In The Interest of Lowering Future Student Debt, My Loan Situation

I went to a public university for a bachelor’s degree and have almost $50K in student debt. I graduated in 2009. It took four years, with a full load every semester and summer school. I also worked at Starbucks 25-30 hours per week. When I graduated, like everyone else in 2009, I couldn’t find a job. For a year after college, I worked full-time at Starbucks. Needless to say, I fell a little behind on my student loans, detailed below:

Federal Direct
Original amount: $20,301.07 at 6.8%
Amount I owe now: $22,645.45

Sallie Mae
Original Amount: $13,125 at 8.25%
Amount I owe now: $14,460

Chase
Original Amount: $12,753 at 3.96%
Amount I owe now: $12,565.72

Total Amount I Owe: $49,671.17

I’m 26, and thankfully, I have a job now that allows me to live in New York City and pay my rent, bills, and student loan minimums—I can even save a little bit. I feel very fortunate, but also, should college cost this much? My mom helped as much as she could, and I went to college knowing I would be paying for it for a long time. But if I pay just the minimum ($348) every month, these will be paid in full when I’m 41 years old. I hope it’s much sooner than that!

 

Kate Lowry lives in NYC. (“Initially, I was going to not use my real name, but then I thought more about it. Debt is nothing to be ashamed of! [This is hard to remember.]“)

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30 Comments / Post A Comment

WaityKatie (#1,696)

Should college cost this much? No. Should student loan interests rates be this high? No.

Mike Dang (#2)

@WaityKatie The 8.25 percent on that Sallie Mae loan is kind of nuts. It’s like charging tuition on a credit card!

@Mike Dang My Sallie Mae loan has a 12% interest rate. Sometimes thinking about it makes my stomach hurt.

sockhopbop (#764)

@Mike Dang @WaityKatie My federal loans are 6.8 and 7.9 percent! (The second one is GradPLUS.) It’s the best, by which I mean worst.

Mike Dang (#2)

People with high interest rates (12 percent, WOW), have you tried speaking with your lenders and asking for interest rate reductions? Things like offering to automate your loan payments every month with a debit card are incentives for lenders to lower your rate (because they know they’ll get an on-time payment from you every month).

eagerber (#1,958)

@Mike Dang Negotiating to lower the interest rate is one thing, but why do students have such varying interest rates on their loans? In my case, my student loans have the same rate: 6.8%, and they’re from two different lenders. How did people get 2.5% rates or lower? How do other people get stuck with 12% rates? Why are my Sallie Mae loans at 6.8% while Kate Lowry’s are at 8.25%? I ask because it seems kinda nuts that students (who most likely have very little/limited/similar credit history) aren’t offered the same rate, by the same lender (I’m looking at you, Sallie Mae).

WaityKatie (#1,696)

@eagerber It changes from year to year, and also based on whether you’re in grad school or undergrad, and probably other things. The year I consolidated, my federal loans were at 6 percent, but people consolidating now are getting 3.5 percent I think. And you can never refinance! I have this giant debt-pile at 6 percent (5.75 with the reduction for electronic payments) forever. SO unfair and arbitrary.

Mike Dang (#2)

@eagerber I have a 2.5 percent interest rate, but it’s variable, meaning it could rise in the foreseeable future. It all really depends on several factors, including when you took out a student loan, and if you have a cosigner, whose credit scores are also taken in account—the timing matters because variable rates are usually pegged to whatever the LIBOR rate is at the time. Interest rates on federally subsidized student loans are set by the government.

@eagerber My loans are also at 6.8%, but they’re federal– did you maybe take out federal loans that were then sold to Sallie Mae? I remember they used to do that.

Also, remember a while ago when people were fighting to keep the interest rate for federal loans from going up, saying that the higher interest rate would give students crippling amounts of debt? They were talking about 6.8% interest. Sigh. Sadly, I’m pretty sure there aren’t any refinancing opportunities.

eagerber (#1,958)

@cuminafterall @MikeDang @WaityKate Federal loans… I guess mine are? And I guess that also means I can’t negotiate with Sallie Mae for reduced interest rates? Also, mine aren’t in repayment yet, as I’m still in school.

Mike Dang (#2)

@eagerber Well, if you’re still in school, you should definitely meet with counselors in your financial aid office. They can help you figure out things like whether or not you should consolidate your federal student loans and lock in a lower interest rate.

WaityKatie (#1,696)

@eagerber Yours probably are federal. I think Obama’s student loan reform made all loans issued as of now federal (?) I could be making this up though. Which means you can qualify for income based repayment, but never ever get your interest rate lowered (once you consolidate…I would advise against ever consolidating, given what happened to me!)

eagerber (#1,958)

@WaityKatie @MikeDang thanks, guys! Alot more to consider moving forward…

ThatJenn (#916)

@eagerber @Mike Dang I would love to see a piece (from an “expert” if possible – are there lawyers or something that do this?) on negotiating your interest rates down. I mean, I think it’s most relevant on student loans but I suspect the same logic would apply to everything else.

