Basic Student Loan/Finance Questions. Overwhelmed

[cctaylor88]

Recently graduated and started working my dream job (yay!) full time. Lately I have been receiving my two private (Sallie Mae) loans by paper statement because I like to physically look at statements every month. They are depressing to say the least. What do I mean by this?

Lets say for the sake of numbers I have two Sallie Mae loans.. both for 10k at 7.5%. Essentially I am paying $400 to move my overall balances down about $100 (these aren't exact figures but pretty close)... so of course I'm heated. These loans are barely getting paid down yet costing me a fortune.

So what are my options? Ideally, is there a way to have my personal bank (Chase) "buy" these loans and have them consolidated so that I get one statement with everything laid out, possibly at lower interest rates? I'm just throwing ideas out here because I'm very green when it comes to student loans (being a new graduate and all).

These are my teeny-tiny loans (the private Sallie Mae ones that is). This post doesn't even include my massive federal student loan... but still these private loans are really making me depressed when I look at what comes out of my bank account versus what it actually takes off the loan itself.

TL;dr very overwhelmed with my two private loans, barely being paid down yet hitting massive chunks of my paycheck. Can I consolidate? Can I lower the interest? Can my bank buy them and I instead pay the bank (Chase). Thank you so much in advance...

 

[purbeast0]

man i can't wait to see your post when you buy a house and look at how your payments are broken down the first few years.

 

[s0me0nesmind1]

man i can't wait to see your post when you buy a house and look at how your payments are broken down the first few years.

Actually, homes aren't that expensive in comparison... especially with todays interest rates. That said... just like homes... you can always pay more than the bill they send you.... Which is how you avoid paying obscene interest rates. Considering your loans are 7.5%, you can't get a better return on investment than paying extra principle on those loans. Of course, I'm sure OP just sees his monthly bill and declares thats all he can pay for each month...


I love how OP is still in denial... He's probably... what? A few weeks into his job? He still calls it his "dream job" hahahaha. I wonder how long it will last?

 

[cctaylor88]

man i can't wait to see your post when you buy a house and look at how your payments are broken down the first few years.

Right. And I understand that. Thats $250K versus $20k though. Just looking for financial advice to those more knowledgeable but thanks for the input.

 

[cctaylor88]

Actually, homes aren't that expensive in comparison... especially with todays interest rates. That said... just like homes... you can always pay more than the bill they send you.... Which is how you avoid paying obscene interest rates. Considering your loans are 7.5%, you can't get a better return on investment than paying extra principle on those loans. Of course, I'm sure OP just sees his monthly bill and declares thats all he can pay for each month...


I love how OP is still in denial... He's probably... what? A few weeks into his job? He still calls it his "dream job" hahahaha. I wonder how long it will last?

Way to make two very quick and generic assumptions. OP went to nursing school for four years, what many consider to be one of if not the hardest undergraduate degrees a person living in the United States can strive for. OP passed the national boards and is now a registered RN. OP is currently a full time pediatric nurse at the single largest childrens hospital in the United States. OP is very proud of his job, loves children, and couldn't work for a better hospital. OP is in fact working his dream job. But of course you probably know better than I about what is and isn't my realistic dream job right? Right. Clearly.

Assumption number two, OP knows he can pay more per month and never once eluded to the fact that this is all OP can afford per month. OP just turned a major chapter in life and is trying to understand and take full advantage of things like investing into his TIAA retirement for the maximum amount, looking for better options on student loans, and currently also saving for a first time home purchase. That is why OP turned to (hopefully) those more knowledgeable and willing to help him. But is quickly finding just the opposite, and I guess not so surprisingly because...well. Internet.

But again, fantastic input. Thank you

 

[Viper GTS]

Check out Earnest, Common Bond, SoFi, Citizens Bank, etc. You should be able to refinance down to a much lower rate, particularly if you go adjustable given the small balances. You'll likely cut your rate by 2/3 if you are willing to go short term. I went through this recently (not my loans, but helping in the process). We had the best luck with Earnest and CitizensBank. Earnest ended up matching CitizensBank rates.

