Student Loans

[haha]

Hi all. I'm at my sisters in the midwest. Talking to my niece I discovered that she is graduating this spring with about $45,000 in student loans that will go into repayment mode on graduation. These are private loans from Chase, at 12%!

I am wondering if she can refinance these into Stafford Loans at a better price? If not, what are some guidelines to get a better non-federal loan?

I don't have ay experience in this area at all, but just hope that she is not stuck with 12% loans. The paybcck on these will take almost a third of her starting salary.

Thanks for any suggestions.

Ha

[podey]

I have Stafford loans. I am not sure about all the details but you have to file a FASFA and everything to get these federal loans. I have never heard of anyone converting private loans into federal loans. Why didn't she just apply for federal loans in the first place? 12% seems like an aweful lot. I pay 5.62%.

[GLM]

Sorry - school loans my be "good debt" but too much of even a good thing is bad for you .

No experience with student loans myself (other than avoiding them like the plague for myself and my kids ) . However, as your responses have been slim I agree with the above poster. It is my understanding that...

Private loans cannot be turned into Stafford Loans. Stafford Loans are only originated thru Stafford with the painful FASFA form required.

Unfortunately, I think the only recourse your niece has is to try and refinance the loans if she should qualify somewhere, somehow at a better rate. Additionally, it is my understanding that student loans cannot be discharged in bankruptcy.

personal comment - I think loans like these are worse than the lousy mortgage terms getting all the bad press lately for taking advantage of folks stretching for a home loan . These student loans prey on young unexperenced adults who have often have no clue how they are impacting their future. These loans should be rare with full disclosure and counseling to urge the student to consider future income prospects...

[haha]

Originally Posted by podey

Why didn't she just apply for federal loans in the first place? 12% seems like an aweful lot. I pay 5.62%.

As an uncle trying to be helpful but not overly intrusive, I don't really think I know how to ask that question respectfully. Whatever the reasons might be-bad advice, lack of knowledge, whatever- she finds herself with 12% loans.

I looked at her notes, and they are private loans.

Ha

[podey]

Originally Posted by haha

As an uncle trying to be helpful but not overly intrusive, I don't really think I know how to ask that question respectfully. Whatever the reasons might be-bad advice, lack of knowledge, whatever- she finds herself with 12% loans.

I looked at her notes, and they are private loans.

Ha

Too bad. Like the other poster said, maybe she can refinance. Or possibly even consolidate them. I did that twice to get a better rate.

[jazz4cash]

Unfortunately, I know way too much about student loan debt. Fortunately, your niece should be at least able to find some cheaper alternatives to consolidate that debt and lower the rate. Not sure if these can be converted to Federal loans. Try bankrate.com and myrichuncle.com (no not you, its a website). For reference my recently graduated daugter's Federal loans are around 8%.

[bright eyed]

The student loan business has been ripe with private lenders finding fresh meat - 12% is on the lower side of what i've heard from some people. And there are some finally looking at regulating this area once dominated mostly by the federal programs that protected students from these higher interest rates.

But then the university's started getting in bed with the private lenders and current generation of students are the ones who got screwed!

Sorry - not a good situation - but not at all unusual either! Private school kids regularly leave with $40-60k in debt - public school kids about half that. I'm still paying mine and in the last stretch, but my rates are very low 2-4% - federal

[Abreutime]

I think she could get cheaper private loans. I haven't researched it recently, but my private loans were/are around 7%, and my federal loans were (of course) lower. Would her parents consider co-signing the loans? That is one sure-fire way to get reduced interest.

[Bestwifeever]

If she already has the loans and is now graduating, she could at least talk to banks and see what her options are re refinancing them. I'm not sure you can consolidate private loans like you could federal loans.

Maybe it's just spilt milk at this point and the worst case she pays them back as is--congrats to your niece on her college graduation.

[ChrisC]

Ah, why don't you do your neice a favor and pay off the loans and let her pay you at 6 percent over 7 years, about the most favorable CD rate you might get from an insured depository institution? She's good for the payment right?

12 percent sounds like a bad rate, but when you consider that she didn't pay any interest while in school for 4 years (right), it's an unsecured loan, and the default rate might be a bit higher than most consumer financed debt -- 12 percent doesn't strike me as that bad.

