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Help! Defaulted Student Loans (and other debt fun)


Rdskn4Lyf21
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You obviously have been happy with SOFI. Any tips on doing the conversion to them? Is it a pretty straight forward process? How long did it take to convert?

 

I'm curious about this as well.  My student loans aren't killing me, my wife and I make a pretty good living but I do have a pretty good sized sum outstanding from grad school, and the interest rate is in the 6-7% range with Navient.  I just have the payments withdrawn automatically, but if I can consolidate to a lower rate and pay them off faster with someone else, I'd do it in a heartbeat.

 

Not to mention, my wife is in grad school now herself, and will be done at the end of next year.  That will be another pile of loan debt I'd need to consolidate.  More information please.

 

*Edit* Oh well, nevermind.  Apparently they aren't licensed to do business in Virginia.

 

*Edit 2* Scratch that, I was in the mortgage section without realizing it.

Edited by Forehead
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My rate went from between 6.5% and 7.6% depending on the loan (i had 9) to 3.105%.  The difference that makes is crazy. Before, like 85% of each payment went to interest, now 2/3 goes to principal.  AND SOFI SENT ME A PIE.  Seriously, it was a bourbon pecan pie.  From here:  http://threebabesbakeshop.com/product/bourbon-pecan-pie/.  I don't even like pie, but it's a nice gesture that makes me not want to elbow them in the face.  

 

How did you get down to 3.105%?  Did you go variable?  The best fixed rate they offered me (I tested it out) was 4.375%.  I didn't have my wife listed as a co-signer during my test run, so her income wasn't factored in, and it's still over a 2% drop I'm just curious how you got yours so low.

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Interesting. I'm in the process of helping my son get his SL straightened out so he can start to repay them. For all of 2015, he has been successful in getting the Fed to charge him $0.00/month because he wasn't making enough money. He just started a new, full-time job where he will now be able to start making payments. 

 

You obviously have been happy with SOFI. Any tips on doing the conversion to them? Is it a pretty straight forward process? How long did it take to convert?

 

Yes, i've been happy, SO FAR, with SoFi.  It's only been 1 month of payments so far though.  It took me 2 weeks to apply and get approved, then they handled the conversion.  I also got a refund of about $1000 from the Dept of Education. :)

 

I did the research (I used to be in the lending industry).  There are only 4 companies that will refinance student debt (not consolidate, refinance).  They all require stellar credit and that you earn enough $ to service the debt, which is the big difference between refinancing and consolidation.  With consolidation, you still end up with a government servicer (Navient and FLS are the big ones) and they still charge you a high rate, the advantage is you can get lower payment options.  The lower payment options **** you in the long run though, b/c the interest continues to run.  

 

These are the four banks that will refinance graduate loans at non-usurious rates.  All of them require stellar credit and lots of income.  My advice is to shop rates and see who will give you the best one.  

 

https://www.citizensbank.com/student-loans/education-refinance-loan.aspx

 

https://www.sofi.com/refinance-student-loan/

 

https://student.drbank.com/?provider=slh

 

https://commonbond.co/

 

Here is a WashingtonPost story that is worth reading:

http://www.washingtonpost.com/news/storyline/wp/2014/10/15/student-loan-refinancing-will-save-you-money-if-you-dont-actually-need-it/

 

I'm curious about this as well.  My student loans aren't killing me, my wife and I make a pretty good living but I do have a pretty good sized sum outstanding from grad school, and the interest rate is in the 6-7% range with Navient.  I just have the payments withdrawn automatically, but if I can consolidate to a lower rate and pay them off faster with someone else, I'd do it in a heartbeat.

 

Not to mention, my wife is in grad school now herself, and will be done at the end of next year.  That will be another pile of loan debt I'd need to consolidate.  More information please.

 

*Edit* Oh well, nevermind.  Apparently they aren't licensed to do business in Virginia.

 

*Edit 2* Scratch that, I was in the mortgage section without realizing it.

 

I have about a quarter of a million bucks in student debt.  Refinancing down to 3% is going to save me tens of thousands of dollars.  It was a critical move for me.  Refinancing (the process) is easy.  Qualifying is somewhat difficult since refinanced student debt is basically unsecured.  

 

How did you get down to 3.105%?  Did you go variable?  The best fixed rate they offered me (I tested it out) was 4.375%.  I didn't have my wife listed as a co-signer during my test run, so her income wasn't factored in, and it's still over a 2% drop I'm just curious how you got yours so low.