Viper GTS

 

[soulcougher73]

Live the first couple years the same as you did in college and pay off the loans as soon as possible? This is assuming you lived cheaply like most college students of course. Live with parents and pay them off?

 

[dave_the_nerd]

1) Pay off higher interest rate loans first.
2) Anything that's higher-APR than your investment return should be paid off before you put money in a retirement account.
2b) Unless you'd be leaving employer matching on the table. Get free money.
3) the % of your payment that goes to principle will increase over time. That's just how loans are structured.
3b) You should be able to get a complete payment schedule that will illustrate this.
4) I prefer to think in terms of months remaining rather than amounts. Less depressing.

That's about it. There's math if you want to get involved, but the rules of thumb are pretty simple.

 

[dullard]

Lets say for the sake of numbers I have two Sallie Mae loans.. both for 10k at 7.5%. Essentially I am paying $400 to move my overall balances down about $100 (these aren't exact figures but pretty close)... so of course I'm heated. These loans are barely getting paid down yet costing me a fortune.

Lets look at those numbers more closely. Suppose you owed $10k at 7.5% interest. Then in the worst possible month you would pay $10000 * 0.075 / 12 = $62.50 in interest per loan. If you paid $200 per loan (total of $400), then each loan would go down by $137.50 in that month. Or in other words, in your worst month, 31% of what you paid goes to Sallie Mae and 69% goes into your pocket by reducing the balance on the loans.

But, it gets better. The next month you'd only pay $61.64 in interest per loan. And the next month would be $60.78 per loan. The amount that goes to Sallie Mae just keeps dropping each month and the amount that is going into your own pocket keeps increasing each month.

Basically, you are only seeing the bad part of a loan (right at the beginning).

 

[dullard]

I may be wrong, but I think that private Sallie Mae loans are not really able to be consolidated any more unless you fit into a few exception areas. There are some very specific types of loans for nursing you might be able consolidate though if you happen to have them. I just don't know the details on those exceptions nor what exact type of loans you got.

 

[MegaFlop]

I just transferred a 10K student loan to a 0% Credit Card...

Depending on your situation you might be able to do something similar.
Pay down as much as you can while in the 0% period and then either eat the CC interest or transfer the balance again. You might come out ahead even if you had to pay CC interest.

 

[cctaylor88]

Lets look at those numbers more closely. Suppose you owed $10k at 7.5% interest. Then in the worst possible month you would pay $10000 * 0.075 / 12 = $62.50 in interest per loan. If you paid $200 per loan (total of $400), then each loan would go down by $137.50 in that month. Or in other words, in your worst month, 31% of what you paid goes to Sallie Mae and 69% goes into your pocket by reducing the balance on the loans.

But, it gets better. The next month you'd only pay $61.64 in interest per loan. And the next month would be $60.78 per loan. The amount that goes to Sallie Mae just keeps dropping each month and the amount that is going into your own pocket keeps increasing each month.

Basically, you are only seeing the bad part of a loan (right at the beginning).

Fantastic quick glance, I guess It's been some years since I saw the beginning of my huge car loan (but I was a 19yr old kid who just saw shiny rims and leather interior and paying school loans is quite a bit glamorous). So lets just say I have a $10k loan, what would you personally pay on these if the interest rate was 7.5%. Out of curiosity. I believe I can pay as low as like $125 or so but not really sure on this.

 

[cctaylor88]

Check out Earnest, Common Bond, SoFi, Citizens Bank, etc. You should be able to refinance down to a much lower rate, particularly if you go adjustable given the small balances. You'll likely cut your rate by 2/3 if you are willing to go short term. I went through this recently (not my loans, but helping in the process). We had the best luck with Earnest and CitizensBank. Earnest ended up matching CitizensBank rates.

