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Old 08-17-2014, 03:22 PM   #1251
Jack
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Great point! If a refi with extra cash in can drop the PMI, it almost doesn't matter what the new rate is. PMI is evil.

I agree that mortgage rates are so low that a 30 makes sense. Rates WILL go up. My benchmark isn't a mortgage rate, but a car rate that Digital Credit Union has offered at 1.24%. They just went up to 1.49%. I have no magical crystal ball, but take that as a sign that the rates are about to creep up.

Beyond that, yes, fill up the 401k to max. Then go to fill up a Roth IRA.

I am a big NON fan of 529s. When you fill out the FAFSA and realize.....oh crap. I saved all that money in the 529 which now is being subtracted from the money I would have been offered in aid.......doooooh!

I also would not have a big issue with using multiple target date funds with some big caviats. First.....that you're using them because you know you will be too lazy to adjust your contributions once a year to keep the asset allocation on track. Next....that you understand the AA of each fund and find that multiple funds gives you the AA you want. Last, that the ER isn't outrageously high and that you understand the costs you're paying for not spending 18 minutes, once a year to adjust your contributions.

jack is 100% in low cost index funds. Total US Stock, Total US Bonds and International Stocks. I do also have a boat load of iBonds and EE Bonds (from before I paid any attention to investments).
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Old 08-17-2014, 05:22 PM   #1252
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Today we found a house plan we like.

Optioned as desired it'll come out to about 2.2x my current gross income. Oof.

[...]mortgage calculators say we should be ok even with a 15 year note. I am somewhat dubious. Need to get a few normal months of expenses vs income under belt to see how it feels, not to mention refinancing my wife's more recent high interest student loans as per my cricket-inducing post about SoFi and DR Bank.

I figured out expenses expected with a 2.2x gross income house as per above vs my expected income after taxes and pre-tax insurance/retirement contributions are extracted, and the short answer of what I found is that I can't afford everything I want.

Something will have to give, and it'll have to be on the expenses side as I can't will myself to make more money and am not willing to save less than 20% (including employer match) towards retirement. (That's maxing out a 403(b) on top of participating in the mandatory 5% employee contribution 10% employer match 401(a).)

Problems in the budget, beyond the house cost itself, which is non-negotiable if we build and in the same ballpark for the resale market in this neighborhood:

1) Student loans, for which repayment on standard 10 year plans would be a touch over $3k/mo alone.

Refinancing can get this down to $2800 or $2700, but it's still a huge amount of money each month x 10 years.

2) Preschool costs, doubly compounded if we have more kids. Even if we have three we'll probably only have at most two simultaneously in non-free preschool. One kid at the current school runs $1070/mo for five half days per week (!).

I'm actively encouraging the wife to look at a 20-25% cheaper still local, still Montessori option for next year, and am reemphasizing that we should take advantage of free public schooling from Kindergarten onward, as our current rental and future "owned" house prices are high in large part because of being in good school district.

3) Car costs, albeit this being a distant third. Perhaps re-upping for another LEAF lease is in the cards instead of buying a RAV4 EV. It's hard to accurately compare leased EV costs with bought EV costs given the tax credits are rolled into the capitalized price of one vs granted at year end for the other (which are a sum total of $13.5k for purchases, once per car, as I'm in Colorado).

I'm ambivalent about trying to save money on cars given the much smaller magnitude of potential savings--we could save a few hundred dollars per month by each driving $10k used cars, but I've done that and it's not going to make or break the budget ultimately.
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Old 08-17-2014, 05:31 PM   #1253
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I totally get the lower interest rate with the 15 year, and I have never done the math to figure out if it is better off to pay a 30 year in 10 years versus a 15 year in 15 years.

The answer to the above depends on the interest rate. If one really paid off a 30 year mortgage in 10 years versus a 15 year note in 15 years it'd take a huge gulf in interest rates for the 10 year plan to not be cheaper.

I think we will end up with a 30 year mortgage if the rates are in the same ballpark, not for job loss security but instead for unforeseen expense flexibility. Extra money that we should have each month would go to highest effective interest rate debt first, which probably would not be the mortgage but (post-student loan refinance for my wife's terrible 6.8/7.9% loans) rather my 4.25% student loan pile.

