Ask the Experts: How Do I Manage Multiple Student Loans?
The following question was submitted to our experts through the Ask the Experts form:
“Right now I have about $50k in undergraduate private loans at a 3% interest rate. My monthly payments once I finish grad school next year will be $600/month. These are not flexible and I don’t have any forbearance time left.
I also have around $125k that I’ve racked up while in grad school, from which I graduate next spring. I am panicking because I’m afraid I won’t be making enough to support myself, pay rent and expand be able to make monthly payments after I graduate. I called my provider for my graduate loans and they said my monthly payments right now would add up to about $750/month. If I add that to the $600/month I will owe on my undergrad loans that’s almost $1,400/month.
I don’t have any flexibility in terms of the undergrad loan which is fine – I can definitely afford to pay the $600/month. With the graduate loans – I have the income-based repayment (IBR) option in terms of leniency, but I am still really worried.
I am currently working full time making about $50K/year. I budgeted and I can probably afford to throw $1,000/month towards loans right now. What should I start paying off first? Is it the loan that yields the highest interest rate? Any help/advice/guidance would be great.
One more thing: when consolidating, what do I need to look out for in terms of if and how it will benefit me? Thanks!”
Since you’re still in graduate school and are able to make payments now, one thing you could do is begin making paying on the larger, higher-interest graduate loan that you have. According to what you wrote, you have about $1,000/month that you can pay right now.
Paying down the interest is the best way to reduce your payments when you graduate. You might want to contact your graduate loan lender and ask how you can make interest-only payments right now while you are still in school, and let them know how much you want to spend. They may have restrictions on how much they will apply toward interest, and the rest would help pay down principal.
Once you graduate, you can look into consolidation. Essentially, when consolidating, you want to try and end up with a single payment and an interest rate that is reasonable. Consolidating can benefit you in terms of making it easier to manage your loans, but financially, it really depends on the consolidated interest rate. Here is a helpful article on private student loan consolidation.
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