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Which student loans to pay off first: Stafford or private?

Muffpub — Tue, 15 Dec 2009 19:03:02 -0800

Student loans in the United States: I have larger fixed-interest Stafford loans, and smaller private loans tied to LIBOR. Which should I pay back first? Thanks to anyone in advance for being patient enough to read this.

I'm just entering the beginning of my payback period for my student loans in the U.S. and I'm wondering which I should prioritize fiscally and pay off first, seeing as I'm going to have to lower my monthly payments on at least one set of loans.

So I have two sets of student loans:
- A set of three private loans with quite low interest rates (~3.29% right now - around LIBOR + 3%) but which may rise in the future;
- A set of four Stafford loans, three fixed at 6.8% and one mysteriously at 2.48%. (I have not yet consolidated, but plan on exploring that ASAP.) Together the Staffords add up to about 1.5 times the size of my private loans.

A part of what complicates the situation is my ignorance about consolidation, which is something that I have to explore further with Sallie Mae (who services my Staffords.) One of my loans is now a Department of Education loan (but not the 2.48 percent one...) and I have no idea if I can even consolidate those altogether.

The larger question I'm facing is this: I can focus on paying off the private loans, but get hit by the Staffords' higher interest rates compounding on an already significantly greater sum. And I'm assuming the interest rates, even fixed, will be even higher consolidated / pushed out.
Or,
I can focus on paying off my Staffords, but risk the LIBOR going up past six percent, as it has done in the past, which could really hurt down the line. If these were relatively small amounts I can see it not making much of a difference, but with sums as big as these (over $10,000 each) I don't want to take a decision lightly.

I feel more comfortable owing the government than owing a private lender, but apparently while I was in college the world decided that I could no longer make financial decisions based on fuzzy feelings. So I'm making them based on the hive mind's judgement instead. Thank you all.

What lender should I pick for my student loans?

amalgamator — Thu, 16 Apr 2009 21:36:15 -0800

Which lender should I use for my government student loans? I have previously attended a direct loan school and thus I had to take out my Stafford and GradPLUS loans through the school directly. I am now going to another school that is FFELP school and I can choose my lender. I was given a preferred list from the school. I remember reading that sometimes the preferred list isn't the best deal around. And that you should shop around. However, I've read that it's getting harder and harder to find great borrower benefits such as waiving loan origination fees.

I found a list of the top 100 lenders. Yet #1 on that list is Sallie Mae which is a terrible company?

Have any of you found a lender that you like with good benefits? Anything else I'm missing?

What are the pros and cons of giving back unused student loan money at the end of the semester?

SuperNova — Mon, 22 Dec 2008 14:32:48 -0800

I'm in my first year of law school and also a first-time student loan borrower. I ended up having a decent amount of loan money left in my bank account at the end of the semester. Should I pay it back or hang on to it? All my loans are federal -- both types of Stafford and GradPLUS. The PLUS is my highest-rate (8.6% I think?), so if I were to pay the money back, it would go there.

The PLUS had a 3% origination fee that I believe I read would be waived if I paid back within 120 days of disbursement (i.e., this week). The deal is, you borrow"$X", you actually receive ($X-fee), and then you have to pay back $X. Theoretically, if you paid back the ($X-fee) before the time ran, you would be clear of the whole amount -- or at least that's my understanding. That won't happen, in my case, but I could pay back around half. The fee is not huge -- less than $300 total, so less than $200 at stake here.

Maybe more importantly, what's the story on in-school interest? Both the unsubsidized part of the Stafford and the PLUS loans charge interest while in school, and say that it will be added to the principal amount if not paid back during school. My lender's website reports a "Payoff Balance" around $500 higher than my loan amount (which, for the PLUS, is around 3.4% -- which doesn't correspond to anything that makes sense to me relative to my interest). Is that difference the interest? Should I pay it back now?

My priorities are keeping my ultimate burden as low as possible, but also not running short of money now (when I have much less of it!). Based on this semester, it looks like I should have plenty for the spring, but I might end up needing to save some for this summer if I don't have a paying job. I'm not opposed to paying as much as I can back now, but only if there is a good reason to do so.

