A little history about me with student loans:
- I graduated in 2002 with $40K in student loans
- I got my Masters in 2004 and added $20K more in student loans
Why? Whyyyyy???? I know how you feel. Back in the days, I was ballin man. I didn’t care if I have to pay it back later. Just like Kanye West’s rap, I was “livin da good life.” Yes, I’m a dumba$$ for getting that much loans. But hindsight is 20/20, I honestly have no regrets because I thoroughly enjoy the college life.
But this post is not about me, it’s about trying to come up with the best strategies to bring down your student loans. Gregg, a longtime reader, wrote to me:
I have been a reader for a while, and I do some of your deals if I am
eligible for them, and I was reading over your intro again today and I
noticed your mention of student loans. I am going to be having quite a bit
of them when I am done in May and I was wondering your approach to
them…Thanks.
First of all, find out how much you owe by going through this link. After some research, here is what you do… Balance transfer and cash advance all your credit cards, then pay off your loans, then declare bankruptcyyy…I kid I kid…Please don’t do that. It’s unethical and not worth it.
Seriously, these are the best strategies:
- If you have less than $10K in loans and think that you can pay it off in 1 year, then just find a no balance transfer fee 12 months 0% APR credit card and just pay it off. Hence, you pay no interest for 12 months. Only do this if you know you can pay it off in less than 1 year.
- With the recent Fed rate cuts, NOW is the best time to consolidate. I would shop around and find the best fixed rate. Even when you found the lowest rate, use it as your leverage to see if others will counteroffer with even a lower rate. Treat it like if you were buying a new car. You simply don’t buy the first offer they give you. Everything is negotiable.
- If I’m making a good salary and the interest rate is low on my loans, should I pay it off as early as possible? It depends on what kind of person you are. For me, it would be an easy NO. My rate is 2.25% fixed when I consolidated in 2004. This is even below inflation. I’m going to take my sweet-a$$ time to pay it off. It makes no sense to pay this off early since I could invest that money to get a higher return. Also, paying student loans is tax deductible each year.
- If you are the type who hate borrowing, owing, etc and rather not deal with it. You want to simplify your finances, then go right ahead and pay it off asap. However, life is all about borrowing. I don’t know anyone who pay cash with a house.
Here are some of the best Student Loan Consolidation Companies:
- Educational Loan Company
- Next Student
- College Payway
- Northstar
- OSLA
- All Student Loan
- Graduate Leverage
Those are some of the best ones I found. I’m sure there are plenty more out there, especially the ones cater to your respective State. If anyone know some good ones, please share. If you are about to consolidate, I would call each one of them and see what they can give you. E.G.
Immediate interest rate reduction for auto debit
Interest rate reduction after N payments
Again, find out all the rates, and use them as leverage against each other. Talk to the Supervisor to see if you can get a better deal, etc, etc.
If you are like me, and it’s going to take 30 years to pay it off, any other strategies?
- I use my Citi Professional (10000 TYP bonus) to rack up Thank You Points(TYP). Thank You Points network allows me to use the points toward my student loans. Example: 2500 TYP = $25 toward your student loans.
- Originally, my rate was 3.25% fixed. But after 36 months of consecutive payment from auto debiting, they reduced my rate by 1 point. My interest rate now stands at 2.25%.
Citi® ProfessionalSM Card with Thank YouSM Network gives you 10000 Thank You points bonus = $100 towards your student loans
- No Fee Rewards Program
- Get 3 ThankYou Points for every dollar you spend at restaurants, gas stations, on auto rentals and certain office supply merchants.
- 1 ThankYou Point on every other dollar spent.
- Redeem your points for: air travel, statement credit, gift cards and certificates, merchandise or create your own reward.
- No balance transfer fee with this offer
for the re-consolidation do the rates changes take effect in july or does it happen as the fed cuts/raises interest rates?
What about private student loans?
Thats what I meant, I didnt mean the cash advances, butyou answered my questions, I just wasnt sure if instead of putting that balance transfer check in your account you could pay the loans down. And yes of course, as long as there isnt a fee and you plan on paying it back before the interest on that credit card kicks in.
I was only kidding with the cash advances. The fees are too high to be worth it.
It’s only worth doing it for Balance Transfer under $10K and you plan to pay it off in one year. Why? Because you are not paying any fees if you can get cards with no BT fee and 0% APR interest for 12 months.
Good post, you brought up an interesting point with the 0% transfers though…not in the sense that you said, but say you consolidate and have 90k in loans. (also, due to tax laws, onlt the first $2500 of SL interest is deductable I think) But, you start with 90k, can you do 0% cash advances of say 10k, and pay it down while continuing to make your normal SL payments, but on the side you can be paying some down at 0%? Pretty much, the question is…after consolidated, you can make larger payments if you want, even if they are from credit card cash advances?