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How to refinance large student loans

Fare 558 49 October 24, 2015 at 10:35 PM
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Last Edited by Fare November 18, 2015 at 06:20 PM
Hi,

My girlfriend has a bunch of loans and not a high-paying job yet. Stats are roughly:
90k loans (In 4 loans, current average ~7% interest)
28k salary
600/mo total expenses (rent, food, car etc.)
High 700s credit score

Loans to salary is high, but expenses are low and credit is good. By my calculations even at 6% she could pay that off in 15 years on current salary if she wanted to be really aggressive. A 20 year or a better rate should be plenty of breathing room.

However, she is getting turned down for loans, even the latest one which she said she asked for half the total amount and had a parent as a co-signer who I believe has a solid salary.

1. Why is she getting turned down even if she would be able to pay them and has good credit and a co-signer?

2. Any adjustments she can make to her approach to get approved? Other advice? It would be much appreciated. Thanks!

22 Comments

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#2
Quote from Fare View Post :
Hi,

My girlfriend has a bunch of loans and not a high-paying job yet. Stats are roughly:
90k loans
28k salary
600/mo total expenses (rent, food, car etc.)
High 700s credit score

Loans to salary is high, but expenses are low and credit is good. By my calculations even at 6% she could pay that off in 15 years on current salary if she wanted to be really aggressive. A 20 year or a better rate should be plenty of breathing room.

However, she is getting turned down for loans, even the latest one which she said she asked for half the total amount and had a parent as a co-signer who I believe has a solid salary.

1. Why is she getting turned down even if she would be able to pay them and has good credit and a co-signer?

2. Any adjustments she can make to her approach to get approved? Other advice? It would be much appreciated. Thanks!
What're the rates on her current loans, and the minimum payments? Is she trying to do a refinance, or just take out a (personal) loan? If the latter, that's likely why she's getting denied. They see the DTI being high and don't want to extend any more credit. As for the cosigner, the parent could have debt of their own and may not have as solid a salary as you might believe. Hard to tell.
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Marshall: Have the rest of you guys figured out by now that mmathis is the smartest guy on SlickDeals?
#3
Debt to Income is too high. She needs to be exploring opportunities to increase her salary. $90k in student loans means she should have been gearing up for a more lucrative job.

You say in the subject "large student loans" but the post only says "90k loans". Are these all student loans or is it a mix of loan types? If so, please detail what types of loans.

You also say she is being turned down for loans. What is she applying for and why?

This isn't making a lot of sense yet as she doesn't have anything to show for $90k worth of debt. Her education, if that is where this money is going needs to be paying off better than $28k/year. You can make more than $28k without a degree.

I'm going out on a limb here and assuming that the debt she is applying for is not necessary so she should definitely avoid adding more debt. Her debt will be manageable if she gets a higher paying job. This should be first and foremost. This will also fix her ability to pay off the loan and apply for more debt should she need to. This is really the only true answer out there that is responsible.
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#4
Quote from eekthecat View Post :
Debt to Income is too high. She needs to be exploring opportunities to increase her salary. $90k in student loans means she should have been gearing up for a more lucrative job.

You say in the subject "large student loans" but the post only says "90k loans". Are these all student loans or is it a mix of loan types? If so, please detail what types of loans.

You also say she is being turned down for loans. What is she applying for and why?

This isn't making a lot of sense yet as she doesn't have anything to show for $90k worth of debt. Her education, if that is where this money is going needs to be paying off better than $28k/year. You can make more than $28k without a degree.

I'm going out on a limb here and assuming that the debt she is applying for is not necessary so she should definitely avoid adding more debt. Her debt will be manageable if she gets a higher paying job. This should be first and foremost. This will also fix her ability to pay off the loan and apply for more debt should she need to. This is really the only true answer out there that is responsible.
Could be living in a more rural area since her rent is pretty cheap. Depending on what you major their is certain jobs even with a degree that don't pay that much. As to getting a loan with a lower rate have you checked lending tree? I think what makes it hard to get the loan is salary vs debt. Since they pull a credit check they see the loan vs salary which makes them back away.
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#5
I ran into this same issue when trying to pay my debt off (I still am). There is really nothing you can do at the moment outside of paying it down the best you can. Here are steps I took to pay it down:

1) Set a budget where you can go out once a month for dinner & movie (or something similar) to keep your sanity in check.

2) The rest of the money after living expenses must go to paying your student debt down. Pay the minimum on every loan and with the extra left over apply it to your highest interest rate loan. This will save you money over time and help pay your debt off quicker.

3) Keep trying to work up the chain at work or find a better paying job. I started my first job out of college at a similar salary but after gathering experience I was able to move to a better paying company. Always look for better opportunities.

4) After you land your new job with better pay stick to the same plan as steps 1-3. Just because you are making more money doesn't mean you can go out more. Pay the debt down first and once you consolidate at a low rate (hopefully around 3.5% or lower) you can ease up and have more fun.

