Paying back student loans

[Deleted]

maybe they should start by reading the loan documents they signed....

[Deleted]

What in the heck are the people in the Financial Aid office doing other than saying "just sign here"?  That's awful.

[Deleted]

That is normal it seems, the not knowing. My wife was going into grad school and did not know the total of her loans... I almost had a heart attack when I added it up.

As for Income Based Repayment (IBR) unless like MidJD you have a stable job with a government agency or non-profit that you know you will be able to hold on to for the next 10 years... DO NOT DO IT!!!

For my wife and I, it was like the 2 years we spent making payments never happened because the amount she was paying each month did not even cover the interest so the balance was still growing. Add on that due to my job (relocation) we weren't sure where she would land her next job, it was more beneficial to us to just pay it.

One of my wife cousin had her student loans in deferment for the past two years (100k+) and now to avoid her problems is headed to law school (full ride). I don't want to know what that balance will balloon to 4 years from now. That is another one that unless you absolutely have to... DO NOT DO IT!!!

[midjd]

The most important thing for students to know is this website: www.nslds.ed.gov/nslds_SA/
 It gives you all your federal loan balances, servicer, terms - everything. I had subsidized Stafford, unsubsidized Stafford, and PLUS loans at 3 different lenders, and trying to find all that info myself was overwhelming!

Speaking only for federal loans - there are basically 4 repayment plans. I'd recommend consolidating any separate federal loans at graduation (if the interest rate is the same or less) - it makes things a lot easier.

1) Standard - 10 year term.
2) Graduated - basically like an ARM, starts out low, goes up every few years
3) Extended - up to 25 year term.
4) Income-based/income-contingent/income-sensitive - Your payment is either 10 - 15% of the difference between your AGI - 150% poverty level. For some high earners or people with low balances, these plans' payments will be higher than their standard payment; for others it won't cover the accruing interest. The maximum repayment term on a federal student loan is 25 years - at that time any balance is forgiven (and you're taxed on the imputed income). Others in certain public service jobs can receive loan forgiveness after 10 years.

They should also know whether their loan has a 6 month grace period or whether repayment begins when enrollment ends. I mistakenly assumed I had the 6 month deferment and when I retrieved a stack of unopened mail from my mom's house at Christmas, discovered that I was 2 months behind on the standard plan and was about to be put into default!

I both agree and disagree with Cawaiu about IBR. He is right that it is a big risk if your payment isn't enough to cover the accruing interest and you move or change jobs. But I think in certain situations it can be beneficial. The nice thing about IBR is that it's very flexible - you can always go back to the standard/extended plans, or can choose to pay extra toward interest or principal. I'd mostly recommend it for teachers, since almost all teaching jobs qualify, or anyone who is expecting a huge salary jump at some point within the first few years. It's usually not a good long-term plan if you can afford your standard payments.

Here's a good summary of the Public Service Loan Forgiveness program: studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service.

[midjd]

Do many of your students have private loans? That's a whole other can of worms.

[midjd]

No problem! I know how much time and worry it took me to navigate my own SLs, kids starting out need all the help they can get.

My 23yo brother just graduated - we were talking finances and he said he didn't have much in SLs, only about $10K. A few weeks later my mom told me it was more like $30K. Whoops! He belongs in the airhead kids thread, but I'd suspect very few students graduate knowing exactly how much they owe. I didn't - I knew how much I'd taken out each semester, but had never added it up (and boy was it a bad day when I did ).

[Mardi Gras Audrey]

Ughhh... I am in grad school now and they seem to encourage the loans (or at least they don't seem to make it clear to students that YOU WILL PAY THESE BACK).  I have constantly seen my classmates say they are "going to financial aid to get more money".  

Basically, they can't live within their means so instead of finding ways to cut back, they go " get more money".  The school has a "budget" on which they base eligibility for loans and grants.  It assumes that living costs are a little less than $2k a month.  So they give you that in loans/grants.  When you spend more than that every month, then you have to go "get more".  The ones I've talked to act like financial aid is just handing out $$.  Then you find out it's really more loans... why would you be happy to get that    It is ridiculous. 

[SVT]

May 2, 2013 18:31:23 GMT -5 midjd said:

Speaking only for federal loans - there are basically 4 repayment plans. I'd recommend consolidating any separate federal loans at graduation (if the interest rate is the same or less) - it makes things a lot easier.

1) Standard - 10 year term.
2) Graduated - basically like an ARM, starts out low, goes up every few years
3) Extended - up to 25 year term.

1) If consolidating Federal loans, one will be able to use the standard plan up to a 30 year term.  That is what I did.

2) Just for clarification, the graduated repayment plan starts with lower payments and increases every couple of years through the life of the loan.  The interest rate will never fluctuate like with an ARM.

[Deleted]

May 2, 2013 23:55:09 GMT -5 Mardi Gras Audrey said:

Ughhh... I am in grad school now and they seem to encourage the loans (or at least they don't seem to make it clear to students that YOU WILL PAY THESE BACK).  I have constantly seen my classmates say they are "going to financial aid to get more money".  

Basically, they can't live within their means so instead of finding ways to cut back, they go " get more money".  The school has a "budget" on which they base eligibility for loans and grants.  It assumes that living costs are a little less than $2k a month.  So they give you that in loans/grants.  When you spend more than that every month, then you have to go "get more".  The ones I've talked to act like financial aid is just handing out $$.  Then you find out it's really more loans... why would you be happy to get that    It is ridiculous. 

I am in grad school too and I am constantly sent emails about applying for Financial Aid.  I have been paying for my own classes and have 0 desire to take out more money.  Between Goose and I, we already have $69K in SL to pay back.  My payment for this month was $620.
My loans are in school deferrement, but I am still making the payments because I did the deferrement thing before and my loans ballooned by time I was done with my Bachelor's degree.  I am trying to avoid that.

I honestly think there are a lot of college kids that do not know how much they have in loans.  I know I was in denial about it when I was taking them out...it was scary to think about. BUT I did finally add them all up before graduation and nearly had a heart attack. 

[SVT]

May 2, 2013 18:32:56 GMT -5 midjd said:

Do many of your students have private loans? That's a whole other can of worms.

Private seems easier because now there seem to be less options so less to go through and figure out! 

All of my private loans were through Sallie Mae.  I never ended up refinancing/consolidating them although I tried to.  I couldn't get a cosignor which is what I needed to consolidate/refinance with Wells Fargo which was pretty much the only lender I could find that would refi.  Anyway, it worked out fine for me.  Sort of hidden (as I recall) in Sallie Mae's site was some information about being able to make extremely low interest only payments for up to 4 years on all loans for the entire amount.  There were no income requirements or anything like that.  I requested the interest only payments for 4 years and to my surprise, was approved for it.  For $30k+ in loans, the payment was only like $120/month.  Currently I have $12k left and the interest only payment is only $65/month.  The 4 years is up Fall of 2014.

While that doesn't help pay off the loans, it does help with cash flow if you end up not being in a good cash flow situation starting out due to low salary or other high bills or whatever.