Tag Archives: student loans

Credit crunch hits close to home

With only two payments left on my credit card debt, it’s time to get serious about paying down my ridiculous private student loan debt.

For the past year, I’ve been working hard to claw my way out of leftover debt from college. My first goal was to focus on my high-interest credit card debt. I can’t tell you how thankful I am that we’re almost completely credit-card-debt free just as the financial world is crumbling.

After paying down credit card debt, my next goal is high-interest private student loan debt. My plan was to lower my 8-12% interest rate by consolidating my high-interest private student loans at today’s lower rates. I planned to attack those loans for the next three years until only our low-interest federal debt was left.

I’ve been keeping an eye on two separate lenders for private loan consolidation: CitiBank and Chase. Since it takes about 6 weeks for processing and my forbearance period ends at the end of December, it’s now time for me to apply for these consolidation loans.

Last night I logged into CitiBank’s website to find out what information I would need to gather to apply this week. Unfortunately, it appears that CitiBank has stopped offering this type of loan in the past two weeks. I guess it’s not surprising, but it’s certainly disappointing.

Private student loan consolidation is still listed as an option on the Chase student loan web site. However their information hasn’t been updated since June. It’s highly possible that they’re no longer accepting new applications either. Sigh.

My credit score is excellent, so I’m hoping I’ll be able to find a company that’s still offering private student loan consolidation. Unfortunately, my timing couldn’t be worse. I need to find a lender before December at pretty much one of the worst times in history to get a loan. With lenders cracking down even on credit limits, this type of high-risk private student loan consolidation seems to be next to impossible to get even for people with high credit scores.

We’re currently devoting $325 a month to debt. Without consolidating to a lower interest rate, my monthly payment is about $300. Luckily, we have enough money in our budget to cover the payment as is, but I was hoping to cut our minimum monthly payment in half. If our minimum payment was only $160 and we continued to send $325+ every month, it would greatly reduce the amount of time it took to pay down the debt. If we could gradually raise that amount to $500 a month, we could pay off $20,000 in about three years.

Obviously, things could be much worse. Even if we have to keep the high interest rate for a little longer, we’re still better off than we were a year ago with $4,000 in credit card debt.

I’m grateful that we’re able to make ends meet and save a little money at the same time even as the financial market crumbles around us. It’s still a bummer. I had lofty goals to pay off my private student loan debt in the next three years. If we can’t get a lower interest rate, then that’s clearly not going to happen.

I’m calling Chase tonight to see if I have any options with them. If not, I’ll call my original lender and see if I can bargain for a lower interest rate. I’m hoping I’ll have some bargaining power thanks to my high credit score, but I’m kind of doubting it. With lenders cutting credit limits and saying “see ya” even to responsible borrowers to reduce their credit risk, I’m thinking they’ll be unlikely to take on a loan like this.

Just goes to show how much harder it is to achieve lofty goals in this crazy financial market …


My personal (student) loan experience

As part of the Extended Group Writing Project at the Personal Finance Bloggers Network, I’m sharing the story of my biggest financial mistake: my student loan debt.

I was in the same position as many high school graduates. I knew I needed to go to college if I ever wanted a chance at a successful career. Unfortunately, two of my sisters were also in college at the time. I didn’t qualify for grants or financial aid, but my parents simply didn’t have enough money to cover the high cost of tuition for three children simultaneously. My grades were good, but I didn’t think they were good enough to earn me scholarships, so I didn’t apply. I know, stupid.

I didn’t choose an expensive Ivy League or out-of-state school. I was happy to attend a state school. State schools are still expensive, though.

I often hear people say that living in an off-campus apartment is a luxury that students on a budget can’t afford. I completely disagree. For the first year I lived in the dorms. In addition to tuition, my food and boarding costs alone were $800 a month. It was much cheaper for me to live off campus in an apartment with roommates.

My parents generously contributed by covering my rent. I worked part-time all the way through college, but most of my time was devoted to classes, homework, and extensive work for the campus paper. I didn’t have time to work the hours I needed to cover my tuition and living expenses.

Each year, I took out federal Stafford loans to cover my tuition. Then I took out additional private loans to cover my living expenses.

The truth is, I didn’t really know what I was getting into. I was very young, and I thought, “I’ll be making so much after I graduate, paying these loans won’t be a big deal!” That might be true for low-interest federal loans. Not the case when it comes to $20,000 in private loans at 8-12% interest. Ouch.

I had no understanding of interest rates. I didn’t know the difference between a 4% and a 12% interest rate. I’d never paid down debt, so I didn’t know that the difference between those percentage points was thousands and thousands of dollars.

That money paid for me to eat and live, but I certainly could have lived more frugally. I didn’t really shop for groceries. I ate out constantly. I bought stuff I didn’t need. I had a lot of fun.

Was it worth it? Yes and no. If I could go back and do it all over again, I would still go away to school. Those four years were essential to my personal growth. I became the person that I am today because of those four years of independence and learning. If I hadn’t gone away to school, I never would have met my husband. I’ll take some debt in exchange for my husband and an invaluable education.

I would have stopped at the federal loans, though. I would have taken out as much as I could at 4% interest and worked my butt off in my part-time job, lived as frugally as possible, and earned my education without that extra $20,000 at an average of 10% interest.

I’m paying the price now. My private loans have a minimum monthly payment of $250. If I paid the minimum payment, it would take 30 years to pay them off.

They’ve been in forbearance steadily accruing interest for the past 2 years. I simply don’t have the money to pay the minimum payment and pay off my credit card debt. Paying down this debt is my only way out of it. Like federal student loans, private student loans cannot be discharged even in bankruptcy.

My federal loans are $75 a month, and my husband’s small amount of federal student loan debt is deferred until he graduates. When we finish paying our credit card debt in November, those private student loans will become our focus.

My credit score is very high, so I should be able to consolidate them for a lower interest rate. That will cut the minimum payment almost in half. Then my goal is to pay off the high-interest student loan debt in 3 to 5 years. I don’t want to be paying my own student loans when it’s time to send our kids to college.

My biggest mistake was that I signed up for a loan that I didn’t understand. I will never again do anything with my money that I don’t understand.

I’m overwhelmed by the debt, but we have the tools now to pay it down. It took four years to acquire it. My hope is that it won’t take 30 years to pay it down.