Defer or not? (credit cards, student loan, debt, fund)

[ferrarisnowday]

I have 3 categories of student loans. Stafford, Perkins, and one from Sallie Mae. The Stafford ones are 17,000 @ 6.5% I believe, Perkins are 7,500 @ 3.5%, and Sallie Mae is 7,000 @ 10.5%. Roughly.

I also have a car loan with a current balance of 8,500 @ 13.25% (YIKES!).

I can afford to make minimum payments on all of these, but not much more. I do not have much in savings and am trying to build up an emergency fund as well. My question is, how much does it hurt your credit to defer student loans? I was thinking of deferring / forbearing on the Perkins and/or Stafford loans to pay off the Sallie Mae and car one faster. Mostly the Sallie Mae, as after a year on the car I am going to try to refinance it. My loans are just coming out of their grace period now and I have no other debt aside from living expenses.

So is it a good idea to not be paying anything towards the Stafford and Perkins loans even while they accrue interest at a lower rate? Or will it hurt my credit badly, or not make much difference versus just paying the minimum on all of them?

[drjones96]

Have you checked into consolidating your student loans. I had two when I graduated and consolidated. I think the rule is you can do it once...

You should probably see if you could refinance that car loan. 13.25% APR is pretty high for a car loan. I don't think I've ever financed a car for more than like 7%.

[ferrarisnowday]

Thing is I have essentially no credit history, so I don't know if I could get approved to consolidate. I know there is a federal consolidation program, but I think that only applies to the perkins and stafford loans, which aren't too bad.

I've only had the car for a few months, and that is the whole of my credit history: 3 car payments. I couldn't even get approved for the auto loan without a cosigner.

It seems like it is easiest to just pay the minimum on all these bills as they come in, but if I could overall pay them off faster without hurting my credit then I think that would be the thing to do.

[drjones96]

It appears you are right about the Sallie Mae loan.

Sallie Mae Student Loan Consolidation

I didn't have that type of loan when I was in school. Mine were both subsidized loans.

Borrower Services - What Loans Can I Consolidate?

But would it help you to at least consolidate the Stafford and Perkins loans and get a reasonable payment for them? I think they take the weighted average between them and if my fuzzy math is right that would end up being $24500 @ ~5.5%. If you spread your payments out to the maximum duration they would be less than $150/mo.

[Briolat21]

Most student loans will allow a graduated repayment - different than a defferal. They will offer you a smaller payment now while your income is lower, with it graudally rising to a higher rate in a few years.

I believe you can only do an out of school deferment once - so I would save that for an emergency.

However, they are usually good at working out repayment plans that will fit your income. I would call and talk to them, that won't hurt you.

[Mike From NIU]

You wouldn't want to consolidate the Sallie Mae private loan with the Perkins and Stafford loans even if you could. The Stafford/Perkins loans have federal guarantees and subsidies that continue with consolidation. However, as soon as you mix a private loan in there, you lose all those benefits. Another advantage of consolidation is that you could get an extended payback timeframe instead of 10 years (again, lowering the initial monthly payments). If you use the federal consolidation program and chose auto-pay, you get a .25% discount on your interest rate.

Good luck with starting out. It seems like you have a good sense of responsibility for your obligations, which puts you ahead of most people these days.

[drjones96]

Good point by Mike. I remember there was a bit of an incentive with the auto pay route when I did it.

Questions for the OP:
Did you graduate?

and

Do you have a job?

If the answers are 'yes' to both questions I don't know why any reasonable institution wouldn't give you a better rate on a car loan. Try a credit union maybe?

[skaternum]

I hope that along will all this great advice on deferring your loans, you'll use this as an opportunity to take a good hard look at your financial behavior. If you have over $31K in student loans, why would you buy an expensive car at a ridiculous interest rate? Does that reflect other buying habits? If so, now is a good time to get those in check, so you don't wind up in further debt.

[drjones96]

^listen to that.

No matter how bad you think your debt load is right now....it can get much worse with the addition of credit cards, accts at furniture stores, lowe's, home depot and sears, mortgage, HELOC, etc. You think you are just some average guy fresh out of college and you don't see yourself getting into much more debt than you already have but trust me....you can.

[ferrarisnowday]

Wow, that was a lot of replies quickly, thanks everyone.

Originally Posted by Briolat21

Most student loans will allow a graduated repayment - different than a defferal. They will offer you a smaller payment now while your income is lower, with it graudally rising to a higher rate in a few years.

I believe you can only do an out of school deferment once - so I would save that for an emergency.

However, they are usually good at working out repayment plans that will fit your income. I would call and talk to them, that won't hurt you.

I want to pay them off faster, not slower. Like I said, I can afford the minimum payments on all the loans on the current payment plan, which I am pretty certain is 10 years for all of them except the car. This is with me saving 12% of each paycheck in the bank, too.

Originally Posted by drjones96

Good point by Mike. I remember there was a bit of an incentive with the auto pay route when I did it.

Questions for the OP:
Did you graduate?

and

Do you have a job?

If the answers are 'yes' to both questions I don't know why any reasonable institution wouldn't give you a better rate on a car loan. Try a credit union maybe?

Yes, I plan to do the autopay routes for the incentives.

And yes, I graduated and have a job. I though the same thing when I was car shopping, too. I got denied 8 times, twice with a cosigner. This was with a down payment, a trade in, and through both banks and car companies.

Originally Posted by skaternum

I hope that along will all this great advice on deferring your loans, you'll use this as an opportunity to take a good hard look at your financial behavior. If you have over $31K in student loans, why would you buy an expensive car at a ridiculous interest rate? Does that reflect other buying habits? If so, now is a good time to get those in check, so you don't wind up in further debt.

Actually I double checked and it is 12.5%, but that is still pretty darn high. The short answer is because I needed a car, including for work. I don't think is an expensive car, either. It was 1,000 below blue book value and on top of that I got 1,000 on my trade-in, a 1985 that wouldn't pass inspection, would cost thousands to repair to inspection passing quality, and didn't qualify for cash for clunkers.

I do think I got taken a bit on the interest rate, but I justified it by the 2,000 dollars below value I bought it at. It was just the situation I was in - I had to get a car and they were the only used place that would finance me one. It has been reliable so far and only has 38,000 miles so it should last for a while.

Originally Posted by drjones96

^listen to that.

No matter how bad you think your debt load is right now....it can get much worse with the addition of credit cards, accts at furniture stores, lowe's, home depot and sears, mortgage, HELOC, etc. You think you are just some average guy fresh out of college and you don't see yourself getting into much more debt than you already have but trust me....you can.

Trust me I know. Through watching family and friends, I know. It can definitely be easy to get in over your head. I made it through 4 years of college without getting a credit card and hope to continue that way.

And I actually don't think my debt load is bad right now. Like I said, this post isn't "help i'm going bankrupt" just "hey, is there a better way to be doing this?"