Our Student Loan Questions Live: Part Two

Summary of Our Student Loan Questions Live: Part Two

by WNYC Studios

September 14, 2017
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Overview of Our Student Loan Questions Live: Part Two

This live call-in episode of Death, Sex, and Money (WNYC Studios) gathers listeners’ concrete student-loan questions and answers them with financial experts Miranda Marquit (Student Loan Hero) and Danny (a university financial aid counselor), plus callers and guests including a professor and an Ohio state representative. The conversation focuses on practical steps for managing federal and private loans, refinancing/consolidation, income‑driven repayment, how loans interact with other life goals (retirement, homebuying, having kids), and where to find help and resources.

Key topics covered

  • Differences between federal and private student loans
  • Refinancing and consolidation options (pros/cons)
  • Income-driven repayment plans and temporary relief
  • How to talk to loan servicers and what information to gather first
  • Strategies to prioritize student debt vs. retirement or other financial goals
  • Parent PLUS loans and co-signer issues (cosigner release)
  • How student-loan payments affect mortgage eligibility
  • State-level policy and how state funding affects tuition and debt
  • Practical advice for graduate/medical students considering heavy debt
  • Finding a financial planner who understands student debt

Main takeaways / actionable advice

  • Federal vs. private:
    • Federal loans offer protections (income-driven plans, deferment, forgiveness programs). Keep loans federal if you want access to these protections.
    • Private loans can be refinanced (consolidated) to lower rates or monthly payments, but you lose federal protections. Refinancing typically requires strong credit/income or a co‑signer.
  • Income-driven repayment (IDR):
    • If you can’t afford your monthly payment, apply for an IDR plan through the Department of Education. Payments can be capped at a percentage of income and sometimes be $0—these count as on-time payments.
    • Downsides: longer term and possibly paying more interest over time; have a longer‑term plan to pay down principal when feasible.
  • Consolidation:
    • Federal consolidation averages your interest rates and can stretch repayment terms (commonly 20–25 years) to lower monthly payments.
    • Private consolidation = refinancing; shop around and compare rates.
  • When you can’t pay:
    • Call your loan servicer first. Know all your loan details before you call (use NSLDS — nslds.ed.gov).
  • Prioritization rules of thumb:
    • If loan interest is around 6% or higher, paying down debt often beats investing for many people (Miranda’s personal rule of thumb).
    • If loan interest is low (examples in this episode: undergrad 4.45%, graduate 6.0%, Parent PLUS ~7%), weigh investment returns vs guaranteed interest savings.
  • Mortgage and student loans:
    • Lenders focus on your monthly payment and debt-to-income ratio rather than total loan balance. Payment size can limit mortgage borrowing power.
    • Recent changes (e.g., Fannie Mae) have made qualifying easier for some borrowers with student loans.
  • Cosigner release / credit checks:
    • Policies vary by lender. If cosigner release is rejected, you may need to reapply (another credit inquiry typically has a small, temporary effect on credit score) or refinance the loan into your own name if possible.
  • Windfalls and extra payments:
    • Consider paying higher-rate debt first (e.g., Parent PLUS) rather than lower-rate student loans. Don’t withdraw retirement accounts (e.g., Roth IRA) lightly to pay loans.
  • Finding professional help:
    • XY Planning Network (planners focused on Gen X/Y) and letsmakeaplan.org (CFP referrals) were recommended to find planners who understand student loan issues.
  • Campus advice:
    • Financial aid counselors recommend students understand their true cost of attendance (including living costs) and use calculators to estimate future monthly payments.

Notable quotes / insights

  • “Call your loan servicer first. Know all your numbers. Go to the National Student Loan Data System (nslds.ed.gov).” — Danny (financial aid counselor)
  • “If the interest rate is about 6% or higher, I prefer to pay down the debt to investing.” — Miranda Marquit
  • “Getting funding for higher education back up in the state budget is a way to reduce student debt burdens long-term.” — Rep. Kristen Boggs (Ohio)

Quick Q&A highlights (caller cases)

  • Private loans (Michelle): You can refinance private loans to consolidate and possibly lower the rate, but options and protections are limited compared to federal loans.
  • Parent PLUS (Becky & Karen): Parent PLUS loans are separate from student loans; consider paying down Parent PLUS first (higher interest) or exploring cosigner release/refinance options.
  • Stay-at-home parent (Josh): If you can’t afford payments, enroll in income-driven repayment—monthly payments can be lowered or zero and still count as on-time.
  • High balance & payoff strategy (Brian): Options depend on interest rates, risk tolerance and goals—methods include snowball (smallest balance first), avalanche (highest interest first), investing vs paying down low-rate loans, and keeping federal protections.
  • Retirement vs paying loans (Laura): Continue contributing to retirement accounts where possible; consider shifting some, but not all, retirement contributions toward high-interest loans (Miranda suggested shifting 50–75% of contributions in that caller’s case).
  • Medical school applicant (Orr): Favor federal loans first, evaluate interest rates/terms, and consider whether the higher-cost school meaningfully increases future earnings and opportunities; also explore forgiveness programs for health professionals in underserved areas.
  • Mortgage impact (Wendy): High monthly student loan payments can hurt debt-to-income ratio; some agency rules were eased to help borrowers qualify.
  • Cosigner release (Nelson): Lender policies govern release; you may need to reapply (another credit check) or refinance to remove cosigner.
  • Entrepreneur balancing loans (Dina): Start the business in spare hours and direct extra income to aggressively pay loans.

Resources mentioned

  • Death, Sex, and Money student-loan hub: deathsexmoney.org/studentloans
  • Student Loan Hero — loan comparison and articles (Miranda’s site)
  • National Student Loan Data System (NSLDS): nslds.ed.gov (lookup all federal loans and servicers)
  • XY Planning Network — financial planners focused on Gen X/Y
  • letsmakeaplan.org — CFP referral service
  • Consumer Financial Protection Bureau (CFPB) — complaint data on servicers (implied)
  • Fannie Mae / mortgage underwriting updates (for homebuying guidance)

Short checklist for a caller who’s overwhelmed

  1. Gather your loan details on NSLDS (loan types, servicer names, balances, rates).
  2. Call your servicer and explain hardship—ask about IDR, deferment, or hardship programs.
  3. If loans are private and unaffordable, get rate quotes for refinancing (compare multiple lenders).
  4. Prioritize high-interest debt (Parent PLUS, private loans) if you can’t afford everything.
  5. Don’t cash out retirement unless you’ve run the numbers—consider partial reallocation of new contributions instead.
  6. If you need professional advice, look for fee‑only planners via XY Planning Network or letsmakeaplan.org and consider a one-session plan if funds are tight.
  7. Use any windfalls to target higher-rate loans or to build a small emergency fund before extra payments.

For full show notes, caller stories, and links to all resources mentioned, go to deathsexmoney.org/studentloans.