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Consolidating Student Loans

Finance

This is a guest post.
If you owe on multiple student loans, you may have heard of or are considering consolidating your student loan debt. Whether you are fresh out of college or struggling with making multiple student loan payments, consolidating your debt can relieve you of that burden in exchange for one manageable monthly payment.

What is Student Loan Consolidation?

Student loan consolidation is one personal loan big enough to cover the amount owed on multiple student loans. The loan amount you receive is used to pay off the other student loans which leave you with a single monthly payment to make. You can consolidate all federal student loans with a debt consolidation program through the US Department of Education. Although FFELP, or Federal Family Education Loan Program, no longer offers debt consolidation, you can still be eligible through the US Department of Education. You may also still qualify for the federal student loan consolidation program even if your college does not participate in the Direct Loan Program. Many private lenders also offer student loan consolidation options as well.

Eligibility Requirements for Student Loans

You may be eligible to consolidate student loans if you are enrolled at part time status or less or if you are no longer in school. You would also be considered eligible by most lenders if you are within the loan’s grace period or are currently paying on your loans. You should also have your loans in good standing and have at least $5,000 owed in student loans. Each loan consolidation lender may have their own eligibility requirements, so it is best to check with the specific ones you are considering.

The Benefits of Loan Consolidation

There are numerous potential benefits to consolidating student loans including streamlining multiple payments into one affordable monthly payment. You may have multiple due dates on loans and you may be struggling to remember which one is due on which date. Streamlining your student loans is simpler and easier to remember, it also allows you better control over your budget.

Another benefit of choosing to consolidate student loans is extending the repayment terms. Many student consolidation loans can be obtained as long-term debt. Although it will require you to pay your loan for a longer time period, it does reduce the amount paid each month into a more affordable payment.

You will also pay a lower interest rate with a consolidated loan. The interest rate is determined by weighing all the interest on your loans and finding the average rate. You may have variable interest rates on your student loans and consolidating them can give you a fixed rate which is highly advisable given the uncertainty of the US economy.

A lowered interest rate and a longer repayment term mean a lower monthly payment than what you were currently paying on multiple loans. A smaller monthly payment leaves more money in your pocket at the end of the month and allows you to use that money elsewhere.

The Disadvantage of Debt Consolidation

It is important to be aware of all aspects of a student debt consolidation loan in order to make the best and most informed decision. There are some drawbacks to consolidating debt including having a higher repayment term which means you, in the end, will be paying more than if you paid it off sooner. You will also end up paying more in interest on a long-term loan than a short-term as less of the monthly payment is applied to the principle. You may also have to pay prepayment penalties depending on your original student loan terms. There are some student loans that prohibit paying them in one lump sum or ahead of the schedule without incurring a monetary penalty. You may also be required to repay any waived fees or rebates. Check your current student loan contracts to find out if you may be penalized for paying off the debt through a consolidation program.

Unfortunately, there are countless fraudulent and unscrupulous lenders trying to talk you into consolidating your student loans with enticing introductory rates or temptingly low monthly payments. However, it is essential to read all the small print before signing any contract in order to avoid the numerous scams out there. You should be wary of any lender that is promising really low interest rates. You can determine your potential interest rate by compiling all the student loans, adding their interest rate and determine the average. You may have to round up to the nearest one-eighth of a percentage. Beware a lender that promises an interest rate significantly lower than that interest rate.

Carnival Roundup

Misc

As of today, my mother-in-law’s house is just about ready.   We’ve got some stuff in a couple of the bedrooms to clean out, then it’s time to scrub it all down, paint, and clean the floors.   It’s been a long, horrible, emotional summer getting this property ready, but we are definitely at the “light at the end of the tunnel” stage.

This weekend, the renters are going to come over and help wipe it all down.  That will be nice.

Live Real, Now was included in the following carnivals recently:

Yakezie Carnival:  List of Awesome Finance Articles hosted by Learn Financial Education

Carnival of Retirement hosted by Club Thrifty

Yakezie Carnival:  The Less than Graceful Edition  hosted by Earth and Money

The Wealth Artisan FinCarn hosted by Wealth Artisan

Carnival of Money Pros hosted by Master the Art of Savings

Carnival of Financial Camaraderie #49 hosted by My University Money

Carnival of Personal Finance #381 hosted by Tie the Money Knot

Yakezie Carnival hosted by I Am 1 Percent

Carnival of Money Pros  hosted by Young and Thrifty

Carnival of Financial Camaraderie #50 hosted by Wealthy Turtle

Yakezie Carnival hosted by I Heart Budgets

The Wealth Artisan FinCarn  hosted by Wealth Artisan

Carnival of Money Pros  hosted by Vanessa’s Money

Carnival of Financial Camaraderie #51  hosted by My University Money

Carnival of Retirement #40  hosted by Term Life Insurance, Inc.