I don't know of any program that would allow you to refinance your neice's student debt; loan consolidation programs generally apply to federally insured student debt and Sallie Mae is getting out of the loan consolidation business; my daughter consolidated all of her graduate school student debt, but her federal student debt had low interest rates to begin with - she just lowered the rate and stretched out the term.

See if the lender will lower the interest rate and stretch out the term to soften the hit.

[Abreutime]

Originally Posted by ChrisC

12 percent sounds like a bad rate, but when you consider that she didn't pay any interest while in school for 4 years (right), it's an unsecured loan, and the default rate might be a bit higher than most consumer financed debt -- 12 percent doesn't strike me as that bad.

All of these conditions were identical to mine, which is why I suspect she could shop around for a better deal. I believe my parents were co-borrower on this loan, which is what may be a crucial difference (as well as the tightening of the entire business).

If you do pay off the loan for her and charge her interest, you should probably write up a contract, so it's clear on both sides what is expected.

[ChrisC]

Originally Posted by Abreutime

All of these conditions were identical to mine, which is why I suspect she could shop around for a better deal. I believe my parents were co-borrower on this loan, which is what may be a crucial difference (as well as the tightening of the entire business).

If you do pay off the loan for her and charge her interest, you should probably write up a contract, so it's clear on both sides what is expected.

I stand by what I said before: a 12 percent interest rate on a student loan made to a student (whether or not the parents co-signed the loan) is not a bad rate. Maybe she could get a better deal from someone other than Chase, which is one of the biggest private student loan lenders. But I scanned the micro-lending rates at Prosper.com, and the interest rates to take out student debt, for those with good credit, are generally above 12 percent; the one exception appears to be a teacher with 10 years of work experience and good credit, where the interest rate is 10.75 percent. These private student loans are not good credits for lenders -- they can't easily be packaged into the secondary market these days.

You know a lot of what we consider as "private student loans" are not really private loans but are loans subsidized by the government or other sources. I find the 7 percent rate for an unsubsidized student loan that you mentioned to be incredible especially if interest on the loan didn't accrue until after you graduated from school and it went into repayment status shortly afterwards. Most private loans these days to students require the parents to co-sign anyway, if the student hasn't reached 21, so I doubt one gets a favorable rate of 300-400 basis points by that fact alone. Maybe this loan was made to you and your parents with the provision that your parents maintain a compensating balance in accounts at the bank. If this was the local community bank, I can see a loan officer lending you at 7 percent if your parents maintain below market jumbo CDs in the bank for a specified period. I could be wrong, but you got a great deal, in any event.

[RockOn]

Originally Posted by ChrisC

I stand by what I said before: a 12 percent interest rate on a student loan made to a student (whether or not the parents co-signed the loan) is not a bad rate. Maybe she could get a better deal from someone other than Chase, which is one of the biggest private student loan lenders. But I scanned the micro-lending rates at Prosper.com, and the interest rates to take out student debt, for those with good credit, are generally above 12 percent; the one exception appears to be a teacher with 10 years of work experience and good credit, where the interest rate is 10.75 percent. These private student loans are not good credits for lenders -- they can't easily be packaged into the secondary market these days.

You know a lot of what we consider as "private student loans" are not really private loans but are loans subsidized by the government or other sources. I find the 7 percent rate for an unsubsidized student loan that you mentioned to be incredible especially if interest on the loan didn't accrue until after you graduated from school and it went into repayment status shortly afterwards. Most private loans these days to students require the parents to co-sign anyway, if the student hasn't reached 21, so I doubt one gets a favorable rate of 300-400 basis points by that fact alone. Maybe this loan was made to you and your parents with the provision that your parents maintain a compensating balance in accounts at the bank. If this was the local community bank, I can see a loan officer lending you at 7 percent if your parents maintain below market jumbo CDs in the bank for a specified period. I could be wrong, but you got a great deal, in any event.

From what I have checked out, a Plus loan is around 8.5% or 9%. I'd look into that, maybe it wouldn't work for you. No huge spike of inflation in college costs, eh?