 

I did go variable, plus they give you another 1/4 if you get the payments autodeducted.  Its a 10 year variable rate loan.  I knew that rates would start going up when i refinanced, but I am gambling on having it paid off before my rate goes up to 5% (which is where the fixed rate would have been).  The Fed raised rates this week, but I'm pretty sure it was a symbolic move and i seriously doubt they are going to go crazy with rate increases.  The economy is improving, but these still arent boom times by any measure.  

Edited by PleaseBlitz
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his plan in a nutshell:

(prelude: create a zero based budget, where every dollar coming in has a specific place to go)

1. save a $1000 mini emergency fund

2. debt snowball (list debts in order from smallest amount to largest amount, and pay them in that order while paying minimum payments on all)

3. save your emergency fund: 3-6 months of expenses

4. invest 15% of income

5. college fund for kid(s)

6. pay off house

7. save your face off now that you don't have any payments at all.

don't do #2 until you do #1; don't do #4 until you do #3; etc.

 

 

What's #8? 

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Dave Ramsey offers a lot of good advice. With the Exception of Debt Snowballing. That's simply a feel good measure for people who feel bad about their situation. Your first order of business should be paying off which ever debt is costing you the most. Which means going after loans with the highest APR first.

mathematically, that is correct. dave would say that getting out of debt is emotional and requires motivation. Having those smaller debts drop away (and applying those payments to the next largest debt) provides that motivation. if you don't require that, good for you, but you shouldn't be so dismissive of a plan that has helped millions get out of debt (by saying it is for people who feel bad about their situation).

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Dave Ramsey offers a lot of good advice. With the Exception of Debt Snowballing. That's simply a feel good measure for people who feel bad about their situation. Your first order of business should be paying off which ever debt is costing you the most. Which means going after loans with the highest APR first.

He is also 1000% incorrect on his love of mutual funds. He's been called out repeatedly and responds with anger

But anyway

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He is also 1000% incorrect on his love of mutual funds. He's been called out repeatedly and responds with anger

But anyway

 

It's shameful how many financial advisors recommend products that gouge customers on fees for no upside. Unless you count the warm feeling that someone is taking care of you' as 'upside'. Except they're taking care of themselves.

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Well said, ExoDus84.  It's also been shown in several studies to be the income where people are "OK"...can get what they need, a few things they want, and know the difference between the two. 

I never use my change.  Never.  I save it, and when I need  $50 for a pair of shoes or clothes,... something,... I have it.  My husband never thought of this.  Now he thanks God that I did.

 

I like that. 

(HAIL!)

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Interesting. I'm in the process of helping my son get his SL straightened out so he can start to repay them. For all of 2015, he has been successful in getting the Fed to charge him $0.00/month because he wasn't making enough money. He just started a new, full-time job where he will now be able to start making payments. 

 

You obviously have been happy with SOFI. Any tips on doing the conversion to them? Is it a pretty straight forward process? How long did it take to convert?

 

Obviously look into consolidation if it's going to be a viable and affordable option. But you are at an advantage in regards to what the Fed in charging monthly in relation to his income. It's all based on your previous years AGI. So, if the time to reapply is here and he's still using last year's AGI where he wasn't making enough to be charged, you can still go with that and basically owe nothing without penalty, but pay down the interest when the cash is available.

 

My question to you folks who use SoFi. Where do they stand on very high private loan balances? I've looked into refinancing. My problem is that with a +$100,000 balance and around 3-5% interest rates on private loans from Sallie Mae, it just doesn't seem like it would do much to help. Problem is, yeah, those rates sound low. But my monthly payments are just over $700/mo. That's a tough bill to shell out every month. My credit is very good. I'd love to refinance if it'll bring these monthly payments down. But if it's just going to end up being the same monthly payment, there isn't much of a point yet.

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Obviously look into consolidation if it's going to be a viable and affordable option. But you are at an advantage in regards to what the Fed in charging monthly in relation to his income. It's all based on your previous years AGI. So, if the time to reapply is here and he's still using last year's AGI where he wasn't making enough to be charged, you can still go with that and basically owe nothing without penalty, but pay down the interest when the cash is available.

 

 

Given the above, you recommend paying down the interest instead of the principle? Is there a reason for this? Typically - and I don't know anything about SL - you pay down the principal with any extra money, thus reducing future interest charges.

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The way I understand it is that the interest continues to accrue. That's the only reason that I suggest that. I may be wrong. But I know that with virtually all SL interactions that involve paying less or getting a break(Forbearance etc.) your interest will continue to accrue.

