Lothar's Federal student loans thread.

[imported_Lothar]

Loans Overview

Loan #1 details
Loan #2 details
Loan #3 details


As you can see, I have both fixed and variable loans. I anticipate the Fed possibly increasing interest rates in the future so it might be better to consolidate now. Interest rate on the variable is low right now.

Couple of questions...
1.) Can I choose to consolidate my variable loans together and keep them separate from the fixed loans or is it an "all or nothing" type of thing?

2.) If I'm able to do the above question as planned, can I pay the minimum on both fixed and variable loans monthly, and write an extra check to signify that I want it to go specifically towards paying the principal for loans #3(the fixed loans)?

3.) If I'm not able to do question #1 as planned, can I just pay the minimum separately on all loans monthly, and write an extra check to signify that I want it to go specifically towards paying the principal for loans #3(the fixed loans)?


Besides "locking down" rates and increasing the repayment period(I don't see this as a benefit at all), what other benefits are there to consolidating loans?
And no, I don't care about other petty reasons such as having or seeing all loan bills on one statement or some other crap that won't lead me to any monetary savings.

a) My previous goal is to pay everything off within the next 2 years. Is my goal unrealistic? My mom thinks it is. I originally set a goal of 2 years but after seeing the amount of taxes "Uncle Sam" took out from my 1st paycheck, I was 😕:frown::|.
I now have a new "estimated" goal of 2-3(maximum) years.

b) If I can pay the 6.8% fixed loans all off in 2 years, I just might leave the proposed "consolidated" variable loans alone and just pay only the monthly minimums since interest is low (3.61% vs. 6.8% for fixed). That strategy might be fine too.
Of course if I'm not able to consolidate them separately from the fixed loans as I asked in question #1 earlier, this strategy will be taken completely off the table.

The stock market can easily gain 3.61% annually with it's eyes closed within the next 10-30 years, no question about it.
I seriously doubt though that it will gain 6.8% annually, so I'd prefer to hedge my risk by paying down the minimum for all loans then have any extra cash going towards the principal of loans #3(the fixed loans).

Which is a better strategy, (a) or (b) and why?

 

[imported_Lothar]

Bump.

 

[CasioTech]

pay that shit off as fast as possible, we need our money back.

 

[Special K]

D'oh, I misread the information given.

 

[imported_Lothar]

None of my loans are private.
They're all federal that I got by filling out the FAFSA form. Subsidized and unsubsidized.

When I use the term "variable", they are federal loans I took out before US loans became fixed.
Loans before Fall '06 are variable, loans after are fixed.

 

[imported_Lothar]

Originally posted by: CasioTech
pay that shit off as fast as possible, we need our money back.

From China you are not.

 

[CasioTech]

lame joke.

 

[Cheesetogo]

Originally posted by: Lothar

I seriously doubt though that it will gain 6.8% annually, so I'd prefer to hedge my risk by paying down the minimum for all loans then have any extra cash going towards the principal of loans #3(the fixed loans).

I believe that the S&P 500's average annual return since its creation has been approximately 11% . Really, if you're going to be paying back the loans over the course of 30 years, I don't think you have much to worry about.

 

[imported_Lothar]

Originally posted by: Cheesetogo

Originally posted by: Lothar

I seriously doubt though that it will gain 6.8% annually, so I'd prefer to hedge my risk by paying down the minimum for all loans then have any extra cash going towards the principal of loans #3(the fixed loans).

I believe that the S&P 500's average annual return since its creation has been approximately 11% . Really, if you're going to be investing over the course of 30 years, I don't think you have much to worry about.

Past performance is no guarantee of future results.

If the markets keep going up by 10% every year, that would mean the DOW would reach 2 million by the end of the century.
I find that to be very unrealistic.

 

[Special K]

I did a bit of searching, and came across this:

link

Here is an answer to your question 1:

Originally posted by: Linked Article
Q.2 Can I consolidate both fixed and variable interest rate loans together?
A.2 Yes, but you can also just consolidate your variable rate loans if you like without including
your fixed rate loans in the consolidation.