One could argue that investing the excess (perhaps maxing out the 457 plan also offered to me) would be a better move, but I have enough debt already pre-mortgage that paying it down would be preferable for psychology alone. The hassle of changing pre-tax contribution amounts also is another argument against this route--kind of kills the 30 year for flexibility argument.
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Old 08-17-2014, 06:02 PM   #1254
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1) 2.2x gross income? So a million dollar plus home? Jeebus.

2) Damn you with your 4.25% interest rate on your student loans.

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Old 08-17-2014, 06:24 PM   #1255
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No, no--I went into academics, remember.

Re: your loans, see DR Bank and SoFi for refinancing options for attendings' student loans. Resident/fellow salaries won't cut it for debt to income ratio.
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Old 08-17-2014, 08:26 PM   #1256
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No, no--I went into academics, remember.

Re: your loans, see DR Bank and SoFi for refinancing options for attendings' student loans. Resident/fellow salaries won't cut it for debt to income ratio.
Gotcha. The last time Full_Clip noted your personal endeavors, you were trying to get the cigarette smell out of a Land Cruiser

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Old 08-17-2014, 09:48 PM   #1257
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Gotcha. The last time Full_Clip noted your personal endeavors, you were trying to get the cigarette smell out of a Land Cruiser



chris619

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Full_Clip will have to look into DR Bank of PSLF doesn't hold out.

A well used, pre-depreciated 2007 Land Cruiser, mind you.

Good point re PSLF. I'm at a 501(c) institution, and to the best of my knowledge cobbled together 27 months of Income Based Repayments over the prior 72 months of internship, residency, and fellowship. Unfortunately the first 6 pre-consolidation apparently don't count. Bah. I'm also going to make at least 8 payments under IBR before the loan servicer gets wind of my new income via IRS tax return data. Remainder of time was deferment and forbearance. IBR caps at 10 year fixed repayment levels.

Therefore, it looks like if I stick with IBR even at my attending income, which again puts the payments at the 10 year fixed level, then I should get the final 29 payments shy of 10 years forgiven. (It would be even better had I logged 60 payments, but such is life.)

That's a nearly $49k windfall relative to 10 year fixed, if true! (and if the program isn't modified in intervening years to means test for scenarios just like mine)

Problems with my logic, peanut gallery?

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Old 08-17-2014, 10:18 PM   #1258
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need thoughts on current plan.

bought starter home at 4% apr for $135k FHA with evil PMI.

both have student loans. i'm an engineer wife is a nurse.

We want to move closer to wife's family in better part of town better schools, centrally located etc.

Lots are very expensive ~400k with older livable home. Looking to get an older home with plan to rebuild on lot after a few years.

We tested waters on pre-approval process to see where we were and we have too much debt to income.

2 cars, acura tsx owe:about 13k on and acura tl-shawd owe about 27k on.

Im debating getting rid of TL for cheaper car such as used prius in range of 15-17k. This will put us in a better lending situation for trying to get into better location housewise etc.

Current house appraised for around 145k after about 2.5 yrs of living there. Was a brand new construction typical cookie cutter home.

the tl was prolly a mistake financially. So now i am trying to get back on the right track.
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Old 08-17-2014, 10:33 PM   #1259
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SELL THE CARS -

http://i.imgur.com/sR5lHYq.png


Seriously sounds like almost a starting over thing. If priority is moving then do what it takes to move. Hurts, can take time to recover, worth it in the end. Pretty similar situation aside from having bought in 2005 and wanting to move. It took selling cars and saving up Texa$ to "sell" the old house... but in the end the new quality of life was worth the sacrifice. Still had fun along the way through that basically 5 year plan... shouldn't be THAT bad for you since at least you're above water on your home.
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Old 08-17-2014, 10:33 PM   #1260
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Switching cars like that will reduce your payments by maybe $200 per month.

If the banks, who are incentivized to offer more loans than you should accept, don't think your balance sheet is solid enough currently, I wouldn't think that it'd be prudent to jump on such a loan with just a net $200/mo change, even if they did approve you.

