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Guru Q&A: Help Me Fix My Student Loan Consolidation Fiasco
FiLife User Question: I am trying to help my son who has $160,000 in student loans, $100,000 of which are private with an 11% rate. I would be willing to co-sign on a consolidation plan and I have a credit score averaging over 800. I make approx $175,000 per year, but no bank will let me co-sign since I have a home equity line of credit that is extremely high - even though I have only a small fraction as an outstanding mortgage. He keeps on deferring the payments and accruing huge sums of interest that keep adding to the principle. What can we do?
-vpancaldo
FiLife Guru Response: Only seven lenders are still offering private consolidation loans. Lenders do use the higher of the two credit scores to determine eligibility and the interest rates and fees, so your 800+ credit score would likely result in a somewhat lower interest rate. (Recently, lenders have started increasing interest rates on new private student loans by 2% to 4% to reflect their increased cost of funds.) However, you’d then be on the hook for your son’s loans if he were to default — as soon as he’s late with a payment, the lenders would require you to start making payments on the loans.
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Guru Q&A: Can I Defer My Student Loans?
A lot of graduates’ student loan grace periods are about to expire. But there are ways to defer payment for longer. One FiLife user asks our guru whether going back to school will do the trick…
FiLife User Question: I graduated this past summer with a degree in elementary education. My loans are coming due this month. If I start a Masters in Education program in January, will this defer my loans?
-erma
FiLife Guru Response: If your loans are federal education loans, they are eligible for an in-school deferment. Ask your school to notify the lender of your in-school status. Verify with the lender that you have been granted an in-school deferment before you stop making payments on the loans. Otherwise, you’ll be in default and lose eligibility for an in-school deferment. For example, you should make this month’s payment and continue making monthly payments until you’ve received confirmation that the in-school deferment has been granted.
Guru Q&A: How Can I Lower My Student Loan Payments?
FiLife User Question: I graduated about a year ago. I have 3 private school loans (one with Key Bank) and one federal loan. I have been struggling with consolidating these loans ever since. I manage the restaurant I have worked at since I have been 15 and would love to be able to get out and do what I want. Unfortunately I entered school without knowing how hard it would be for someone living under the poverty line like me to consolidate my loans and cannot afford to make an occupation change.
I earn decent money - however, I cannot afford the four separate loan payments every month. I have been turned down by every place I have applied and have run into one dead end after another. I have no one close enough to me as a credit worthy co-signer becasue my step father ruined my mother’s credit and my own credit was bashed because of an unpaid carpet bill thanks to my roomates in college. I have two children and plan on adopting my fiance’s daughter as my own. Currently we are living on my income only and I am paying on two of the four loans with the other two in forbearance. I can stay afloat fairly well like that, but November 18th will mark the end of this 3-month forbearance term and I still have not had any luck.
All these factors combined have made the repayment of these loans the center of my life. I know the credit markets are in bad shape in today’s economy, but I would love to discover some sort of program for people like me that I can turn to for help. I am very responsible and always pay my bills, but I am afraid of drowning under the pressure of these loans. If there is anything I can do or anywhere I can turn, even just a point in the right direction would be more help than I have recieved from anyone else thusfar. Thank you for your time.
-J King
FiLife Guru Response from Mark Kantrowitz: Federal loans cannot be consolidated with private student loans, so the best case scenario is two loans. But you’re not really asking about consolidating loans, since a consolidation loan will still have the same loan balance. (Also, a private consolidation loan will only yield a lower interest rate when the borrower or cosigner has a significantly improved credit score.)
What you need is a reduction in the total monthly loan payment. Consolidating the private student loans will not necessarily accomplish this, as most private student loans start off with a 20 or 25 year loan term.
Guru Q&A: Should I Pay LifeLock to Protect Me from Identity Theft?
FiLife User Question: I have seen ads for a service named “Lifelock” where the guy professes that with his service it is virtually impossible for someone to steal your identy. Are you familar with this company and how are their ratings?
-debbieha
FiLife Guru Answer: According to the LifeLock terms and conditions, Lifelock places fraud alerts on your behalf with the three major credit reporting agencies, Experian (1-888-397-3742), Equifax (1-800-525-6285), and TransUnion (1-800-680-7289). You can place fraud alerts with the credit reporting agencies yourself for free. The fraud alerts must be renewed every three months. LifeLock does this for you. When there’s a fraud alert on your credit reports, companies must call you at the number listed in the fraud alert before opening a new account in your name.
LifeLock also provides other services, such as removing your name and contact information from credit card and direct mail marketing lists. This again is something you could do yourself for free using the opt-out options provided by the Direct Marketing Association.
LifeLock also orders your annual credit reports from the major credit reporting agencies once a year. You can do this yourself for free at annualcreditreport.com.
-Mark Kantrowitz, FiLife Guru
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Want to know more about identity theft protection? Check out our guide.