Viper GTS

I have only ever heard of SoFi (and very recently). What if my two loans have different interest rates (both from Sallie Mae)? Would I still be able to consolidate or does this depend on if they are fixed or variable? Would they both ahve to be fixed for example?

 

[dullard]

I just transferred a 10K student loan to a 0% Credit Card...

Depending on your situation you might be able to do something similar.
Pay down as much as you can while in the 0% period and then either eat the CC interest or transfer the balance again. You might come out ahead even if you had to pay CC interest.

Suppose the OP had $10000 at 7.5% interest. He would pay it off after 60 months of $200/month payments (total of $12000 paid).

Suppose instead the OP moved that to a 1-year promotional 0% CC and then paid 15% CC interest after that (the national average rate is 15.05% right now). He would pay it off after 64 months of $200/month payment (total of $12800 paid).

So, unless the OP jumps through hoops with constant transfers (which may nor may not be possible) your method would increase the interest paid from $2000 to $2800 (40% more interest).

 

[cctaylor88]

Suppose the OP had $10000 at 7.5% interest. He would pay it off after 60 months of $200/month payments (total of $12000 paid).

Suppose instead the OP moved that to a 1-year promotional 0% CC and then paid 15% CC interest after that (the national average rate is 15.05% right now). He would pay it off after 64 months of $200/month payment (total of $12800 paid).

So, unless the OP jumps through hoops with constant transfers (which may nor may not be possible) your method would increase the interest paid from $2000 to $2800 (40% more interest).

yeah I read his suggestion and thought it sounded quite risky. I've only ever had one CC in my entire life, paid off to $0 balance each and every month.

 

[NutBucket]

Given you have a high paying job why not just live cheap for a year or so and pay off that loan quickly?

 

[MegaFlop]

Suppose the OP had $10000 at 7.5% interest. He would pay it off after 60 months of $200/month payments (total of $12000 paid).

Suppose instead the OP moved that to a 1-year promotional 0% CC and then paid 15% CC interest after that (the national average rate is 15.05% right now). He would pay it off after 64 months of $200/month payment (total of $12800 paid).

So, unless the OP jumps through hoops with constant transfers (which may nor may not be possible) your method would increase the interest paid from $2000 to $2800 (40% more interest).

18 month promotional period, $0 transfer fee, USAA.
Yeah you have to watch the offers. A quick google shows a 0% 21 month Citi card. That would change the math a bit.

Edit: Anyway I'm not necessarily advocating this. It works for my particular situation. It is just a option to consider.

 

[dullard]

So lets just say I have a $10k loan, what would you personally pay on these if the interest rate was 7.5%. Out of curiosity. I believe I can pay as low as like $125 or so but not really sure on this.

Dave_the_Nerd covered that.

Basically I would pay what you can to your retirement to get the company match. Then have a good but not extravagant life for a few more years (be semi-frugal but don't make yourself miserable missing out on things). Put the rest towards the high interest rate loans.

If you paid $125/month per loan it would take 9.25 years to pay off and you'd pay $3875 in interest per loan.

If you paid $200/month per loan it would take 5 years to pay off and you'd pay $2000 in interest per loan. Just bumping up the loan payments by $2/day cuts your loan time nearly in half and your interest nearly in half.

If you could swing $250/month per loan, then it would take 3.8 years to pay off and you'd pay $1500 in interest per loan. That extra amount didn't do so much any more. Yes it is better, but you didn't save that much. You are at diminishing returns. So if you can pay $250/month, do so. But don't make your life miserable to get there. You'd only save $500 for having 4 years of misery.

 

[cctaylor88]

Given you have a high paying job why not just live cheap for a year or so and pay off that loan quickly?

This is an idea, however paying off $20K in loans over the course of 12months just seems really difficult IMO. I don't believe I have a very "high paying job" esp after you look at actual take home. I mean its an idea for sure but I would have to live on quite the budget. I will for sure weigh this as an option though.

 

[cctaylor88]

Dave_the_Nerd covered that.

