Help What to do with Student Loans

Subject: debt counseling


Hi,I came across your blog accidentally, but am glad that I did. I live in California and have been looking to find some debt counseling services. After an initial web search, I was very confused - most services seem like debt consolidation scams. Could you point me in the right direction? I have around 30k in student loans and another 2-3 in consumer debt. I currently make a fair salary and am spending (slightly) less than my income. If you can provide any info - even a few links to authentic services.
Thanks!
John

John,

Thanks for the opportunity to help. I am going to go over a few basic concepts that you need to think about before consolidating your loans. Remember the rules change all the time and the state you live in may have different rules. So this is a general guideline.

• Do you have Government loans? Gov. loans usually divide into four types: Stafford Loan, subsidized & unsubsidized, Federal Plus Loans & Federal Perkins Loans.


• Do you have Private Student Loans?


• Use a loan calculator to list all your student loan debts and determine your situation.

Now you have a picture of your current situation. Make a call.

• If you have government loans I would start by calling them to determine your current situation and options.


• Private loans I would call your current provider to see what the options are with them.


• Ask questions - my understanding is Gov. Loans and Private loans can not be consolidated. Government loans normally have a lower interest rate. If consolidating private loans be careful not to increase your rate and watch for fees.

What is your goal?

• Paying off as soon as possible?


• Simplifying - one payment


• Extending your payments to lower monthly payments - but will add more interest you pay over time?

My recommendation always is pay off as soon as possible. If you do not consolidate take the highest interest rate loan and pay as much extra to principle payment as possible while paying the minimum on the remaining loans. Once you pay off the higher interest loan - add the payment from the first loan to the next highest interest rate loan and pay it off etc.

The companies who gave you the loans want you to take the longest repayment schedule and will make it very appealing by telling you how low your payment will be. What they don't tell you is the longer you have the loan - the less freedom and opportunity you have in your life. As well as, how much more money they make from you.

Hopefully, you will never be poorer than while being a college student. So I tell recent graduates - do not increase your lifestyle dramatically - take the time to pay off your debt instead of creating debt with large purchases or expensive living accommodations. If you can keep a roommate or continue to live modestly for a few more years - you can have so much more freedom to live your passion going forward.

Regarding your credit card debt - I would try to pay that off as fast as possible - more than likely that is your highest interest rate debt. Attempt to live debt free - pay cash for any purchases so you don't continue the cycle.

My next post will cover steps to save while paying down all the debt you currently have as that is as important as paying off debt. Time is currently on your side for long term planning - also the need for emergency savings, and money needed over the next couple years to everyday living.

It is truly a life choice to change your thinking and set yourself up for long term success. I believe you can live your passion and have a very balanced and financially successful live.

Stay tuned......

Stephenie