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Student Loan Repayment and Consolidation?

Hello everyone! I just graduated and have about $100,000.00 in total student loans including Govt. subsidized / unsubsidized Stafford Loans and Private loans. About $50,000 is in Stafford loans with an interest rate of 6.8% and $50,000 in “Signature Private Loans” at about 10%. They are all with Sallie Mae. I’m in the 6 month “grace period” now. I’ll be going to graduate school starting this spring (in seven months)

Any advice on if/how/with who I should consolidate my loans with and how do my interest rates look. Any ways to get them lower? I have great credit, a co-signer with great credit and a full time job. Any help on figuring out the best way to pay this stuff back/make my payments lower, would be great.

Any other advice is also welcome /and/or personal stories from those who have gone through this process. Thanks!


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3 Responses to "Student Loan Repayment and Consolidation?"

  1. melbough says:
    If you tell Sallie Mae you are going back to school, they will postpone your payments until then (because they don’t require you to pay at all if you are in school)- my boyfriend just went through this.
  2. Found-1 says:
    Hi, I graduated with 22K in debt from Stafford loans. I never took out private. I paid off all my student loans this winter. 12 years after I graduated with my masters.

    Personally, I never consolidated. Why? well it was before the whole HYPE about consolidation. That is all it is.. hype. Think about it this way, Why in the world would Sallie Mae consolidate loans for you if it wasn’t making them money in the long run. Sure the payments are lower, but rather than a 10 year payment plan, you are now on a 30 year plan. Paying them tons more interest than you would have at the higher rate for ten years. Also, sure you COULD have a single payment, but you already said you have both federal and private and you can’t consolidate them together. Defeating the whole purpose of consolidation anyway. I had like 9 federal loans when I graduated, and like I said, I never consolidated them. I only made one payment to Sallie Mae a month. They automatically distributed my money across the loans to make them happy.

    Also, once you consolidate, you loose any pre loan terms. Like mandatory deferment, loan forgiveness and forbearance terms… you know the things that say…. if you die or become disabled you don’t have to pay the loans back. These are standard terms on federal loans, but not necessarily on consolidated ones.

    Also, will your consolidated loans interest still be tax deductable? Becasue technically, the money borrowed on the new loan wasn’t used on higher education purposes… but to pay off an existing debt. Something to investiage.

    If you have a good job and can afford the….1000 a month or so you’ll be paying, don’t consolidate unless you absolutely have to.

  3. Woelfe says:
    Found-1, sometimes you surprise me with the completely left-field responses.

    HYPE on consolidation? If you believe that then you do not understand some of the complexities that existed before Stafford loans were changed to fixed rate loans. Sometimes extending the repayment period and getting a lower monthly payment rate can help someone in the first couple of years of getting themselves established and making enough money to pay more on their loans. I wish we all had your enduring capacity for financial discipline. *grin*

    Oh, and by the way – you do not lose deferment/forbearance options on consolidated federal loans. And your interest paid on a consolidated federal loan does qualify for tax purposes when claiming it as a deduction on your return.

    To the Asker: You already have fixed rate loans on your federal loans so you do not need a consolidation. With 30K or more in federal debt you can choose a longer repayment period up to 25 years. Talk to your lender about this.

    We counsel students to do this in cases where they have a LOT of debt. By reducing the amount you pay per month you will be able to free up more money to put toward paying off your private loans sooner. This is a very important because they will end up costing you the most in the long run. Eventually you can go back to making larger federal loan payments and pay them off sooner as well. Just because you change the repayment period doesn’t mean you have to use 25 years to pay off the loan. Keep in mind that the longer you take to pay them the more you will pay over the life of the loan in interest.

    Give up on looking for a private loan consolidation. It won’t be worth it financially. Focus on paying off private loans first. Target your payments toward the higher interest loans and work your way down as you pay them off.

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