Basically I would pay what you can to your retirement to get the company match. Then have a good but not extravagant life for a few more years (be semi-frugal but don't make yourself miserable missing out on things). Put the rest towards the high interest rate loans.

If you paid $125/month per loan it would take 9.25 years to pay off and you'd pay $3875 in interest per loan.

If you paid $200/month per loan it would take 5 years to pay off and you'd pay $2000 in interest per loan. Just bumping up the loan payments by $2/day cuts your loan time nearly in half and your interest nearly in half.

If you could swing $250/month per loan, then it would take 3.8 years to pay off and you'd pay $1500 in interest per loan. That extra amount didn't do so much any more. Yes it is better, but you didn't save that much. You are at diminishing returns. So if you can pay $250/month, do so. But don't make your life miserable to get there. You'd only save $500 for having 4 years of misery.

This is a breakdown that I was asking for, thanks for that. So it sounds like the sweet spot may be about $200 or so? Versus $125 where it would take nearly twice as long to pay down, just $75 more per month would cut the time by about 4.25 years you say? This is a fantastic insight! Thank you

 

[dullard]

18 month promotional period, $0 transfer fee, USAA.
Yeah you have to watch the offers. A quick google shows a 0% 21 month Citi card. That would change the math a bit.

Edit: Anyway I'm not necessarily advocating this. It works for my particular situation. It is just a option to consider.

18 months is a break-even point. 21 months would turn out slightly better (assuming all other things were equal).

 

[dullard]

This is a breakdown that I was asking for, thanks for that. So it sounds like the sweet spot may be about $200 or so? Versus $125 where it would take nearly twice as long to pay down, just $75 more per month would cut the time by about 4.25 years you say? This is a fantastic insight! Thank you

Paying more per month is always better mathematically. But, if that causes you to miss out on too much, I say enjoy life and pay closer to $200/month per loan.

I'm all for balance in life. Splurge a bit now, but don't forget about your future either.

 

[Viper GTS]

I have only ever heard of SoFi (and very recently). What if my two loans have different interest rates (both from Sallie Mae)? Would I still be able to consolidate or does this depend on if they are fixed or variable? Would they both ahve to be fixed for example?

No it makes no difference what the current rate is, or whether it's fixed or variable. Whatever the balance is your new lender just pays it off and presto one loan under a (presumably) much more favorable rate.

We had no trouble finding rates in the low 2% range for 5 year and mid 2% for 10 year adjustable. Depending on your income situation you may be better off with fixed, but with the payoff schedule we have planned even if rates go up 1/4 point every quarter between now and when we have it paid off we still come out ahead on adjustable. Either way 7.5% is absurd for a loan that is already lacking the federal benefits. Refinance those ASAP, even a fixed rate should be less than half what you are paying now.

Viper GTS

 

[deadlyapp]

As others said - don't get overly attached to saving for your retirement considering your gains in a retirement account likely won't offset the increased interest in your loan. In addition, while you may have pre-tax retirement money coming out which lowers your overall tax burden, so also does your student loan interest at the end of the year.

The only reason you should be saving/investing at this stage is if you are getting an employer match that increased the overall value of your contribution.

Personal opinion - Pay as much on your loans as you possibly can, while maintaining a lifestyle that you enjoy. If you feel that you've got a decent amount of job security and ability to recover from some financial set backs (car trouble, house issues, etc) then socking away money into a savings account shouldn't be your primary focus.

 

[AznAnarchy99]

Suppose the OP had $10000 at 7.5% interest. He would pay it off after 60 months of $200/month payments (total of $12000 paid).

Suppose instead the OP moved that to a 1-year promotional 0% CC and then paid 15% CC interest after that (the national average rate is 15.05% right now). He would pay it off after 64 months of $200/month payment (total of $12800 paid).

So, unless the OP jumps through hoops with constant transfers (which may nor may not be possible) your method would increase the interest paid from $2000 to $2800 (40% more interest).

Well ya the only reason you should go this route is if you think you can pay it off within the promotional period. I've done this before with my higher interest school loans.