5) If you feel you are at a good company with growth it is time to work your way up the ladder so stay put for at least 2-3 years. One of the key factors lenders look at are your time of employment with your current company. The longer you are there the better because its a great way to measure job security. After one year of employment attempt to consolidate with a larger bank such as Wells Fargo. They are willing to take on a little more risk especially with a co-signer. They also have programs where if you have a checking/savings account, direct deposit and auto debt with them you can receive a discounted interest rate.

6) Do not try to consolidate all of your debt at once. In my case I had about $70,000 with Sallie Mae that I was trying to consolidate. I was rejected every time so I then moved to only consolidate my highest interest rate loans first. For example, I had three loans at 9.5% which was about $30,000. Wells Fargo agreed to consolidating the three higher interest rate loans with a co-signer. This maneuver alone saved me thousands over the life of the loan. After a year with them, never missing a payment and showing growth in the work place with a pay increase I was able to consolidate the rest of my private student debt with Wells Fargo, eliminating the need for a co-signer and at their lowest rate of 3.5% after the above deductions.

7) Don't give up.


Following these steps I have paid down my $113,000 debt to now $40,000 in 7 years. These tactics have saved me several thousands of dollars over the lifetime of my loans. You can do the same if you keep to the plan. There are other companies you can try and consolidate with as well. I am just using Wells Fargo in this example because they are who I use. If you have any other questions I will do my best to help because I know this situation is no fun.
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Last edited by swanm October 27, 2015 at 12:00 PM
#6
Quote from Fare View Post :
Hi,

My girlfriend has a bunch of loans and not a high-paying job yet. Stats are roughly:
90k loans
28k salary
600/mo total expenses (rent, food, car etc.)
High 700s credit score

Loans to salary is high, but expenses are low and credit is good. By my calculations even at 6% she could pay that off in 15 years on current salary if she wanted to be really aggressive. A 20 year or a better rate should be plenty of breathing room.

However, she is getting turned down for loans, even the latest one which she said she asked for half the total amount and had a parent as a co-signer who I believe has a solid salary.

1. Why is she getting turned down even if she would be able to pay them and has good credit and a co-signer?

2. Any adjustments she can make to her approach to get approved? Other advice? It would be much appreciated. Thanks!

Because in all likelihood, making as little as she does the bank feels she is too much of a risk to default at some point. No collateral and a low-paying job where expenses can destroy what if any saving she has are not something a bank probably wants to gamble on and they know people pay school debts last in many cases when times are tough.

Surprised a co-signer does not change the game though depending on the financials of the parents. A co-signer is on the hook if the person receiving the loan defaults. That is a recipe for credit destruction by the way as I would never advise anyone co-signing anyone's loan. If you want to underwrite a child's\relative's loan, then just loan them the money yourself (assuming you have the cash on hand) at whatever interest rate you want to charge and keep the bank out of it. My 2 cents.
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#7
Hi guys, sorry it took me so long to get the info. She said no Federal loans, they are all Sallie May. It's split into 4 loans of roughly equal amounts except the lowest interest one which is smaller. Rates are roughly

9%
7%
6%
3.5%
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#8
Quote from mmathis View Post :
What're the rates on her current loans, and the minimum payments? Is she trying to do a refinance, or just take out a (personal) loan? If the latter, that's likely why she's getting denied. They see the DTI being high and don't want to extend any more credit. As for the cosigner, the parent could have debt of their own and may not have as solid a salary as you might believe. Hard to tell.
Average around 7%, I forgot to ask minimum payments. She is trying to do a refinance. I made sure to double check. It does make sense that they wouldn't want to extend additional credit. Asked about the parents and she knows they have a least a little debt but doesn't know how much and doesn't want to pry.
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#9
Quote from eekthecat View Post :
Debt to Income is too high. She needs to be exploring opportunities to increase her salary. $90k in student loans means she should have been gearing up for a more lucrative job.

You say in the subject "large student loans" but the post only says "90k loans". Are these all student loans or is it a mix of loan types? If so, please detail what types of loans.

You also say she is being turned down for loans. What is she applying for and why?

This isn't making a lot of sense yet as she doesn't have anything to show for $90k worth of debt. Her education, if that is where this money is going needs to be paying off better than $28k/year. You can make more than $28k without a degree.

I'm going out on a limb here and assuming that the debt she is applying for is not necessary so she should definitely avoid adding more debt. Her debt will be manageable if she gets a higher paying job. This should be first and foremost. This will also fix her ability to pay off the loan and apply for more debt should she need to. This is really the only true answer out there that is responsible.
They are all student loans. She is applying to refinance, not to add more debt.