In other words, reducing your car debt by $200/month may or may not get you approved, but if you were that close to (on the far side of) bank underwriting rules to begin with, I think it would not be a good idea to buy a house that expensive.
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Old 08-17-2014, 10:41 PM   #1261
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A well used, pre-depreciated 2007 Land Cruiser, mind you.

Good point re PSLF. I'm at a 501(c) institution, and to the best of my knowledge cobbled together 27 months of Income Based Repayments over the prior 72 months of internship, residency, and fellowship. Unfortunately the first 6 pre-consolidation apparently don't count. Bah. I'm also going to make at least 8 payments under IBR before the loan serviced gets wind of my new income via IRS tax return data. Remainder of time was deferment and forbearance. IBR caps at 10 year fixed repayment levels.

Therefore, it looks like if I stick with IBR even at my attending income, which again puts the payments at the 10 year fixed level, then I should get the final 29 payments shy of 10 years forgiven. (It would be even better had I logged 60 payments, but such is life.)

That's a nearly $49k windfall relative to 10 year fixed, if true! (and if the program isn't modified in intervening years to means test for scenarios just like mine)

Problems with my logic, peanut gallery?
Not following the math. You need 120 payments (10 years) under the IBR while working for a not-for-profit organization and meet their qualification criteria (usually "financial hardship" due to loans excess of $100k for most residents or former residents).

If you have made 27 payments under IBR, you have 120-27 = 93 payments left. You can continue making IBR repayments under your fellow salary until about May 2015, then it will be time to re-submit your tax/income data and you will likely be reset to the maximum possible repayment, which is the standard 10 year repayment plan installment. There is some criteria that your total loan payment per year should be less than 15% of your gross income, but that's probably irrelevant for an attending salary.

Did your new job not offer some sort of loan forgiveness/repayment? It was more of the norm during the mid and late 1990s, but even that is gone now it seems.

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Old 08-17-2014, 10:59 PM   #1262
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Not following the math. You need 120 payments (10 years) under the IBR while working for a not-for-profit organization and meet their qualification criteria (usually "financial hardship" due to loans excess of $100k for most residents or former residents).

If you have made 27 payments under IBR, you have 120-27 = 93 payments left. You can continue making IBR repayments under your fellow salary until about May 2015, then it will be time to re-submit your tax/income data and you will likely be reset to the maximum possible repayment, which is the standard 10 year repayment plan installment. There is some criteria that your total loan payment per year should be less than 15% of your gross income, but that's probably irrelevant for an attending salary.

Did your new job not offer some sort of loan forgiveness/repayment? It was more of the norm during the mid and late 1990s, but even that is gone now it seems.

chris619

dr_wheel

Full_Clip is going to ride the IBR plan till it collapses.
No loan forgiveness at current job. Perks are cheap health insurance and 10% (up to $26k due to IRS limits) employer contribution for 5% employee contribution.

I made 6 payments after graduating under IBR then consolidated. Those 6 pre-consolidation payments are unfortunately ignored per the PSLF FAQ I read, so I really just have 21 logged. Add in maybe 9 more until May 2015 as you say and let's call it 30.

Then, yes, IBR calculated payment will go to match the 10 year standard repayment. The thing is that payments under the 10 yr plan, or IBR payments that calculate to 10 yr equivalent are still eligible as PSLF qualifying payments, as per my reading of the below FAQ. This is the key.

Therefore I should end up paying 10 yr rates from then out, but will be eligible for PSLF after 90 full 10 yr payments by virtue of logging 30 true IBR payments before.



PSLF FAQ: https://studentaid.ed.gov/sites/defa...-questions.pdf

Quote:
Public Service Loan Forgiveness—Qualifying Payments

Q13 What are the specific loan repayment requirements for loan forgiveness under the PSLF Program?

A13 You must have made 120 separate, on-time, monthly payments (after October 1, 2007) on the Direct Loans for which you are requesting PSLF forgiveness while employed full-time by a public service organization. Each of the monthly payments must have been made for the full scheduled installment amount and no later than 15 days after the scheduled payment due date. Each payment also must have been made under a qualifying repayment plan (see Q21).
Quote:
Public Service Loan Forgiveness—Qualifying Repayment Plans

Q21 What Direct Loan Program repayment plans qualify under the PSLF Program?

