my options?

    Go to annualcreditreport.com and find out who you owe money to.
    Then go to their website and find out what your options are.

    Or, just get the info from your parents. If they've handled everything they should have the documentation on what loans you have. Though checking your credit report is definitely a good way to make sure you get info from them on all your loans.

  • SniperGuySniperGuy Also known as Dohaeris Registered User, ClubPA regular
    Daenris wrote: »
    Deebaser wrote: »
    SniperGuy wrote: »
    Related question, having just recently graduated and foolishly allowing my parents to manage most of the money aspects of my education, how do I go about getting information on exactly what my loans are and from who, as well as my options?

    Go to annualcreditreport.com and find out who you owe money to.
    Then go to their website and find out what your options are.

    Or, just get the info from your parents. If they've handled everything they should have the documentation on what loans you have. Though checking your credit report is definitely a good way to make sure you get info from them on all your loans.

    Yeaaaaah I wasn't kidding when I said "foolishly" up there. I definitely will try that website though, thanks!

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  • FeralFeral Who needs a medical license when you've got style? Registered User regular
    edited March 2012
    As a general rule, consolidation loans are bad ideas. Most people who get consolidation loans end up in more debt in the long-term.

    This is for two reasons. First, private consolidation loans tend to be predatory - they offer you bad interest rates with long payment schedules hoping that the low monthly payments will entice you. Often they have lender's fees that they don't tell you about up-front.

    Second, getting a consolidation loan does no good if your expenses are too high or your income is too low. Your first medical bill or car repair will just go right back on a credit card.

    There are a couple of exceptions: federally-sponsored student loan consolidation, as Daenris pointed out. (The other exception, which doesn't apply to you, is a home equity loan, because those tend to be much lower interest than credit cards.)

    Daenris wrote: »
    You should be able to consolidate all the federal loans into a fixed-interest direct consolidation loan. See here for more info: https://loanconsolidation.ed.gov/AppEntry/apply-online/appindex.jsp


    This type of loan consolidation can be a good thing. You can lock in a lower interest rate and renegotiate your payment schedule. I did this a few years ago and it has worked out fine.

    You said that you're able to keep your head above water right now. That is a good sign - many people can't. Keep pushing at that debt.

    One thing you might be able to do is negotiate lower interest rates with some of those banks. Would you feel comfortable posting your interest rates here? We'd be able to tell you whether you're getting totally screwed or just moderately screwed.

    Feral on
    every person who doesn't like an acquired taste always seems to think everyone who likes it is faking it. it should be an official fallacy.
    the "no true scotch, man" fallacy.
  • schussschuss Registered User regular
    Also, if consolidation doesn't work, use the snowball strategy:
    Pick the 3k loan with the highest interest rate, and put an extra $100 toward it each month. Once that gets paid off, take that $100 and the amount you were paying and put it toward your other 3k one, then move onto the bigger ones.
    Your monthly payment doesn't change, but you'll be able to knock out the lenders fast and give yourself a cushion if something goes awry, as you'll only have 1 or 2 loans to pay. Also, kick ass at your job, make more money, then put all the extra in your paycheck towards paying down the debt. It doesn't feel as good initially, but will be better in the long run, as downgrading lifestyle is hard and keeping the same is easy.

  • AthenorAthenor Registered User regular
    I'll post my rates when I get home. Thanks for all the advice! I'm actually trying the snowball strategy, starting with my credit cards.

    I can't drop home internet, or downgrade it much. I am on-call for work on a regular rotation, and VNC/RDP requirements are steep. Comcast just raised my rates from $44 to $68.

    My phone bill is $56, when my parents remember to take it from my account. I'm on a family plan, unlimited 4G Verizon.

    fCew0YJ.jpg
    Steam & NNID - Athenor // 3DS: 3883-5283-0471
  • SniperGuySniperGuy Also known as Dohaeris Registered User, ClubPA regular
    edited April 2012
    I'm bumping this and hijacking it for a minute. I've now figured out what exactly my loans are. From what I learned speaking to the Sallie Mae guy, I have 11 loans, about 60k total, with interest rates that range. 8 of then have a 6.8% interest, one has 11.5% (!!!) and is the largest loan, one is at 9.75% and my favorite is at 3.4%. Most of these are actually still under a grace period since I graduated undergrad in December.

    Since I graduated with an education degree however, finding a job has been difficult and I'm currently substituting which is not the most reliable of positions. (Especially since spring break screwed my paycheck over hard). I probably won't be able to get a salaried position until August, assuming I'm even lucky enough to get one. 8 loans are department of education, 3 are sallie mae, and one sallie mae is a private loan. According to the guy I spoke to, I could consolidate all of these but the private loan. So what would my next step be? I could potentially defer under economic hardship or something he was saying, or I could attempt to consolidate. It seems like it would be possible to get a slightly better interest rate locked in and consolidated and then I can concentrate on killing off the private loan then work on the consolidated loan. But I am also feeling overwhelmed and confused, so, thoughts from those more experienced?

