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  • December 13, 2018, 09:23:35 AM

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Author Topic: interest is insane  (Read 1013 times)

shomethemoney

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interest is insane
« on: February 07, 2018, 07:30:39 PM »
Okay folks, my first time on this site, hoping to glean some wisdom from you all.
I am working on paying off my grad school debt which, upon graduation in 2010, or more like 2012 after the initial post-grad no payment period, was around $62k.
Since graduation I've been working decently paying jobs, gotten married, and have had 2 kids.  I've paid over $22k since 2012 and my principal is now over $63k. 

???????????

Okay, I haven't sat down and gone through every little calculation to work this out, but I understand that interest can be a MoFo.  I've had my fair share of debt issues- paid off large credit card debt, etc.  Currently my husband and I have no revolving debt except these student loans.  We pay *everything* on time, and besides a few stints of forbearance here and there when we were struggling with high FedLoan payments, I've been making payments ranging from $300-700/month.  Now Fedloan wants to up my monthlys to $1100+.  I can't deal with this.

Still, is it seriously possible that $62K worth of student loans with an average interest rate of 7%, that I could pay $22K in 6 years and my principal has actually INCREASED??

I have 7 loans with Fedloan.  I'm considering putting 5-6 of them in forbearance while I dedicate all of my monthly payments to one particular loan so that I *know* I will slowly be paying that one loan off, and then continuing with the rest in the same way as each gets paid off.  I feel like this is more effective than simply paying a bunch of money each month that just goes into interest on this huge lump sum and doesn't actually pay anything off.    Can anybody confirm whether or not this is truly effective?  I know I could work through the math, but honestly the fixed interest rates confuses me and makes it difficult for me to really calculate exact numbers.  I tried asking the Fedloan counselor over the phone today about this and she couldn't explain it.  All she could tell me was my daily interest rate (which, duh, changes each day as the principal changes), so this is not *super* helpful, but kind of to give me some reference points, at least.

Okay, I think this is enough info for smarter people than myself to give some feedback on.
Thanks in advance for any advice!

**Yes I've looked into debt consolidation with SoFi, for example, and the possibility of being stuck with the fee if I somehow manage to pay debt back earlier is what's stopping me from doing it.**

TheCollegeInvestor

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Re: interest is insane
« Reply #1 on: February 13, 2018, 07:49:48 PM »
So first off, what repayment plan are you on. The fact that your payment is changing (and your loan balance isn't reduced much) tells me you're either on an income-driven plan, or a graduated plan. Confirm this as a starting point. If you're on a different plan, what is your monthly standard 10 year repayment plan amount and can you afford that?

Second, what can you reasonably afford to put towards your loan each and every month. Not a variable amount - what can you guarantee (and extra is bonus)?

Third, stop forbearances and deferments - those are what's killing you. Your plan of putting 5-6 in forbearance is a bad idea. It's going to cost you a lot in interest.

Forth, are you potentially eligible for any forgiveness programs, such as PSLF?

Fifth, why haven't you consolidated (don't do it if you qualify for PSLF, but if you don't...)? It won't change anything with your underlying loans - just make it easier to manage as a single loan versus 7.

Spitballing here without the answers to all my above questions, I'd simply consolidate them get on the highest repayment plan I could reasonably afford each month (ideally the standard 10 year plan). Then I'd work hard to earn more and pay more towards the loans each month.

If you consolidated your $66k worth of loans today, you could get:
- Standard 10 Year plan roughly would cost you $700/mo
- Standard 30 year plan would cost you $430/mo