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Student Loan Consolidation – if both spouses have $80K+?

OK so I asked about the 20% plan and because we both have huge loans, the only option is to pay 40% of our income for 30 years. (20% of our combined income twice). I argued, talked to supervisors, but that is the best deal they can give us. Regular payments would be $3K/month, which is more than we make. We were both low-income kids who thought going to college was a good idea, now we will never get out from under. It seems so completely hopeless so any ideas would be helpful.

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2 Responses to "Student Loan Consolidation – if both spouses have $80K+?"

  1. John says:
    Can I ask what/where you studied that costed $80,000 and you don’t make $3000/month? I went to community college and make more than that! Please don’t tell me you studied communications or psych.

    so take away 40% of your income for 30 years, suddenly college really isn’t that worth it….

  2. Woelfe says:
    You don’t take the time to explain the types and amounts of the loans that you have so it is difficult to know what to tell you, or how to advise handling consolidations. I’m going to guess that the lion share of these loans is private education loans that you took out. The smaller amount is most likely federal.

    If you have at least 30k in federal debt you can use extended repayment to lower your monthly payment. This increases the life of the loan from standard (10 years) to a 25 year repayment period. If you use the whole 25 years to repay it is going to significantly increase the total amount you pay for the loan because of interest accruing over a longer period.

    For federal loans there are also forbearance and economic hardship options you can take if you are struggling to make payments. Consolidating federal loans into a federal consolidation program is ONLY going to be useful if you have older variable interest rate Stafford loans. By consolidating these after July 1, 2008 you can lock in a lower fixed interest rate.

    As for consolidations of private debt I would advise against this, and if you do find some programs read all the fine print because in many of the instances we have found that the borrower ends up paying far more in the long run. Best to suffer with the loans you currently have. And you never want to use a program that offers to consolidate your federal with your private. That is bad because you will lose your forbearance/deferment options.

    Going to school was a great idea because over your lifetime you have the potential to earn significantly more with a degree than without one. However, it would be good if someone slapped you around when you decided going to an expensive school that you could not afford to repay private loans for was a good idea. Maybe someone did caution you about it and you were just ignorant. I see it happen to a lot of people. It is important to understand the cost you will pay over the life of college and know how much you will need to repay so you can decide if the school is the right choice financially.

    Best options is to start working 2nd jobs and cut way back on your expenses, bare bones as much as possible. Extend your federal repayment period as much as it allows to give you a lower monthly payment, then use your deferment options on federal loans and while they are on hold throw every single copper, wooden nickel and kitchen sink at paying off the private loans. You are going to have to work your asses off to pay it off, but when you do you will be far better off for it.

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