topic Re: How can I significantly reduce student loan debt? in Personal Finance

How can I significantly reduce student loan debt?

CashBackQueen — Tue, 12 Mar 2019 18:49:41 GMT

Experian's simulator says my student loans are holding my score back 30 points. I have $63,000 in student loan debt (yikes! I know) and I won't see a change unless I pay at least $9000 which would boost my score about 15 pts, and 30 pts if I pay the full $63,000 (of course this is just from simulation, and it's my only loan(s) so paying it off completely would probably hurt my score in that aspect)... Anyway, does anyone know of any way to reduce student loan debt? Is it possible to apply for grants or even scholarships that can go toward them, even after finishing school?

Re: How can I significantly reduce student loan debt?

thornback — Tue, 12 Mar 2019 20:03:08 GMT

I don't believe there are any scholarships / grants avail just to go towards paying your student loans.

Honestly, you shouldn't worry about them so much - just make your payments on time (pay extra if you can). The existence of the loans are helping your scores more than hurting them. There are other areas of your credit that you can improve to achieve higher scores.

I have 11 student loans totalling $54K and achieved scores of 770+ across the board with all of my loan balances still being equal to their original loan amounts (i was only paying the interest).

What else is going on with your reports that is holding your scores down?

Re: How can I significantly reduce student loan debt?

calyx — Tue, 12 Mar 2019 20:12:23 GMT

Never trust simulators - there are too many moving parts in a credit file for those to be of any real use.

Honestly, the only way to significantly reduce it is to pay it faster.
For many people, student loans are the oldest tradeline, so just pay it and enjoy the nice, long, steady account that adds to your credit mix, or pay it as fast as you can if you really want it down (which won't have much of an effect until it's really low, like 9% of the original amount).

@tmr is right - if it's about your FICO score, something else is keeping it low, not the student loan (unless it is full of derogatories).

Re: How can I significantly reduce student loan debt?

CashBackQueen — Tue, 12 Mar 2019 20:18:06 GMT

I know why it's low, a semi-fresh bankruptcy. That has to be it because I have zero collections, utilization at 1%, and everything is reporting accurately. I don't have a very large number of inquiries and my AAoA is about 5 years.

Re: How can I significantly reduce student loan debt?

thornback — Tue, 12 Mar 2019 20:29:47 GMT

Oh, i see, okay. Well - with a recent BK - paying 9k of your loans will likely not help much anyway (scorewise). Besides, the more positive payment activity you have, the better. Those loans (assuming they're all in good standing) are a blessing to your FICO scores (just not your pockets...). You just need time and as much good payment history as possible from now on. Seems like youre doing all the right things so far so just try to be patient (I know it's hard) - your scores will rise as the BK ages.

Re: How can I significantly reduce student loan debt?

CashBackQueen — Tue, 12 Mar 2019 21:47:56 GMT

Thanks y'all!

@TMR, you mentioned having as much good payment history as possible, should I gradually add more tradelines or are the five I have sufficient? Is it like drowning out the negatives with positives?

Re: How can I significantly reduce student loan debt?

thornback — Tue, 12 Mar 2019 21:55:45 GMT

No, the 5 you have is more than sufficient. I meant more along the lines of a longer positive payment history. Those good payments will continue to rack up over time. So the more positive history you have, the more it will help offset the sting of the BK for your scores to increase. More cards won't do you any good... only time and payments will. Build on that 5 year AAoA - the higher your AAoA, the better. See where your scores are in a year when the BK passes the 2 year mark post discharge - i'm thinking you'll hit at least 680, if not a bit higher. I honestly don't think you need to do anything different right now... it really is just a waiting game for you at this point (which sucks).

Just curious - what is the age of your youngest account?

Re: How can I significantly reduce student loan debt?

CashBackQueen — Tue, 12 Mar 2019 22:36:20 GMT

7 months. All 5 of my accounts post BK are between 7 and 10 months old.

@thornback wrote:
Just curious - what is the age of your youngest account?

Re: How can I significantly reduce student loan debt?

thornback — Tue, 12 Mar 2019 22:42:06 GMT

@CashBackQueen wrote:
7 months. All 5 of my accounts post BK are between 7 and 10 months old.

Oh then you definately just need time. You should see a bit of a score boost once your youngest passes the 1 year mark (the amount of the boost varies based on profile, so I cannot estimate for you); another boost after your youngest reaches 2 years -- by that time, your BK will be around / at 3 years. There are also some data points indicating a 6.5 year AAoA threshold - so you may see more of an increase in 1.5 years when your AAoA hits 6.5 yrs. No more new accounts, work with what you have and hang tight... Good things are coming your way.

Re: How can I significantly reduce student loan debt?

CashBackQueen — Tue, 12 Mar 2019 22:49:35 GMT

Thanks. Can’t wait to see what it looks like in 5 months

Re: How can I significantly reduce student loan debt?

thornback — Tue, 12 Mar 2019 22:51:01 GMT

Me too... i'm impatient for you!! LoL... be sure to report back

Re: How can I significantly reduce student loan debt?

CashBackQueen — Tue, 12 Mar 2019 22:54:11 GMT

@thornback wrote:
Me too... i'm impatient for you!! LoL... be sure to report back

Sure will!

Re: How can I significantly reduce student loan debt?

Queen_Etherea — Tue, 19 Mar 2019 17:51:21 GMT

@calyx wrote:
Never trust simulators - there are too many moving parts in a credit file for those to be of any real use.

Honestly, the only way to significantly reduce it is to pay it faster.
For many people, student loans are the oldest tradeline, so just pay it and enjoy the nice, long, steady account that adds to your credit mix, or pay it as fast as you can if you really want it down (which won't have much of an effect until it's really low, like 9% of the original amount).

@tmr is right - if it's about your FICO score, something else is keeping it low, not the student loan (unless it is full of derogatories).

YUP! My student loan is my oldest account at 12 years and 11 months.

Re: How can I significantly reduce student loan debt?

Anonymous — Mon, 15 Apr 2019 00:07:04 GMT

CBQ: With that kind of a balance for student loans, have you thought about paying them back on a plan that will lead to forgiveness. For example, a benefit of REPAYE is that the interest won't capitalize throughout the life of the loan. There are also significant loan subsidies on some plans.