02-12-2013 04:00 PM - edited 02-12-2013 04:02 PM
I have consolidated my student loans 2 years ago with Federal Student Loan Servicing with a 6.375% interest rate. I use their EFT debit payment service which gave me a rate discount of .25%. My loan balance is $35K. I currently pay $500 a month, which is 2x the amount they bill me.
Is there a way to move this loan to a private institution to receive a lower interest rate? I have an auto loan which is much lower then my student loan.
I feel my only way to pay this faster and pay less in interest is to try to get a higher paying job and pay more on it monthly, or something similar. Which I would have better educated myself before I got myself in this debt situation.
02-12-2013 07:33 PM
If you can get a bank to lend you that amount with a lower interest rate, you can certainly use those funds to pay off the student loan. That said, I wouldn't do it.
Federal student loans have a number of benefits - a variety of payment plans, the ability to defer the loans in certain situations, and the ability to rehabilitate the loan if you default. A loan from a bank has none of those protections, and will probably also have a shorter term, giving you fewer options if you can't make your payments for a few months or even longer.
Your auto loan has a lower rate because it is a secured loan, the bank can take the car back if you don't pay, so there is a lower risk they will be left with the entire unpaid balance if you default. A loan to pay off your student loans would be unsecured, and you'll pay for that higher risk in interest. Unless you have a great credit score and solid relationship with a bank or credit union, I would be surprised to see a lower interest rate than what you have currently.
02-12-2013 08:43 PM
Ahh-- thanks SCF, makes sense.
I was just hoping there was something I hadn't thought of, or something a bank offered which would allow me to pay more towards the principal!!
Haha! Can't say what I would do different! At least I picked a viable area of study!
Thanks for the response!