Paying 7.35% on student loan debt!!!! - Mothering Forums

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#1 of 13 Old 04-29-2009, 08:52 PM - Thread Starter
 
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I can't believe I never looked at this. Our loans are consolidated through the Direct Loans/U.S. Dept. of EDU.

Is there any way to get a lower interest rate? This seems insane to be paying so much.

Julia, mama to Bumpa 2008, and The Mole 2011

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#2 of 13 Old 04-29-2009, 10:46 PM
 
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We have an incredibly high rate on our loans. They are also consolidated and I was told once they were, we could not re-do them. In other words, we are STUCK. Luckily, our loans are pretty low and we should have them paid off soon.
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#3 of 13 Old 04-29-2009, 10:57 PM
 
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That sounds about average for student loans...

Don't forget you can claim all the interest on your taxes *shrug*

me, dh and 2 boys = our family (oh and a cat...who is also a male...lol)
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#4 of 13 Old 04-29-2009, 11:08 PM
 
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The good thing about the interest is that it is an above the line deduction- which has more of an impact because it directly reduces your taxable income.
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#5 of 13 Old 04-30-2009, 12:46 PM
 
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That doesn't make any sense, ours are also consolidated through Direct Loans and it's about 3.85%....I'd contact them.

Amy ~ Web Designing Single Mom to 4: DD14, DS12, DS5, DS3
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#6 of 13 Old 04-30-2009, 12:59 PM
 
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Originally Posted by Mama Dragon View Post
That doesn't make any sense, ours are also consolidated through Direct Loans and it's about 3.85%....I'd contact them.
When consolidating loans, they generally take the average of the interest rates on all your loans (basically...that's a simplistic explanation, probably). Interest rates vary depending on when you took out your loans, whether they're undergraduate or graduate loans, and whether they're subsidized or unsubsidized). Once you've consolidated them, I think you're sort of stuck, but I don't think it can hurt to contact your lender and ask.

Several years ago interest rates on students loans were quite low and 3% on student loans was common. Now they are higher (well, actually, maybe not for loans you take out now, but for loans in the past several years). I just paid off one student loan (consolidated, 3.something %) that I took out in 2001 for my teaching credential. I'm still paying on the one I took out for my master's degree in 2006 (unconsolidated, 6.55%).
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#7 of 13 Old 04-30-2009, 01:05 PM
 
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Originally Posted by Mama Dragon View Post
That doesn't make any sense, ours are also consolidated through Direct Loans and it's about 3.85%....I'd contact them.
Direct loan percentages have varied widely over time.

In the early/mid 2000s, the last time the federal reserve rate dropped incredibly low, rates were tied to that rate (a certain number of percentage points over that rate). At the absolute lowest point, you could have consolidated at, I believe, 2.75%. As someone else said, because the consolidation was a average of the various rates over the loans at that time, I consolidated at about 2.9% and that dropped to 2.8%/fixed after a year of on-time payments.

Because that low rate of return was painful to both banks and the federal government, Congress then passed legislation which fixed the percentage at something like 6%. Their argument was that they were protecting people against student loan rates up in the 8% range (where they had been much of the 1990s) but they were really trying to prevent the rates from dropping into the 2-3% range again. If we were still under the old rules, I think that varying rates on student loans would be down in the 2% range again now.
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#8 of 13 Old 04-30-2009, 01:11 PM
 
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Even if you find out you are "stuck" in terms of the interest rate you're paying, make sure you're taking advantage of any discounts you can get on the rate--most companies give slight discounts for paying on time, for having your payments debited from your checking account, etc.
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#9 of 13 Old 05-01-2009, 06:40 PM
 
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I consolidated my student loans after I fnished grad school in 1996 to 8.25%. I 've been unable to obtain a lower interset rate, despite the misconceptions that student loan interest rates are low or affordable. Unlike refinancing a home, once you consolidate, you are stuck. It's been explained to me several times in my attempts to get a lower interest rate "you have nothing to consoldiate your current loan with." Ug....
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#10 of 13 Old 05-01-2009, 06:55 PM - Thread Starter
 
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I just can't believe the government is willing to charge people so much for a college education. I mean right now we are paying $400 a month to student loans, and more than half of it is going to interest!

It is so frustrating, if we're lucky we'll have the loans paid off by the time we send our first one to college.

What ticks me off the most is they are all my husband's loans and his dad is very well-off, but wanted him to feel like he had a stake in his education, so he didn't contribute a dime towards it all. And because of how well off his father was he didn't qualify for the subsidized loans!!! What a jerk.

I plan to do whatever I can to support my LOs through college so that they can graduate with a clean slate.

Julia, mama to Bumpa 2008, and The Mole 2011

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#11 of 13 Old 05-01-2009, 10:33 PM
 
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I'm not sure that 7% is that bad of a rate... and usually, loans are amortized so that you will always pay mostly interest at the beginning, and then mostly principal towards the end. If they charged you mostly principal now, then your monthly payments would be a lot higher.

Is your DH earning more than $400 a month more than he would be if he hadn't gotten a degree? Can you talk to his dad now? Explain the situation - DH was responsible through college, he didn't party through it, he did finish and get his degree, he did have a stake in his education... now could you help us out with the loans? And discuss that he didn't get the financial aid because of FIL's earnings? Colleges usually have some formula, where they expect some percent to come from the parents and some percent to come from the kids... I don't know what those ratios are, though.

Aven
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#12 of 13 Old 05-01-2009, 11:04 PM
 
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Quote:
Originally Posted by avendesora View Post
I'm not sure that 7% is that bad of a rate... and usually, loans are amortized so that you will always pay mostly interest at the beginning, and then mostly principal towards the end. If they charged you mostly principal now, then your monthly payments would be a lot higher.
Student loans are simple interest, not amortized.

edited: because that was not a good explanation.

explanation of simple versus amortized interest:

http://www.mtgprofessor.com/a%20-%20...erest_work.htm
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#13 of 13 Old 05-02-2009, 02:11 AM
 
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mine too.

i was in default, made my year of payments on time and was told i must consolidate now! or i would not be able to and consolidated right before the rates dropped on june 1st.

it sucks.

once they are consolidated they will keep that rate, so even if you consolidate them with additional loans the total rate is weighed as an average of each amount.

i'm on income-contingent and if i stay on that plan and make 25 years of payments, they write off the rest of the loan. i've figured that i will have paid off about the 65,000 i owed except that it will be in interest... that sounds like a great plan for the gov't

eh. who needs a signature?
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