Can anyone offer some advice on what I should do or at least on what I should consider?

(Lender is Citigroup/Student Loan Corporation, if it matters.)

Can I take a Stafford loan without the help of my school?

serazin — Mon, 08 Sep 2008 19:29:07 -0800

Can I apply for a Stafford loan without going through my school? I am enrolled in a nursing program at a very disorganized and poorly funded community college. I started August 20. Due to "the new computer system isn't working" type problems, no one's financial aid paperwork has been processed for this year. So I've received no aid and neither has anyone else. The person in charge of loans is refusing to even talk to any students until "the computer system is fixed" which could be "never" as far as I can tell. I'm a broke single mama and I'm starting to get desperate.

I want to apply for subsidized and unsubsidized federal loans. Is there any way I can do this on my own - since the financial aid department will not help me or even talk to me?

Thanks folk!

Finding a way out of a tangled web of financial aid

dead_ — Tue, 05 Jun 2007 10:05:20 -0800

I've reached the end of the road for graduate school loans. Well, I was finally accepted to a master's program at my first choice school: Waseda University in Tokyo, Japan. Little did I know that funding my adventure in higher education would prove so ridiculously troublesome and depressing.

My situation is easily summed up as follows: no one wants to give me a loan.

In detail, it goes something like this: I cannot receive any kind of federal loan for graduate school, as my university doesn't admit many American students and as such has no relationship with the Department of Education here in the states--this means that Stafford loans are out of the question. Also, it is an impossibility for the university to get a FAFSA number through the DOE (thus allowing for federal funds) due to the length and intensity of the process and the relatively few American students at the school. I've talked with both the university, and the DOE on that one.

I also seem to have hit a roadblock with private loans. I have found many loans that allow deferred payment and disbursement of funds directly to me, yet during the application process I always encounter the mysterious "eligibility list" of universities they approve or do not approve of--which of course Waseda is not on, excluding me from the loan. After speaking with a few financial aid officers, I realized that these lists are of universities that banks have relationships with so they can determine if the student is still enrolled at full-time (and thus still eligible for the loan). So it looks like private loans are out, too. I've checked hundreds of them, with no luck.

The university itself offers no loans to foreign students, and has no relationships with any US financial institutions.

As for scholarships, I will undoubtedly get them--and have been told as much--however they are not awarded until after matriculation and the initial tuition payments, which I would need a loan to make. I also have no way of knowing how much I'm getting yet.

So what is a foreign-enrolled US citizen to do, with no one to loan him a dollar and his dream school slipping away? That's what I'm asking you.

This has been one of the most disheartening experiences of my life: a long, detailed admissions process fraught with doubt that eventually resulted in the wonderful news of admission to my dream school, and yet now I have no way to finance it--even with the almost certain possibility of scholarship.

Are there any options I haven't tried, or haven't thought of here? Is there anything I can do?

My tax returns are being sucked up by unpaid Stafford Loans that have long disappeared from my credit report. If I offer to pay the whole thing off, what can I expect?

ValveAnnex — Thu, 17 May 2007 18:24:26 -0800

Repaying Stafford college loans that disappeared from my credit report (due to age), but still collect all tax refunds - what kind of hit might I expect on my credit, reactivating the account by a full-payoff? More importantly, what kind of deal can I propose to avoid all the interest? Anyone have experience with this? I've completely blown these people off, so I'd be popping up, after over ten years, offering to close the account. I received an offer about two years ago to repay half of the entire debt to completely close it out. Considering the amount of interest over the years (over 15 years of interest has accrued), I'm afraid if I offer to pay it off, they'll want WAY more cash than I can pay.

My goal is to get debt out of my life, even debt that has disappeared from my credit report. But I don't want to go through more and more years of bad credit due to reactivating this account with activity.

I don't want to continue to lose my tax refunds to this account, which can sometimes be over $5,000/yr. What should I do?

Student loan money after you drop all your classes

drezdn — Mon, 28 Aug 2006 19:30:16 -0800

What happens if someone gets a stafford loan disbursement, receives the money and then drops all their classes?