A21 The 120 required qualifying payments must be made under one or more of the following Direct Loan Program repayment plans:

***61623; The IBR Plan
***61623; The Pay As You Earn Repayment Plan
***61623; The ICR Plan
***61623; The 10-Year Standard Repayment Plan (see Q22 and Q24)
***61623; Any other Direct Loan repayment plan, but only payments that are at least equal to the
monthly payment amount you would be required to pay under the 10-Year Standard Repayment Plan may be counted toward the 120 qualifying payments for PSLF
Re: PSLF caps: http://www.aafp.org/news/education-p...3studcong.html

From this, at least one proposal is to cap PSLF at $57.5k. My possible forgiveness is at or below this, so such a cap wouldn't affect me, not to mention that it is a far from certain thing to be passed and signed into law.

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Old 08-18-2014, 12:10 PM   #1263
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I have a general question a home purchase/student loan situation that I am looking for some suggestions on.

We have an accepted offer on a house, and the ability to put about 20% down on said house. This would free us of PMI, as well as reduce monthly payments while having more equity in an appreciating investment. Rate should be right around 4%

My wife has about $80k in student loan debt, at about 7-7.5% average. She is paying above the required amount, but still has about 8 years to go. We in theory could take half of what we are putting down as our down payment and use it to reduce her principal, an reduce the amount of time paying the loan and reduce interest. I've told her to look into consolidating the debt into a lower interest rate, but she hasn't looked into it yet.

Now after crunching numbers it seems that both options would put us within a few thousand dollars in total cost, including PMI and interest. I'm torn as to which way to go, but the Mrs. would obviously like to eliminate her debt as fast as possible. While it does have a higher interest rate, the principal is lower, and it will prevent us from increasing equity in the appreciating investment that is the house.

What makes more sense, putting the money towards her debt and paying it off faster, or putting the money towards the house and saving money which we could then use towards her loans?

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Old 08-18-2014, 12:16 PM   #1264
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I would think that getting those student loans down ASAP is the way to go. I would think you'd be saving more vs. the temporary PMI payment.

It's really as simple as looking at both rates (including any tax deductions) as well as the cost of the PMI. $80k at 7%+ though seems like that would be more than the PMI...

Many people would tell you that saving for a home while you have $80k in student loans out there at 7% interest isn't the greatest idea in the first place. Of course, that depends on your income, etc. But I'd think getting rid of that debt would be a priority.

I'm guessing she wouldn't be able to get those rates lowered in consolidation, just so you know.

Another option is buying the place, and trying to guess when you could take out of HELOC to pay down the student debt...
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Old 08-18-2014, 12:23 PM   #1265
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I would think that getting those student loans down ASAP is the way to go. I would think you'd be saving more vs. the temporary PMI payment.

It's really as simple as looking at both rates (including any tax deductions) as well as the cost of the PMI. $80k at 7%+ though seems like that would be more than the PMI...
No deductions possible on the student loan due to earnings. One of her larger loan's interest is about equivalent to the cost of the PMI alone. However, it only helps her pay off the total 2 years sooner.

If we put the money towards the house we would have lower payments, no PMI, and after the same ~8 year time period have reduced the principle on the house by significantly more. $ for $ it is very close to the same cost. My theory is that we would have more cash in hand if we put the money towards the house though, and ultimately pay less interest over the life of the home loan(not just the 8 year period).

While I agree with your statement about pursuing a house, I have zero debt and quite a bit of savings. I'd be able to put almost all of the money down myself, and she would essentially just be paying me a portion of the mortgage payment. It really isn't much more expensive than our current rent, and then we are actually building equity over the next 6-8 years.
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Old 08-18-2014, 12:33 PM   #1266
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While I agree with your statement about pursuing a house, I have zero debt and quite a bit of savings. I'd be able to put almost all of the money down myself, and she would essentially just be paying me a portion of the mortgage payment. It really isn't much more expensive than our current rent, and then we are actually building equity over the next 6-8 years.
Yes, but you're not likely appreciating at a rate of 7-7.5% a year. I get making the decision to buy the home for a bunch of other reasons (I made a similar decision as well). But from a strict dollars and cents standpoint, it's very, very likely that you would've have been better killing off such high interest debt.