Originally posted by: Lothar
2.) If I'm able to do the above question as planned, can I pay the minimum on both fixed and variable loans monthly, and write an extra check to signify that I want it to go specifically towards paying the principal for loans #3(the fixed loans)?

Most likely yes. This is what I am doing with my loans right now.

Originally posted by: Lothar
3.) If I'm not able to do question #1 as planned, can I just pay the minimum separately on all loans monthly, and write an extra check to signify that I want it to go specifically towards paying the principal for loans #3(the fixed loans)?

See my answer to 2.

Originally posted by: Lothar
a) My previous goal is to pay everything off within the next 2 years. Is my goal unrealistic? My mom thinks it is. I originally set a goal of 2 years but after seeing the amount of taxes "Uncle Sam" took out from my 1st paycheck, I was .
I now have a new "estimated" goal of 2-3(maximum) years.

b) If I can pay the 6.8% fixed loans all off in 2 years, I just might leave the proposed "consolidated" variable loans alone and just pay only the monthly minimums since interest is low (3.61% vs. 6.8% for fixed). That strategy might be fine too.
Of course if I'm not able to consolidate them separately from the fixed loans as I asked in question #1 earlier, this strategy will be taken completely off the table.

I would go with option b) based on the information I found above. You should probably contact a lender directly though to make sure of their policies. Unfortunately many student loan lenders no longer offer federal loan consolidation programs due to the ongoing credit crisis.

I agree with you that assuming 10%+ returns for the stock market from this point on might be a bit too optimistic.

 

[imported_Lothar]

Originally posted by: Special K
I did a bit of searching, and came across this:

link

Here is an answer to your question 1:

Originally posted by: Linked Article
Q.2 Can I consolidate both fixed and variable interest rate loans together?
A.2 Yes, but you can also just consolidate your variable rate loans if you like without including
your fixed rate loans in the consolidation.

Originally posted by: Lothar
2.) If I'm able to do the above question as planned, can I pay the minimum on both fixed and variable loans monthly, and write an extra check to signify that I want it to go specifically towards paying the principal for loans #3(the fixed loans)?

Most likely yes. This is what I am doing with my loans right now.

Originally posted by: Lothar
3.) If I'm not able to do question #1 as planned, can I just pay the minimum separately on all loans monthly, and write an extra check to signify that I want it to go specifically towards paying the principal for loans #3(the fixed loans)?

See my answer to 2.

Originally posted by: Lothar
a) My previous goal is to pay everything off within the next 2 years. Is my goal unrealistic? My mom thinks it is. I originally set a goal of 2 years but after seeing the amount of taxes "Uncle Sam" took out from my 1st paycheck, I was .
I now have a new "estimated" goal of 2-3(maximum) years.

b) If I can pay the 6.8% fixed loans all off in 2 years, I just might leave the proposed "consolidated" variable loans alone and just pay only the monthly minimums since interest is low (3.61% vs. 6.8% for fixed). That strategy might be fine too.
Of course if I'm not able to consolidate them separately from the fixed loans as I asked in question #1 earlier, this strategy will be taken completely off the table.

I would go with option b) based on the information I found above. You should probably contact a lender directly though to make sure of their policies. Unfortunately many student loan lenders no longer offer federal loan consolidation programs due to the ongoing credit crisis.

I agree with you that assuming 10%+ returns for the stock market from this point on might be a bit too optimistic.

Interesting PDF.
That document answered most of my questions.

I tried the Calculator on this site.
<a target=_blank class=ftalternatingbarlinklarge href="https://loanconsolidation.ed.gov/loancalc/servlet/common.mvc.Controller?controller_task=startCalculator">https://loanconsolidation.e......sk=startCalculator</a>

Input
Output

I don't really care about consolidating the fixed, or the quoted interest rate on it. I plan to pay off all the fixed loans within 1 year maximum, while making the minimum monthly payments on the soon to be consolidated variable loans.

http://articles.moneycentral.m...olidateNow.aspx?page=1