Discover Student Loan Consolidation

[macinjosh]

I have one student loan from 2010 with a 6.8% interest rate, and was wondering if anyone who has/had a loan at that rate or higher that used Discover to consolidate/refinance with? What are the odds they will give the lowest fixed interest rate? My income is about $20k/yr, my credit scores in my sig are current. Owe about $5,400 on my credit cards.

My goal would be the 10 year term fixed interest if I was approved.

[Anonymous]

Is this the loan you have right now a federal loan? If yes, subsidized or unsubsidized? What is the balance?

Honestly, you might not know until you are approved. If you can get into Navy Federal Credit Union the rates might be lower. But as I will tell most people, if you have a federal loan, unless you have significant income and will have a high-paying career, you will almost certainly save the most money by sticking with the federal loan. Yes, the interest rate is higher. But the subsidized loans interest will likely be paid for you on REPAYE and your minimum payment will be near $0 at your income. You can always pay more, but this would give you room to pay down your credit card balances which are significant for your income and possibly a higher interest rate than your student loans. The interest generally will never capitalize on your federal loan either. Also if you run into any trouble paying on the Discover loans, there will be few options.

[macinjosh]

Thanks for the response. It’s a federal unsubsidized loan. Original amount of loan was $6,000. Current balance is $8,600. Payoff by the last Friday of this month is around $9,000.

I’ll have to work on the NFCU thing. I’m estranged from my family, which would be the only way I’d get in with NFCU.

[Anonymous]

It sounds to me like your servicer still has you on the standard repayment plan! They should have told you about IDR a long time ago...
If I were you I'd switch immediately. Like today if possible. If you sign up for a Income-driven repayment (IDR) plan today online, probably Income-based repayment or REPAYE, it should stop the payment from being due. If you didn't file taxes for the year required in order to link your application online with the IRS, print, sign and scan the application, scan your paycheck (? Or source of income) with the frequency written on it and upload these to your servicer. When they receive it to process it, your account should be put on an administrative hold for 30 days.
Check with the Dept of Education right away if this correct.
If you do have to do a private loan, USAA accepts membership with a very small donation ~$10-20) to certain organizations. They also have low rates.
If you need any help with the IDR application or anything, feel free to ask questions or message me.

[macinjosh]

Actually, I am on IDR REPAYE. Just submitted my renewal this morning. My monthly payments are $0.
I’m starting a business and I anticipate enough disposable income to start paying my loans down, but since this is my highest interest loan, I really want to get that rate lower.

[Anonymous]

Oh! I thought you meant the balance was going to be due later this month.

But your real interest rate isn't 6.8% unless it's actually 13.6%. Since you have a $0 payment good for at least the next year, on REPAYE half the interest will be paid by the government. Additionaly you can always recertify early to secure a year again.
I takes a minute but you might want to double-check that they're actually applying the proper interest rate.
When did you start on an IDR plan? Sounds like you're well on the path to forgiveness.

[macinjosh]

I signed the original loan at 6.8%. All my loans have been on REPAYE since I believe 2015.

Also, the government pays half the interest on unsubsidized loans, or just subsidized?

[Anonymous]

Then due to the fact that you don't pay the interest, your real interest rate is 3.4% (fixed, right). loan forgiveness after 20 years, unless you qualify for PSLF or another type of forgiveness like for teaching.

Another tip is to recertify with your lowest income month. So let's say when you get your business, for the month of November it's your lowest month. You certify early then by paycheck/letter/etc. and they'll take this number instead of your annual IRS income. It's on the paperwork. Payment will be good for a year, you aren't forced to recertify early with a change in pay.

Here is the article on interest subsidy:
"RePAYE Student Loan Interest Subsidy
If your monthly student loan payment doesn’t cover all the interest that accrues on your loan, the student loan interest subsidy kicks in. The government will pay for 100% of accruing interest on subsidized loans for the first three years. After three years, they will pay for half of the accruing interest.

If you have unsubsidized loans, the federal government will pay 50% of the interest due."
https://thecollegeinvestor.com/19246/repaye-student-loan-interest-subsidy/

I was actually skeptical but they sent me the regulations spelling it out. So I went back to my servicer and created a spreadsheet.... surprise! My interest rates were all over the place. It's a hassle but if I were you and I decided to go with a private loan because your payments started covering the interest, I'd definitely go back and calculate all of your interest for all the months you paid. I can almost bet you they've overcharged you. Which doesn't matter on REPAYE with forgiveness, but would of you refinanced.

[macinjosh]

Thank you for the information. I’ll take this all to heart. I really appreciate your help.

[Anonymous]

You're welcome. 🙂