It's all about the opportunity cost. You could use that savings to make an immediate, guaranteed 7% return, or buy a home and hope it appreciates faster than that (which is not at all likely).

Last edited by SoapBox; 08-18-2014 at 12:53 PM.
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Old 08-18-2014, 12:34 PM   #1267
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No loan forgiveness at current job. Perks are cheap health insurance and 10% (up to $26k due to IRS limits) employer contribution for 5% employee contribution.

I made 6 payments after graduating under IBR then consolidated. Those 6 pre-consolidation payments are unfortunately ignored per the PSLF FAQ I read, so I really just have 21 logged. Add in maybe 9 more until May 2015 as you say and let's call it 30.

Then, yes, IBR calculated payment will go to match the 10 year standard repayment. The thing is that payments under the 10 yr plan, or IBR payments that calculate to 10 yr equivalent are still eligible as PSLF qualifying payments, as per my reading of the below FAQ. This is the key.

Therefore I should end up paying 10 yr rates from then out, but will be eligible for PSLF after 90 full 10 yr payments by virtue of logging 30 true IBR payments before.



PSLF FAQ: https://studentaid.ed.gov/sites/defa...-questions.pdf





Re: PSLF caps: http://www.aafp.org/news/education-p...3studcong.html

From this, at least one proposal is to cap PSLF at $57.5k. My possible forgiveness is at or below this, so such a cap wouldn't affect me, not to mention that it is a far from certain thing to be passed and signed into law.
This should probably be reposted in the medical school thread, but Full_Clip nearly crapped his pants when you posted the limit on the PSLF program limit of $57k. It appears that the limit would apply to new borrowers (people that enter the IBR plan for the new academic year/July 2015). So, looks like all of those 100 hour work weeks x 5+ years may actually be worth something.

Quote:
1) Will the Proposed PSLF cap ($57,500) only apply to New Borrowers after July 1, 2015 (and those who opt into the new program)? Or to all borrowers? Or all borrowers that use PAYE as a repayment plan (see question #2 for clarification)?
Quote:
ED's Answer: For all new borrowers (with minor exceptions) starting with the 2015-2016 academic year the new expanded PAYE program will be the only income-based repayment plan available so the cap applies. For any other existing borrowers they retain the income-based repayment plan in their promissory note but if they choose to switch to the new expanded PAYE program, they have to accept all the conditions including the caps.
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Old 08-18-2014, 12:36 PM   #1268
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Full_Clip might vote Republican next year if Obama keeps this racket up.
They all come around eventually. Or not.
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Old 08-18-2014, 12:55 PM   #1269
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My wife has about $80k in student loan debt, at about 7-7.5% average. I've told her to look into consolidating the debt into a lower interest rate, but she hasn't looked into it yet.
https://www.sofi.com/refinance-student-loan/

Variable rates from 2.66% on up.

Quote:
Originally Posted by Full_Clip View Post
This should probably be reposted in the medical school thread, but Full_Clip nearly crapped his pants when you posted the limit on the PSLF program limit of $57k. It appears that the limit would apply to new borrowers (people that enter the IBR plan for the new academic year/July 2015). So, looks like all of those 100 hour work weeks x 5+ years may actually be worth something.
It's only a proposal, and one inapplicable to you and me anyway. Newer borrowers have the sweeter PAYE 10% of discretionary income payment plan, whereas I don't since I had loans originated prior to 2007. On the other hand, this proposal would limit the forgiveness, so perhaps that's not a perk after all.

One related, important point: PAYE/standard IBR 25 year forgiveness is considered taxable income. PSLF is non-taxable explicitly. Booyah.
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Old 08-18-2014, 01:05 PM   #1270
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https://www.sofi.com/refinance-student-loan/

Variable rates from 2.66% on up.


7 to 7.5% sounds an awful lot like Gradplus loans, or whatever the federally backed loans are called now. I don't think you can consolidate them via a 3rd party lender, can you?

Edit, yeah, I'm so confused by all the different loan types these days...I have no idea.

