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Confused if I should refinance, switch to PSLF, or stay with Great lakes
October 19, 2018
3:57 pm
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Hello,
So currently I have a student loan in the amount of 55,003.93 with Great Lakes. My unpaid interest is only 91.00 because I continue to make payments so it does not accrue so much and also the government is paying paying part of the interest subsidy every month. My interest rate is 6.75% fixed rate. My question is, I wanted to start putting a dent in my principal so that my loan amount will go down, but is that normal for the interest to accrue $10.00 everyday. Will the principal go down on the REPAYE program if I no longer have interest to be paid. Will the interest still accrue if I pay it off or is it once you pay off the interest it no longer accrues.

If I pay off my current interest, then refinance with a private company, such as Sofi or Earnest, will I benefit from that. Will my interest accrue everyday like it does with my federal loans. My loans with Great lakes show that they are consolidated into a direct loan. I had just consolidated with them for about a year now, and I am on there IBR – REPAYE program.

On the other hand, I also work for a large Hospital, that qualifies for the PSLF. and I have been there for about 5 years now, I know that I probably will not leave there anytime soon and may retire at this company. However, after reading the horror stories of FED LOAN servicing who handles all the pslf, I’m worried to transfer my loans to them and even with reading the stories about people not even being eligible for the PSLF after they applied for it and got denied, I don’t know if its even worth it or should I just continue on making my payments through REPAYE until I reach the 20 year forgiveness.

I don’t know which direction to take and what would be the most beneficial in the long run.

October 21, 2018
9:33 am
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Interest accrues every day. With your balance at your interest rate, $10 per day of interest is about right.

Even though the interest accrues daily, it isn’t added to your balance daily… this happens once a month. When you make a payment, it will be applied to the interest that has accrued, with the remainder reducing your principal balance.

As far as refinancing, there isn’t much of a benefit to making sure you have paid off all of the interest on your current loan… it just reduces the amount you need to borrow. The interest accrual will work the same way, but if you are able to refinance at a lower interest rate, less interest will accrue. (Be sure to shop around with at least 4 or 5 lenders to find the best rate… a full list of lenders is here: https://studentloansherpa.com/student-loan-reviews/

If you just consolidated your loan, it is likely that you are starting for scratch on PSLF. I’d suggest first sending in an employer certification form to see where you stand before making any big decisions with your loan. As for Fed Loan, I’m no fan, but they are pretty similar to Great Lakes. You can have headaches with either servicer. I think the math should dictate the plan you choose, not the servicer. Dealing with the PSLF program can be a pain, but we are talking 10 years worth of payments, so I think it is worth trying rather than just going after 20 year forgiveness.

To figure out the best plan, I’d suggest running the numbers. Figure out how much you will spend to chase after PSLF and compare it to how much it would cost to pay off your loans in full refinancing with a private company. If PSLF is similar or better in cost, that is probably the better route. If aggressive repayment saves some real money, consider the private refinance path. (It can save money because you spend much less on interest over the life of the loan by paying it off quickly… even if there is no forgiveness).

October 24, 2018
3:39 pm
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So is it possible that I can still pay off or knock off a good amount from the principal balance on the REPAYE program that I am on right now when I pay off the interest.

October 24, 2018
4:00 pm
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Yes. The repayment plan you are on really doesn’t affect whether or not your payment is applied to principal or interest… it just impacts how much you have to pay.

An example might help.

Suppose your loans generate $100 per month in interest.

If you pay $100 per month, your entire payment will count towards interest and your balance will stay the same.

If you pay $200 per month, half your payment will count towards interest and the other half will reduce your balance by $100.

October 25, 2018
2:46 pm
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Thanks for explaining that. Also, when the payments are applied to the principal which of course will lower the balance, will that lower the amount of interest that accrues each day because the balance is getting lower.

So basically on the REPAYE program, its more like if I had the money to pay off the balance in 10 years for example, then I can do so, even if my type of plan is not on the 10 year standard payment, Right? The REPAYE is basically an IBR just in case you cannot afford the higher payment of a standard 10 year payment plan like the rest of the millions of people. Is that correct?

October 25, 2018
3:04 pm
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That is correct. As you pay down your balance, less interest will accrue each month.

Your understanding of REPAYE is right. There is nothing wrong with paying extra each month, but having the lower minimum payment keeps things flexible for you.

October 28, 2018
8:17 pm
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Is there is a certain income limit if reached, a person will not be eligible for REPAYE, or one of the IBR plans?

Have you heard of anyone refinancing with SOFI or EARNEST and got any good feedback about them? Its hard to choose between refinancing with one of these private lenders vs applying for the PSLF. I’m worried to go with Fed Loan servicing because I have read horror stories in forums that they cheat on people’s payments or they don’t apply them correctly. Also, how do I know that the PSLF will remain in effect for another 10 years or so, based on the information I read on the internet such as the link below where the government loan forgiveness program has rejected 99% of borrowers so far.

https://www.marketwatch.com/story/this-government-loan-forgiveness-program-has-rejected-99-of-borrowers-so-far-2018-09-20

My type of a loan is a direct consolidation loan with Great lakes that consist of the following below. Does this pass to be on the PSFL. I also work for a big hospital that is part of a non profit organization. I had my HR fill it out at the beginning of this year and they send it back to me with all the appropriate check marks, so I am assuming I qualify but I was just scared of sending it in because I did not want my loan to be transferred from Great lake to Fed Loan servicing.

Subsidized Principal: $21,207.12 @ 6.750% fixed
Unsubsidized Principal: $33,705.41 @ 6.750% fixed

November 8, 2018
10:57 am
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Is there is a certain income limit if reached, a person will not be eligible for REPAYE, or one of the IBR plans?

Have you heard of anyone refinancing with SOFI or EARNEST and got any good feedback about them? Its hard to choose between refinancing with one of these private lenders vs applying for the PSLF. I’m worried to go with Fed Loan servicing because I have read horror stories in forums that they cheat on people’s payments or they don’t apply them correctly. Also, how do I know that the PSLF will remain in effect for another 10 years or so, based on the information I read on the internet such as the link below where the government loan forgiveness program has rejected 99% of borrowers so far.

https://www.marketwatch.com/story/this-government-loan-forgiveness-program-has-rejected-99-of-borrowers-so-far-2018-09-20

My type of a loan is a direct consolidation loan with Great lakes that consist of the following below. Does this pass to be on the PSFL. I also work for a big hospital that is part of a non profit organization. I had my HR fill it out at the beginning of this year and they send it back to me with all the appropriate check marks, so I am assuming I qualify but I was just scared of sending it in because I did not want my loan to be transferred from Great lake to Fed Loan servicing.

Subsidized Principal: $21,207.12 @ 6.750% fixed
Unsubsidized Principal: $33,705.41 @ 6.750% fixed

November 10, 2018
9:21 pm
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Indiana
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People are always eligible for REPAYE or IBR as long as it saves them money over the standard repayment plan.

I’ve heard of many people refinancing with lenders like SoFi and Earnest. Reviews on these lenders and others can be found here: https://studentloansherpa.com/student-loan-reviews/

This article may be helpful for your concern about PSLF or just paying the loans off: https://studentloansherpa.com/earn-qualify-pslf/

As for the high rejection rate, I’d expect it to drop as time passes. More on the difficult of going after PSLF can be found here: https://studentloansherpa.com/hard-qualify-public-service-loan-forgiveness-pslf/

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