As I said implied in the original post she is still at her college job. She is of course working on getting a higher paying job, but is not a lawyer or engineer and either way has only her current income to work with at the moment.
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#10
Quote from gpister View Post :
Could be living in a more rural area since her rent is pretty cheap. Depending on what you major their is certain jobs even with a degree that don't pay that much. As to getting a loan with a lower rate have you checked lending tree? I think what makes it hard to get the loan is salary vs debt. Since they pull a credit check they see the loan vs salary which makes them back away.
It's not quite rural, but smaller city and still at her college job right now. I think she has checked lending tree but I can make sure.
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#11
Quote from swanm View Post :
I ran into this same issue when trying to pay my debt off (I still am). There is really nothing you can do at the moment outside of paying it down the best you can. Here are steps I took to pay it down:

1) Set a budget where you can go out once a month for dinner & movie (or something similar) to keep your sanity in check.

2) The rest of the money after living expenses must go to paying your student debt down. Pay the minimum on every loan and with the extra left over apply it to your highest interest rate loan. This will save you money over time and help pay your debt off quicker.

3) Keep trying to work up the chain at work or find a better paying job. I started my first job out of college at a similar salary but after gathering experience I was able to move to a better paying company. Always look for better opportunities.

4) After you land your new job with better pay stick to the same plan as steps 1-3. Just because you are making more money doesn't mean you can go out more. Pay the debt down first and once you consolidate at a low rate (hopefully around 3.5% or lower) you can ease up and have more fun.

5) If you feel you are at a good company with growth it is time to work your way up the ladder so stay put for at least 2-3 years. One of the key factors lenders look at are your time of employment with your current company. The longer you are there the better because its a great way to measure job security. After one year of employment attempt to consolidate with a larger bank such as Wells Fargo. They are willing to take on a little more risk especially with a co-signer. They also have programs where if you have a checking/savings account, direct deposit and auto debt with them you can receive a discounted interest rate.

6) Do not try to consolidate all of your debt at once. In my case I had about $70,000 with Sallie Mae that I was trying to consolidate. I was rejected every time so I then moved to only consolidate my highest interest rate loans first. For example, I had three loans at 9.5% which was about $30,000. Wells Fargo agreed to consolidating the three higher interest rate loans with a co-signer. This maneuver alone saved me thousands over the life of the loan. After a year with them, never missing a payment and showing growth in the work place with a pay increase I was able to consolidate the rest of my private student debt with Wells Fargo, eliminating the need for a co-signer and at their lowest rate of 3.5% after the above deductions.

7) Don't give up.


Following these steps I have paid down my $113,000 debt to now $40,000 in 7 years. These tactics have saved me several thousands of dollars over the lifetime of my loans. You can do the same if you keep to the plan. There are other companies you can try and consolidate with as well. I am just using Wells Fargo in this example because they are who I use. If you have any other questions I will do my best to help because I know this situation is no fun.
Thanks for the detailed plan of attack. Repped. Points 2 and 6 seem especially valuable.
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#12
Quote from YanksIn2009 View Post :
Because in all likelihood, making as little as she does the bank feels she is too much of a risk to default at some point. No collateral and a low-paying job where expenses can destroy what if any saving she has are not something a bank probably wants to gamble on and they know people pay school debts last in many cases when times are tough.

Surprised a co-signer does not change the game though depending on the financials of the parents. A co-signer is on the hook if the person receiving the loan defaults. That is a recipe for credit destruction by the way as I would never advise anyone co-signing anyone's loan. If you want to underwrite a child's\relative's loan, then just loan them the money yourself (assuming you have the cash on hand) at whatever interest rate you want to charge and keep the bank out of it. My 2 cents.
Risk of unexpected expenses makes sense. I like your line of thinking on never co-signing, though I still think it would make sense if you knew the person was good for the money but you didn't have enough laying around to loan it to them.
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#13
Quote from Fare View Post :
Risk of unexpected expenses makes sense. I like your line of thinking on never co-signing, though I still think it would make sense if you knew the person was good for the money but you didn't have enough laying around to loan it to them.

Problem is though that no one is perfect and can make mistakes and people can change over time (and not always for the better). There is a reason the divorce rate is as high as it is for example lol. As Platonius said to his son Laertes in Hamlet:

"Neither a borrower nor a lender be. For loan oft loses both itself and friend, and borrowing dulls the edge of husbandry."


True hundreds of years ago and still very wise advice.
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#14
Quote from Fare View Post :
I like your line of thinking on never co-signing, though I still think it would make sense if you knew the person was good for the money but you didn't have enough laying around to loan it to them.
Uhm, no. Never co-sign for any boyfriend/girlfriend.

I've seen too many of my idiot friends do that and then they get dumped or do the dumping and then stuff goes south. "Oh but it'll never happen to me". I assure you that they never decided to co-sign thinking it would happen to them...

One of them was on the hook for 2+yr more worth of lease payments on a Honda Accord IIRC!
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#15
Quote from LivninSC View Post :
Uhm, no. Never co-sign for any boyfriend/girlfriend.
Yeah, absolutely don't do this.
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