All I know is, I pretty much thought it was impossible to magically consolidate these federal 6-8% loans into a loan with a much lower rate. The options only used to be consolidating, and getting a blended rate effectively equal to the original rate.

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Old 08-18-2014, 01:41 PM   #1271
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Yes, but you're not likely appreciating at a rate of 7-7.5% a year. I get making the decision to buy the home for a bunch of other reasons (I made a similar decision as well). But from a strict dollars and cents standpoint, it's very, very likely that you would've have been better killing off such high interest debt.

It's all about the opportunity cost. You could use that savings to make an immediate, guaranteed 7% return, or buy a home and hope it appreciates faster than that (which is not at all likely).
I agree, while it wont appreciate at 7-7.5% a year, estimate are around 5-6%. The additional cash flow would allow us to either put more money towards her loans to pay off sooner, or be able to re-invest back into the house. At the end of the time that she pays off her loan, the principal left on the house is something like $30k less.

I understand what you are saying, but waiting another 3-4 years to purchase isn't really an option. We found a house that in my opinion is below market value so we jumped on it.

Quote:
Originally Posted by SoapBox View Post
7 to 7.5% sounds an awful lot like Gradplus loans, or whatever the federally backed loans are called now. I don't think you can consolidate them via a 3rd party lender, can you?

Edit, yeah, I'm so confused by all the different loan types these days...I have no idea.

All I know is, I pretty much thought it was impossible to magically consolidate these federal 6-8% loans into a loan with a much lower rate. The options only used to be consolidating, and getting a blended rate effectively equal to the original rate.
That's what I am generally finding. Especially on grad school loans, there isn't a whole lot you can do that is going to result in a drastic reduction.

I'm looking into the HELOC loan as a possibility, but I think I really need to speak with my mortgage provider or a financial planner.
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Old 08-18-2014, 02:40 PM   #1272
shikataganai
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Quote:
Originally Posted by SoapBox View Post
7 to 7.5% sounds an awful lot like Gradplus loans, or whatever the federally backed loans are called now. I don't think you can consolidate them via a 3rd party lender, can you?

Edit, yeah, I'm so confused by all the different loan types these days...I have no idea.

All I know is, I pretty much thought it was impossible to magically consolidate these federal 6-8% loans into a loan with a much lower rate. The options only used to be consolidating, and getting a blended rate effectively equal to the original rate.

The blended rate rounded to next up 1/8th percent is traditional consolidation. That's what I did in 2009, netting 4.25% fixed plus the benefit of PSLF eligibility from the loan side of things.



SoFi does Grad Plus: https://www.sofi.com/blog/your-plus-...-give-it-back/ . That quoted fixed rate isn't great, but their variable rates are good. They specifically mention refinancing for those more than 120 days out from loan origination, which would be most people.

My wife has Perkins at 6.8% and Grad Plus at 7.9%? Or was it all grad plus? Who knows? Either way the rates are terrible and I will be looking to a SoFi (with me as a co-signer--we have enough insurance that I'm ok with this) variable rate refinance this winter.
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Old 08-18-2014, 05:51 PM   #1273
SoapBox
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Quote:
Originally Posted by Gfunk720 View Post

I understand what you are saying, but waiting another 3-4 years to purchase isn't really an option. We found a house that in my opinion is below market value so we jumped on it.
Yeah, I've been there and have made a similar decision. Enjoy the new home!
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Old 08-20-2014, 09:16 AM   #1274
psychoskip
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Direct Loans is selling off a lot of their loans to subsidies, it seems.
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Old 08-21-2014, 11:05 AM   #1275
indelible
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Student loan - Owe $18k to SM @ 6.55%

Seeking refi w/DRbank right now, I can probably pay it off in 5 years if I'm aggressive. Should I apply for the fixed or variable rate? I was thinking going with the 10 year fixed and just put in extra payments as I am able to.

Rates:

5 year var- 2.63% -3.68%
10 year var -2.63% - 3.88%

5 year fixed- 3.5% - 4.75%
10 year fixed - 4.5% - 5.75%

I'm waiting on an actual rate quote from DRBank, hopefully I'll have it this week. I'm more worried about choosing variable or fixed vs the length of time. I have a good amount in savings but would like to keep it as emergency funds.
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