Thanks for including my posts.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader.  I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook.   Facebook gets more use than Google.  It can’t hurt to see what you want where you want.

You can follow LRN on Twitter.   This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of.   I promise to reply to any email that isn’t purely spam.

Have a great weekend!

Ignore Your Budget

Finance

IMG_1144
Image by Boz Bros via Flickr

For the first year of our journey out of debt, we had a strict budget, with all of our discretionary money spent out of an envelope system.  We had an envelope for groceries, one for discretionary spending, one for clothes and one for baby crap.   At the beginning of the month, we’d divide the money into the envelopes according to our budget spreadsheet.  If we used a card for anything, we’d take a matching about of money out of the appropriate envelope and put it in a box to get reconciled the next month.

Ugh. Almost 2 years later, it has turned into too much work and too much nagging about everything either of us put on a card.

We decided to simplify the system a few months ago.   Now, we still have a budget.  It’s even a zero-based budget, but we ignore it.  We only look at it if something changes for the worse.  If something changes for the better, the extra money just gets automatically rolled into our debt snowball, so there’s no need to worry about updating the spreadsheet.

Instead of envelopes, we kind of eyeball it.   We budget $450 per month for groceries, so we aim to spend $100 on our weekly grocery run.  That leaves some room for losing track of how much we are putting in the cart, or a last minute addition to the list.  It also leaves room for our secondary grocery trip to buy bread and milk later in the week.  We do go through a lot of milk at my house.  We budget $55 per month for diapers, but the deal we are currently getting with Amazon Mom is only costing us $30.79 for 6 weeks of diapers.  We ignore the difference.

This—and our heavily automated bill pay and savings—lets us keep our finances on track, without stressing over every dollar or fighting over every little thing that comes home unplanned.   I used to fire up Quicken and balance the checkbook every week.  Now, that happens at the beginning of the month, usually.  If I forget, it doesn’t matter.  At the beginning of February, I balanced the checkbook for the first time in almost two months and we never came close to exercising our overdraft protection account.  In fact, we had some extra, so that got sent directly to our debt.

Overall, it’s been good to test out a new system.  We have almost no financial stress and managing our money takes about a couple of hours per month instead of per week.  It’s all win.

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Saturday Roundup – Happy New Year!

Misc

This week, my daycare provider has taken off to have surgery.   That means I have 10 days off in a row.  I haven’t done that since I was laid off at my last job, four years ago.  I’m really looking forward to the time with my brats.

Happy New Year!  Here’s hoping 2011 beats the pants off of 2010, no matter how 2010 went for you.

Best Posts

Free From Broke has a monster post with the best personal finance articles of the year.  If you need something to read….

Lifehacker posted about a service that will grade and critique your resume for free.  I’m not looking for a new job, but it looks like a great service.

Have you ever considered the similarities between hookers, doctors, and TSA agents?

Here’s an interesting analysis of the huge stimulus package that was supposed to revive the economy.  With all of the red tape and deadlines involved in getting the stimulus money, only projects that were going to happen anyway and already had permits and approval actually happened.   Private enterprise held off starting projects, hoping to get stimulus funding, only to find out they couldn’t possibly jump through the hoops in time, which is when they lost investors.   Huge fail with nothing accomplished beyond packing a ton of taxpayer money in a fat .gov bong and watching it go up in smoke.

LRN Timewarp

This is where I review the posts I wrote a year ago.

I wrote a post on the dangers of hypocrisy.   It’s a good post to re-read whenever I start feeling judgmental.

I also started my budget series.   Lesson 1 detailed my discretionary budget category.

Finally, I asked what you’ve done to improve your situation.  Every day, you can do something.  It may not be a big thing, but even small steps in the right direction will get you where you need to be.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader.  I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook.   Facebook gets more use than Google.  It can’t hurt to see what you want where you want.

You can follow LRN on Twitter.   This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of.   I promise to reply to any email that isn’t purely spam.

That’s all for today.   Have a great weekend!

Saturday Roundup

Life

I’ve spend the last 10 days at home with my two youngest kids.   It’s been a lot of fun.   It’s amazing watching them interact with each other and seeing how their imaginations works.   It’s also been a helpful reminder that, if I don’t turn on the TV, they will happily find something else to do.

30 Day Project Update

This month, I am trying to establish the Slow Carb Diet as a habit.   At the end of the month, I’ll see what the results were and decide if it’s worth continuing.   For those who don’t know, the Slow Carb Diet involves cutting out potatoes, rice, flour, sugar, and dairy in all their forms.   My meals consist of 40% proteins, 30% vegetables, and 30% legumes(beans or lentils).    There is no calorie counting, just some specific rules, accompanied by a timed supplement regimen and some timed exercises to manipulate my metabolism.   The supplements are NOT effedrin-based diet pills, or, in fact, uppers of any kind.  There is also a weekly cheat day, to cut the impulse to cheat and to avoid letting my body go into famine mode.

