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My student loans are consolidated, is there a way to reduce the burden w/o accruing massive interest or a huge payment?

The loans are divided between Federal Subsidized, Federal UN-Subsidized and Private Loans. Each group is representative of several loans consolidated roughly 8 years ago (interest ranges from 2% to 6% range). Monthly student loans represent 28-32% of my monthly bills. Current Repayment option is standard (pay the same start to finish). I am seeking any option in which I can help alleviate my burden of each loan without increasing my interest paid, life of loans, etc. I am aware of paying more per month will reduce the life of the loan but will directly affect the burden on my monthly budget.

Dec 28, 2016 by Jeff in  |  Flag
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Wow. That's a lot of loan debt to handle. Now, you are telling me that you are doing standard repayment on a consolidated loan that you took out 8 years ago. Standard repayment on most student loans is 10 years - so you would be almost done with payback. Did you extend payment at that time? How much is still due and how many years?

My preference on student loans (you may not like this - but I sense you already know...) is to bite the bullet and pay them off as quickly as possible, making extra payments whereever you can. If that means living in a garage (or parents couch), eating rice and beans 3 days a week, driving a car with 300k on it and vacationing in your own backyard, so be it! You need to get these things out of the way. Especially if you have variable rate loans that may be ratcheting up with higher interest rates!

There are some cases however, where income based repayment options on federal loans are beneficial. Government and non-profit employees who qualify for 10 year income based repayment with tax free forgiveness is one case in point. Otherwise, there is substantial risk to income based repayment. You may end up paying much more money over time as your income rises, and even if your balance is ultimately forgiven after 20 years - you may owe the IRS a boatload of tax money on the amount forgiven.

View all 6 Comments   |  Flag   |  Dec 28, 2016 from Bridgewater, NJ
James D. Kinney, CFP®

Comes down to this. Focus with all your intensity on paying down the debt. Sadly that leaves other goals on hold, including buying a home. Make extra money whereever you can, dedicate all of it to the debt. Avoid temptation to stretch it out to reduce payment, it will only prolong the pain. If you concentrate on sending in 50% more with each payment, you may find you have cut the payoff time in half, and can move on to the rest of your life debt free. Although I shouldn't probably sell on this platform, I would be remiss not to suggest a little personalized help: If you want me to spend time running through your specific budget numbers I would be happy to do that, just call my office. I charge an hourly rate for that kind of service. You may also find a local CFP in your area who will do this type of analysis work for hourly fee - see garrettplanningnetwork.com or xyplanningnetwork.com for referrals.

Flag |  Dec 29, 2016 near Bridgewater, NJ

James, Thank you for the information I may just take you up on the offer!

Flag |  Dec 29, 2016

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Tunc Tanin Level 10

If your credit score is good, you can try refinancing through sofi or purefy. They require great credit but they may lower your interest rate. Check them out

Comment   |  Flag   |  Feb 20, 2017 from Somerville, MA

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