Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Student Loans
Old 05-12-2008, 08:45 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,385
Student Loans

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
__________________

__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-12-2008, 10:16 AM   #2
Recycles dryer sheets
 
Join Date: Dec 2007
Posts: 102
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%.
__________________

__________________
podey is offline   Reply With Quote
Old 05-12-2008, 02:58 PM   #3
Recycles dryer sheets
 
Join Date: Sep 2006
Posts: 103
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...
__________________
GLM is offline   Reply With Quote
Old 05-12-2008, 02:59 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,385
Quote:
Originally Posted by podey View Post
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
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 05-12-2008, 03:03 PM   #5
Recycles dryer sheets
 
Join Date: Dec 2007
Posts: 102
Quote:
Originally Posted by haha View Post
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.
__________________
podey is offline   Reply With Quote
Old 05-12-2008, 06:00 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,951
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%.
__________________
jazz4cash is offline   Reply With Quote
Old 05-12-2008, 06:51 PM   #7
Thinks s/he gets paid by the post
bright eyed's Avatar
 
Join Date: Jan 2007
Posts: 1,891
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
__________________
If i think of something clever to say, i'll put it here...
bright eyed is offline   Reply With Quote
Old 05-13-2008, 09:34 AM   #8
Recycles dryer sheets
Abreutime's Avatar
 
Join Date: Jan 2008
Posts: 323
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.
__________________
Abreutime is offline   Reply With Quote
Old 05-13-2008, 09:40 AM   #9
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 16,375
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.
__________________
Bestwifeever is offline   Reply With Quote
Old 05-13-2008, 10:05 AM   #10
Full time employment: Posting here.
 
Join Date: Oct 2006
Posts: 898
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.
__________________
ChrisC is offline   Reply With Quote
Old 05-13-2008, 04:27 PM   #11
Recycles dryer sheets
Abreutime's Avatar
 
Join Date: Jan 2008
Posts: 323
Quote:
Originally Posted by ChrisC View Post
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.
__________________
Abreutime is offline   Reply With Quote
Old 05-13-2008, 05:05 PM   #12
Full time employment: Posting here.
 
Join Date: Oct 2006
Posts: 898
Quote:
Originally Posted by Abreutime View Post
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.
__________________
ChrisC is offline   Reply With Quote
Old 05-13-2008, 05:55 PM   #13
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by ChrisC View Post
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?
__________________

__________________
RockOn is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Subprime Loans bongo2 Stock Picking and Market Strategy 0 07-10-2007 02:20 PM
Stinkin Student Loans Deetso Young Dreamers 15 01-04-2007 10:07 AM
subprime loans semtex FIRE and Money 7 12-08-2006 09:37 PM
Student Loans maggieddd Young Dreamers 37 03-08-2006 01:53 PM
pay your student loans Martha FIRE and Money 27 12-24-2005 01:06 PM

 

 
All times are GMT -6. The time now is 10:04 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.