I have 75K debt, in 10 different federal loans serviced by Navient.
The interest rates range from 4-6%, with about three quarters of my debt at 6% interest.
I am currently two years into a graduated repayment plan with a monthly payment of $550, which mostly covers interest. I make about 35K a year.
I pay on time, and make it a priority to pay extra whenever I can, but it is not easy.
Would it make sense to partially refinance a (higher interest) portion of my loan at a lower rate with a private servicer? I do have very good credit, but I’m hesitant to enter the world of private loans.
I’m also worried about making payments when my payment grade steps up. Would it make sense to switch to an income based plan sooner rather than later? I know the term will be longer. but I’m not sure my income will increase enough to have made my current plan the right choice. I initially chose a ten year graduated because I couldn’t stomach the idea of a 25 year loan, which will bring me almost up to retirement age.
I have no other debt, but don’t own a house or car. My goal is to get rid of the loan as soon as possible, as it’s sucking me dry and causing me stress! Is there anything else I should be doing differently?
May 3, 2014
I would switch to an income-driven repayment plan right away.
Remember, you can always pay extra. The payment plan you select dictates the minimum monthly payment, not the maximum. If you switch to an income-driven plan you can still try to get it paid off in 10 years with a schedule that works for you.
Refinancing is risky because it means the income-driven plan will never be an option. With as much debt as you have, it could be dangerous.
One option would be to switch to an income-driven plan and just make the minimum payments (consider REPAYE), meanwhile, you save a what you can in a high interest bank account. If you decide that you will be able to pay off the loan, you can use that money to knock down the balance and then refinance what is left. If the numbers say loan forgiveness is a better option, you can keep the extra money in your bank account for retirement and have the remainder of the student loan forgiven.
Thank you so much for your insight!
Interestingly, I have been looking into switching plans with Navient, and after giving them my info as above, received this message:
You don’t appear to be eligible for a new repayment plan with a lower Monthly Payment Amount.
Contact Us for help or to request a higher Monthly Payment Amount.
Is this just a “smoke and mirrors thing?” I assume, so I do have another email out to customer service. It’s sad how sketchy they are.
May 3, 2014
It could be “smoke and mirrors” it could just be really lousy customer service.
To help you prepare for your next call with Navient, you may find the federal student loan repayment estimator to be a useful tool in researching repayment plans and getting an estimate on what you can expect to pay on the various options: https://studentloans.gov/myDirectLoan/repaymentEstimator.action
Another tool that might be useful is this article we wrote about the various federal repayment plans: https://studentloansherpa.com/repayment-plan-options-strategy/
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