I’m measuring two metrics, my weight and the total inches of my belly, waist, biceps, and thighs.   Between the two, I should have an accurate assessment of my progress.

Weight: I have lost 11 pounds since January 2nd.  This is crazy.  At least part of this has to be due to the natural swing of up to 5 pounds from day to day, and part of it is due to the fact that I was wearing jeans when I weighed in the first time and cotton pajamas this morning.  From now on, this is going to be the first thing I do on Saturday mornings, so everything is as consistent as possible.  Another factor is that I’ve cut most of the crap out of my diet for a week.  My body has been flushing garbage.  But dang!  11 pounds in a week.  I’m a bit excited.

Total Inches: I have lost 5.5 inches in the same time frame.  This is proof that it’s not just water that I lost, which is where first, dramatic losses usually originate in a diet.

The loss seems a little bit nuts.   Here’s hoping it stays consistent.

Best Posts

Your retirement account shouldn’t be an optional investment.   Do you know how to maximize retirement savings?

I’m a big fan of making extra money.   Money Crashers lists 6 sites to help you rake in the cash, without needing any special skills.

Unclutterer is giving away three Fujitsu Scansnaps.   I want one of these is a way that isn’t quite right.

I’ve been moving to LED lights instead of CFLs for a few years.  CFLs make lousy security lights in Minnesota in the winter.  They take 5 minutes to get to full brightness when it’s cold.  LEDs last forever.

LRN Timewarp

This is where I review the posts I wrote one year ago.

I posted about the difference between bribes and rewards and the problems inherent in trying to buy good behavior.

Lesson 2 of my budget series went live, detailing my monthly bills.

We made some changes to our budget plans that haven’t worked very well.   Over the course of the last year, every one of these ideas has either been partially or totally abandoned, but it’s working for us.

Carnivals I’ve Rocked

How to Complain – The Squeaky Wheel Gets the Grease was included in the Carnival of Personal Finance.

3 Things You Need to Know About Homeowner’s Insurance was included in the Festival of Frugality.

Thank you! If I missed anyone, please let me know.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader.  I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook.   Facebook gets more use than Google.  It can’t hurt to see what you want where you want.

You can follow LRN on Twitter.   This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of.   I promise to reply to any email that isn’t purely spam.

That’s all for today.   Have a great weekend!

My Financial Life

Finance

My financial life right now is boooring.

And that’s a good thing.

When I started this site I was $90,000 in debt, and considering bankruptcy.  I’d just started on the Dave Ramsey plan and was looking for every possible way to scrape up any extra money  I could.

Now, the debt is nearly gone.

US interest payments on debt by sector as a fr...
US interest payments on debt by sector as a fraction of GDP 1960-2008 (Photo credit: Wikipedia)
  • I’m looking at the last $8000 on my mortgage.  I have enough in savings to pay it off today, without draining my savings completely dry.
  • My IRA gets maxed out every year, and this year, my wife’s will be, too.
  • We save or invest about 30% of our income.
  • My credit score according to CreditKarma.com is 826.

Our credit card is almost paid off every month.  There’s occasionally some overlap between our auto-payment and our charges.  And sometimes the budgeted auto-payment doesn’t match the reality of our spending and I don’t notice for a week or two.  Except for the end of last year, but that’s a post for another day.

The short version is: We’re doing well, and we’re nearing the end of our financial problems.

Our scheduled mortgage over-payments will have it completely paid off in October.  Then we are debt-free and can hopefully manage to live the rest of our lives without paying interest on money that isn’t earning us more than we are paying.   For example, I’m willing to take out a mortgage to buy another rental property, but I’m going to wait to do that until our current mortgage is paid and we have a substantial down payment ready.

No debt.

I’m not kidding when I say it’s been a long 6 years of fighting our debt.  Counting a car loan we got and paid early, we’ve paid more than $110,000 of debt in six years.

I’ve run side businesses, aggressively negotiated raises, and left companies(voluntarily and otherwise) for better pay & benefits.

I’ve watched friends and family take vacations around the world.

I’ve turned my kids down for so many things that I would love to buy them, but couldn’t because being financially secure is a much higher priority than spoiling children.  Try explaining that to a 6 year old.

And now, the debt-ridden part of our financial journey is almost over.   Finally.

So what’s next?

I have no idea.  I’d like to travel more.  Linda and the girls want us to move to a hobby farm and get horses.  We want more rental properties.

Whatever “next” is, it will be done from a position of strength that won’t destroy our financial world or put out futures at risk.