Loan consolidation

[roja]

Any recommendations/horror stories on loan consolidation companies? I don't fall under single lender and am shopping around.

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[edinOH]

avoid the commercial companies if possible. I went with NelNet. Got the 2.8 interest rate with the reduction of 1% with on-time payment and .25 with direct bank draft. One of the commercial one's was trying to tell me the best rate possible was 3.5%. They can kiss my ass...

 

[DrQuinn]

I went with SallieMae's Smartloan... 2.8% with 1% reduction and .25% reduction after 4 years. So I'll be sittin' pretty locked in close to 1.5%. I also get some "SmartLoan" 1% of my total loans consolidated after a few years, too.

Since my total principle is $187k, I'll be paying roughly 750 for 30 years. I plan on deferring the first three years of residency, so it may bump up to 850 for 30 years.

Q, DO

 

[gwen]

i have a question about my loans actually...
my loans are under $40K (i know, lucky, lucky) so it means i can't defer. i have sallie mae which means my interest is 2.8ish%, i just consolidated.

would you guys recommend i go into forbearance so i am not forced to pay each month or start paying the minimum now and get it over with?

some people were recommending not paying and investing the money instead...but the interest rates are so low on any investment that i'm not sure its worth doing that. the other side is that i'll be living in philly starting next year, so do i need more money in my bank to live in a big city instead of paying the loans off each month?

pls, pls, pls suggest something! i'm financially dumb.

 

[edinOH]

Originally posted by gwen

some people were recommending not paying and investing the money instead...but the interest rates are so low on any investment that i'm not sure its worth doing that. the other side is that i'll be living in philly starting next year, so do i need more money in my bank to live in a big city instead of paying the loans off each month?

The question you can ask yourself is "can I make more than 2.8% on my investment?" The odd's are essentially 100% that you can. The fact that your interest rate is so low is exactly the reason it is worth doing that. When you add in the fact that you will most likely have incentives for on-time payment etc, your effective rate will fall to about 1.5%. Considering that annual inflation can average anywhere from 2-4%, your actual "cost" of paying back your loans will actually decrease over the years. The key is to take the money each month you would have used to pay back the loans and invest it. I'm not a compound interest wizard but at the end of your 30 year payback term, you will have made more money investing the difference than you lost in interest.

I'm going to go ahead and defer/forebare during residency. A hundred or so dollars a month interest payments now would be alot more painful than it will be when I'm done with residency in 2.5 years. My repayment will cost about $600/month when I begin. Huge problem now but pocket change later.

 

[gwen]

thanks, edin...
doesn't forbearance also accrue interest?

from what my sallie mae site tells me, if i didn't forbear, i'd be paying about $198/mo as my minimum. but i'm not sure if i can afford that each month once i move out to philly.

aargh, i don't know what to do. btw, what type of investments would you guys suggest if i did forbear? like i said, i'm horrible with investing, etc. what are the safest (i know its a relative term) modes of investing...something even i could understand?

 

[Sessamoid]

Originally posted by gwen
doesn't forbearance also accrue interest?
what are the safest (i know its a relative term) modes of investing...something even i could understand?

The safest would be gov't bonds, but the yield really bites right now. The other relatively safe and easy option is an index fund or a index-tracking security, which is basically an instrument that trades like a stock and follows one of the major stock indices exactly (Dow Jones Industrial, S&P 500, Wilshire 5000). Most of the major indices have actually done pretty well this year.

 

[roja]

I basically got the same rate from the 3 that I spoke with: Sallie Mae, NelNet and Loanstar. I think I have decided to go with loanstar as I can consolidate in my spouses loans as well...

Forbearance does accrue interest but I agree. Why strap yourself now? Also, remember, student loans are non-inheritable, so if something happens to you (ie death) then your family is not responsible.

Thanks for the input......

<b>gwen</b> Are you in Phili? I have a classmate at Thomas Jefferson!