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Student Loan Suggestions

By Terry Savage on January 27, 2019 | College Savings / Student Loans

Dear Terry Savage:
I’m sick with worry over my grandsons student loan total. He is 22 and graduating in May with a Mechanical Engineering Degree. He has four separate Sallie Mae loans totaling $107,000. His divorced parents have been paying the interest only on the loans these last four years. I’m worried at this high loan amount.
Can he consolidate these 4 separate private loans into one loan at a lower interest rate. I don’t know his current interest rates. I’m not able to financially help him. Where should he start to repay these loans?

Terry Says

It’s nice of you to be concerned — but he is not an unusual case. It’s a sad situation for most college grads these days.   Here’s how he should approach the loans.  He must contact the lender on all student loans immediately after graduation (but before 6 months have passed) to make payment arrangements.  Then a lot depends on whether he is employed and has a salary — and whether they are Federal or private student loans.

Surely, he must have some Federal student loans.  Those have special deals, such as “income based repayment plans”  (learn more at http://www.ibrinfo.org/) which depend on his earnings.  Keep Federal loans separate from private loans because those Federal loans have several other hardship provisions if he cannot repay.

Sadly, PRIVATE student loans have very few protections.  If the parents co-signed the loans (which is likely), then the problem is equally theirs.  If he doesn’t repay, they must do so!  Private lenders have no special deals and no incentives to “consolidate” or lower the rates.  But companies like SoFi.com will consolidate private loans and lower rates — IF the borrower can demonstrate income to repay the loans.

In any case, it is wise to start thinking about repayment now.  That’s the one thing you can urge this family to do.

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