I’ve learned to get on the phone whenever I see a rate increase on anything at all, because you can save hundreds on all kinds of things during a 15-minute call without even switching to Geico. I just saved myself over $200 on my homeowner’s insurance yesterday by calling USAA as soon as I saw the massive rate increase for this year. It was like 20 minutes on the phone and 100% worth it – I mean, look, I’m pretty good at reading the fine print but I totally missed a lot of options to save money. (I am thinking about writing up my conversations like this because I want to remind myself that they are totally worth it.)

Wilgrims (#1,318)

I think it actually doesn’t make sense for anyone with debt to save at the moment, if (and I know that’s a big if) they are responsible with credit cards. You can get at most 1 percent interest in a savings account. If you need emergency money, that’s what a credit card is for.

The security of savings is not worth paying much more in loan interest. If we ever get back to 3 percent savings return, maybe. But even then that’s iffy.

Wilgrims (#1,318)

@Wilgrims Also assuming you qualify for countless 0 percent introductory rate credit cards and 3 percent balance transfer fees, of course. But you don’t need great credit for that.

Sallymander (#3,159)

@Wilgrims This is kind-of-almost reasonable, but IMO having cash on hand to cover an emergency is better than 100% relying on a credit card. Paying for an emergency with credit without any savings whatsoever can sink an otherwise financially responsible individual into a bottomless debt hole.

Wilgrims (#1,318)

@Sallymander I guess I went too far by saying “don’t save at all if you have debt!” If don’t have a steady income, you need to save. If you have savings goals over one or two years, you need to save. If you can’t pay off your loans for many years even when you land a job, you need to save. But don’t save just to save, make sure you know it is worth paying more in loan interest, which can double your principal if you only pay the minimum for years.

Mae (#1,769)

@Wilgrims I’ve made this calculation on my loans and concluded that I should prioritize paying off my $9000 loan with 6.8 % percent interest before I focus on other financial goals (besides a modest emergency fund). I do have other loans with lower interest rates (including an interest free loan – thank you, small liberal arts college endowment!), but the interest rates of the loans vary by the original balance: I have a $2500 loan at 2.5 % interest, for example. Makes no sense.

cmcm (#267)

I’ve got $51,000 in student loan debt (down from $58k, with 6.8%, 7.9% and 5.4% interest rates), but $40k of that is from doing an expensive masters degree in the UK when the pound was really, really strong.

It feels like a lot. I feel like monthly payments are enormous and the balance never goes down.

blueblazes (#1,798)

I would just like to point out that 41 is just around the corner. It may not feel like it now, but 30 is going to sneak up on you. 40 even more so.

@blueblazes I was just thinking that too. No, college and interest rates should not cost this much, but also: having your student loans paid off by the time you’re forty isn’t THAT awful. I expected to have mine paid off by the time I’m 35 and with three years to go (of just paying my minimum) that’s looking very likely. But when I graduated at 24, 35 seemed as far off to me as 41 seems to Kate. But being debt free by the time you’re 35 or 41 is actually a really good and attainable goal.

aetataureate (#1,310)

Higher education is overpriced almost across the board, but to me the bigger issue is that there’s no credit awareness before kids decide where to enroll. Having some serious realtalk about what your family can afford and what your loans mean would go a LONG way toward more responsible choices, I think.

Sallymander (#3,159)

@aetataureate Agreed. Another thing to talk to kids about is scholarships. Oftentimes they go to those “in the know” who are also willing to do serious legwork to scrap together the money. I was lucky enough to get a generous scholarship (although from another perspective, I passed up my “dream school” to go to the school that offered me the most money), and yet there were many options that I did not find out about until after college.

aetataureate (#1,310)

@Sallymander Isn’t the idea of the “dream school” interesting on its face? I might have dream clothes or a dream house or a dream job but I don’t assume those things are worth literally any cost — which is how we often look at colleges. And unless your dream school is THE best college money can buy, how can it be worth that?

Sallymander (#3,159)

@aetataureate Agreed! A lot of sources (big ones: the media, the schools themselves) represent the choice of college as the choice of one’s entire future in a package. It’s a lot like fairy tales where the right prince is the only question and then “happily ever after”!

Thanks for the input! When I took these loans out eight years ago, I was admittedly less knowledgable about student loans, credit, debt, saving, etc. I’m going to talk to Sallie Mae to see if there’s anything they can do to lower my interest rate.

A thing that IS worth looking into is Public Service Loan Forgiveness, if you qualify. For me, at least, this seems like a small light at the end of a very expensive tunnel.

Monique H. (#3,261)

If getting rid of them is something you want to do , I want to encourage you to go for it. You don’t have to pay forever.

Having graducate at 26 with $104,616 (car loan, credit cards and student loans) I know hour your feeling. I was supposed to pay them off by the time I was 56. But I paid them off by 32 by getting serious about becoming debt free.

WaityKatie (#1,696)

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