Question about student loans

[Anonymous]

Hi, I'm new to these forums and have a question about student loans.

To begin, I have a large amount of loans through Sallie Mae that have been in forbearance since I graduated due to economic hardship.  During the forbearances, of course, the principal grew due to the interest applied so that my total amount is in the six figures (ouch!).  I recently received notification from SM that my loans would go into repayment in March and, as I cannot afford the scheduled payments, I applied for the income sensitive repayment plan and sent copies of my last two pay stubs as SM requested.  I haven't heard back from SM yet about that, but honestly an income sensitive repayment plan is the only feasible option for me.  In July, I plan to apply for the new IBR plan Congress passed as this, too, will be the only way I'll ever be able to manage these loans.  

Does anyone know how getting into these plans affects one's credit score, if at all?  My loans are not in default or delinquent; I just have this enormous balance to pay that is making my DTI ratio insane.  And, if I am approved under the IBR plan in July, how might this affect my ability to get, say a mortgage loan since my DTI ratio will still be insane?

Any input would be appreciated.  

[SCF]

Hey, and welcome to the forums!

As far as I know, nothing about your repayment plan goes on your credit report.  If the length of your loan term changes (to 30 years for instance), I think that would be reflected on your CR, also, the monthly payment amount will be reported.  As long as you pay as agreed though, your CR will reflect that and the IBR won't affect your score.

As for getting a mortgage, DTI is an important factor in that, so I would imagine that might cause you some trouble, especially in the current lending market.  You may be able to find some more info about DTI and mortgage approvals on the Mortgages board here.

Again, welcome, and good luck getting your loans paid off, have you looked into the Public Service forgiveness program?  With a heavy debt and the use of the IBR, it can be a really good deal, especially if you were planning on working in public service in the first place.

[LynnInMN]

Have you already consolidated your loans with SM??  If not, you could consolidate now with Direct loans and get into the ICR plan.

[Anonymous]

Thanks for your reply, and thanks for the welcome!

As for getting into the Public Service forgiveness program--well, I do teach for a living and am working in my field--why did I ever think I wanted to be an English teacher, for crying out loud?--BUT, I do not teach in the non-profit sector; I teach for a career college that technically is "for profit" and I don't think those qualify for forgiveness programs.  So I'm a strange case, I suppose; while I do work in public service and my day to day job is teaching, it's not non-profit.  (At least for the time being; I'm always looking for full-time jobs in the non-profit sector.)

I think the IBR will be my only long-term solution given only a certain percentage of income can be applied towards the loans and after twenty-five years, the remainder is forgiven.  I just wish I had thought harder about cost-benefits before I borrowed all that money.  Twenty-twenty hindsight, as they say. 

[Anonymous]

No, my loans are not consolidated--it looked to me as though SM has an income sensitive repayment plan, too--do you think I'd be better off going to Direct loans?  What would the advantage be?

[LynnInMN]

Direct Loans offers ICR or income contingent....much more flexible than any FFELP consolidator.

[Anonymous]

What is this IBR and ICR you guys are talking about? My loans are due now as well (first payment due this Feb.) I recently went through a divorce and was hoping that they would let me slid one more year and they said that there was no way that they could (I already consolidated to). I was hoping to take the money that I now have to send in to pay for my student loans and pay off higher interest rate credit cards but I guess that is a no go. They did offer a (I don't know what they called it) basically it lowered my monthly payment over the life of the loan but it is only saving me about $40 a month. I want to start paying on these as they are not going to go away short of me taking a dirt nap. However the divorce blind sided me. I was just hoping to take all that money that I now have to use paying on my student loans and just pay off credit cards (two of them) because I want to buy a house.

Anyway sorry for hijacking your thread but I was wondering what this IBR and ICR was. Thanks.

[Anonymous]

Ditch:

Income Based Repayment (IBR) and Income Contingent Repayment (ICR)  -- sorry I don't have more info to offer about your situation.

Good luck!  I've pretty much exhausted my own forbearance/deferment options w/ Sallie Mae.  I consolidated and went to the 25 year plan.  (Ugh.)  Sending in that payment hurts, but I just remind myself that w/o my education I'd be in a much different place.

CC debt hurts, but at least it feels good to throw money at it whenever you can.  Make a plan and a budget until you get them paid off.  The housing market will be in your favor for the foreseeable future!

[Anonymous]

Well, I didn't have much luck with SM myself--I have used up all my forbearances and, despite my applying for income sensitive repayment, they still want far more than I can afford monthly.  I have never used an economic hardship deferment, though, so I've applied for that.  In the meantime, I've applied to consolidate through Direct Loans who hopefully will be more merciful, ha ha.  (I take all my advice from Lynn in MN who has a wealth of direct experience with all this.)  I guess my point is, even though you've consolidated with SM, I wonder if you can go to Direct Loans, too, who seem to be far more flexible than SM.  Also, if you put "Income Based Repayment" and "July 2009" into, say, Google's search engine, you can read everything you need to know about this new repayment program upcoming this summer.

[LynnInMN]

You  can only  consolidate your  loans once so you cannot jump from one  lender to another.  HOWEVER, if you are applying for the public service loan  cancellation program, then that would  give  you the option to move your Salliemae  (FFELP)  loan consolidation to  Direct Loans. http://www.finaid.org/loans/publicservice.phtml