    And Athenor, sorry for stealing your thread. Feel free to steal it back.

    edit: Oh and if I posted too much information there that could be problematic for me, please let me know. I don't think I did, but just in case.

    SniperGuy on
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  • DaenrisDaenris Registered User regular
    I'd recommend consolidating all that you can so you can now to get the lower interest rate. Even though you're in your grace period, the loans are still accumulating interest, so the sooner you can get that down the better.

    However, the downside to this is that you lose your grace period by consolidating. There is apparently a loophole -- but it only works if the lender agrees to it so it may not be possible. So if you are unable to afford any payments right now, then you should wait until near the end of your grace period to consolidate which just means you might have a higher (or lower possibly) interest rate compared to right now.

  • SniperGuySniperGuy Also known as Dohaeris Registered User, ClubPA regular
    Presumably I can call the consolidation direct loan people and they'll tell me the interest rate I'd get and if too high I can try to wait it out till the end of the grace period? Which is in June I think.

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  • AthenorAthenor Registered User regular
    I don't mind hijacking; it gives me a reason to not be lazy. =P

    So, here we go:

    Student Loans:
    Credit Union Student Loan ($131/mo): $5,904 - 8% APR, $541 interest last year
    Sallie Mae Stafford ($55/mo on the group):
    ---1,101.64, 2.11% APR
    ---940.61, 2.36%
    ---1,443.96, 2.36%
    Chase/AES ($25/mo): $3,174.60, 4.240% APR (I pay 4/mo on principal on this... it's my next goal after the CCs)
    Federal Government Direct Loans:
    ---Direct Sub 1 - $5,033.69, 5.75%
    ---Direct Sub 2 - $280.09, 6.55%
    ---Direct Sub 3 - $2,681.59, 6.55%
    ---Direct Sub 4 - $5,033.69, 5.75%
    ---Direct Unsub 5 - $1,510.25, 6.55%
    ---Direct Unsub 6 - $266.22, 6.55% (how do I owe more on this than I borrowed?)
    ---Direct Unsub 7 - $5,056.46, 6.55%

    Credit Cards:
    BoA - $963, $1000 limit, 24.24% APR
    Target - $370, $500 limit, 22% APR (this is my current goal to try to get knocked out first)


    .... Bah. When I look at it that way, my Sallie Mae loan is by far the best, and the government's actually pretty crappy.

    fCew0YJ.jpg
    Steam & NNID - Athenor // 3DS: 3883-5283-0471
  • AthenorAthenor Registered User regular
  • LilnoobsLilnoobs Alpha Queue Registered User regular
    Deebaser wrote: »
    Get rid of that Chase loan ASAP. You will be paying that off for decades if you're just giving them $25 a month. Shoot for $100, but no less than $75.

    I see $200 in utilities. Do you have cable? Ditch it for Netflix. Put that towards Chase.

    Stop eating at subway. Learn how to cook rice and beans. It's dirt cheap and hearty fare. Make yourself a meal and make a $7 payment to your loan.

    Create a mint.com account. Make it a goddamn game. I jumped for joy the day my mint.com net worth went positive.


    That mint.com site is nice, but seems to be stumped on trying to add credit cards, checking, and savings all from the same bank.

  • finalflight89finalflight89 Registered User regular
    Athenor wrote: »

    Yes, I just consolidated my loans through this program. Although it was only able to do federal loans serviced through another lender, at least I have one less "payment" to make a month. If I'm correct, it could only combine your Sallie Mae Stafford loans and the other federal direct loans.

  • AthenorAthenor Registered User regular
    Athenor wrote: »

    Yes, I just consolidated my loans through this program. Although it was only able to do federal loans serviced through another lender, at least I have one less "payment" to make a month. If I'm correct, it could only combine your Sallie Mae Stafford loans and the other federal direct loans.

    That would at least be a start, especially if I could get the monthly payments down.

    fCew0YJ.jpg
    Steam & NNID - Athenor // 3DS: 3883-5283-0471
  • DeebaserDeebaser Lead Frog Rammer Fake Board GamerRegistered User regular
    @Lilnoobs keep plucking away at it. It has trouble reading some accounts, but if you get it working the payoff is pretty sweet.

  • AthenorAthenor Registered User regular
    Deebaser wrote: »
    @Lilnoobs keep plucking away at it. It has trouble reading some accounts, but if you get it working the payoff is pretty sweet.

    My bank had to re-write code in their system to support Mint. My biggest issue with it at the moment is that it sees my student loan through the bank as cash, so it throws off all my tallys.

    fCew0YJ.jpg
    Steam & NNID - Athenor // 3DS: 3883-5283-0471
  • LilnoobsLilnoobs Alpha Queue Registered User regular
    Deebaser wrote: »
    @Lilnoobs keep plucking away at it. It has trouble reading some accounts, but if you get it working the payoff is pretty sweet.

    Thanks. I just kept at it and eventually it all worked out.

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