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My question to you folks who use SoFi. Where do they stand on very high private loan balances? I've looked into refinancing. My problem is that with a +$100,000 balance and around 3-5% interest rates on private loans from Sallie Mae, it just doesn't seem like it would do much to help. Problem is, yeah, those rates sound low. But my monthly payments are just over $700/mo. That's a tough bill to shell out every month. My credit is very good. I'd love to refinance if it'll bring these monthly payments down. But if it's just going to end up being the same monthly payment, there isn't much of a point yet.

 

I think the market they operate in is largely high balance loans.  Like i said above, i refinanced nearly $250,000 (so i scoff at your meager $700/month payment :) ).

 

That being said, if you are already at 3-5%, it may not be worth it.  It never hurts to check their rates though, it didnt cost me anything upfront to refinance (no points or app fee).  

The way I understand it is that the interest continues to accrue. That's the only reason that I suggest that. I may be wrong. But I know that with virtually all SL interactions that involve paying less or getting a break(Forbearance etc.) your interest will continue to accrue.

 

This is correct.  Your interest rate is your interest rate.  Student loan lenders LOVE that you have a lower payment, it means that you will continue to pay interest FOREVER and never pay down your principal.  

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The way I understand it is that the interest continues to accrue. That's the only reason that I suggest that. I may be wrong. But I know that with virtually all SL interactions that involve paying less or getting a break(Forbearance etc.) your interest will continue to accrue.

 

Great info. Thanks!

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  • 1 month later...

Update on my situation!

My loan has a new servicer (nelnet), and I'm officially back in good standing. My next payment is due in May, and I have to choose a repayment option before then. My current balance is $38k. Here are my options:

1. Standard repayment. $490/mo. for 10 yrs. (about $55k total).

2. Extended repayment. $290/mo. for 25 yrs. (about $85k total).

3. Income-based repayment. (Don't know how much, but probably lower per month and even more interest).

4. Graduated repayment. (Forget it).

I'm strongly leaning towards option #1. I can afford it, and if circumstances change, then I can switch plans at any time. I'd rather get it paid as soon as possible and pay less.

One thing makes me hesitate though: I may qualify for the Public Service Loan Forgiveness Program (PSLF). If you're in a full-time public service job for 10 years, and you make 10 years worth of payments, then you can apply to have the balance of the loan forgiven at the end of those 10 years. If I qualify, then it may be best to go for the lowest possible payments for 10 years and try to get the balance forgiven.

The "if I qualify" question is tricky though. I am a full-time public community college teacher, which ought to qualify, but my contract is a renewable 9.5 month contract. Will that count? It's hard to say, because they aren't even making the application available until October 2017. Also there is no guarantee that my circumstances don't change in 10 years. It seems like a bit of a gamble to rely on that.

Any advice? Anybody know the details of the PSLF?

Here's a link on PSLF: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

Edited by s0crates
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If you haven't read it thru, do so.

Basically the best way to achieve it is to do income based repayment. Standard 10 year plans will have nothing left to forgive.

Thanks for your response. I think your basic point is right.

I have read that info about PSLF through. It sounds like I should qualify, I am a full-time state employee working in education. If I do qualify, then my cheapest options are either the 25-year plan or income-based plan.

I'd rather be sure I will qualify so I don't pile up interest for 10 years and find out I don't. My concerns are:

1. Will it matter that I'm on 9 1/2 month renewable contracts? That is, will the 2 1/2 months a year prevent me from qualifying?

2. Although I have every hope of remaining in my current job for the next 10 years, and I seem to have a fair amount of job security right now (we're offering 15-20 sections of the classes I teach every semester, and my bosses like me), nothing is guaranteed in higher education these days. There is no such thing as tenure anymore. What if I lose my job between now and then?

3. The government might change the laws between now and then. What are the odds of that, and how might it effect me?

It seems like my best bet is to go for the lowest payment and apply for PSLF in 9-10 years to have the balance forgiven, but it also feels like a bit of a gamble. I'd like to have some kind of assurances that I would qualify. Who could I call for more information? Maybe Dept of Ed?

Edited by s0crates
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Are the interest rates the same on all the repayment options? If so, chose option 2, pay as if you were paying option 1. Then, if something bad happens, you arentnup the creek at much.

Thanks. The interest rate is the same, just the term is different. The longer you take to pay, the more interest you pay. I see what you mean about taking option 2 for flexibility, but it looks like I'm allowed to switch payment plans whenever I want anyway, so it's somewhat of a moot point.

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