Changing Terms on a Student Loan?

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Relativease
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Changing Terms on a Student Loan?

Postby Relativease » Sat Feb 02, 2013 10:59 am

I have been scouring the internet all morning trying to find an answer to the following question, but to no avail:

I started paying off $30,500 of student loans about 18 months ago, and through sacrifice and extreme frugality have managed to pre-pay it down to a $13,000 balance. The terms of the loan are $360 minimum per month at a 6.8% rate over 10 years.

I am currently renting and am eager to buy a home before interest rates and prices rise too much, however my debt-to-income ratio based on my $360 minimum payment is too high. This would not be the case if my minimum payment were $150, which is what I have calculated it should be if the terms of the loan were adjusted to account for the lower balance (assuming it's paid off over the remaining 8 1/2 years).

Can I get this minimum lowered? If so, would it affect my credit rating? My loan was recently transferred to a new servicer, so everything is in limbo right now and I can't get any information from them. Also, I'd like to avoid changing to an income-based or income-contingent plan.

I have no other debt, and I'm fully aware of the ramifications of paying a lower monthly amount in terms of the total amount of interest I'll pay over time. However, I'm more concerned about being priced out of the housing market should interest rates and prices continue to rise.

Any advice would be greatly appreciated. Thanks!

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Greenewashed
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Re: Changing Terms on a Student Loan?

Postby Greenewashed » Sat Feb 02, 2013 11:14 am

This is called "recasting." My student loan people let me do it, but YMMV. You should check your promissory note to see if there's anything in there giving you the right. Even if there isn't, your servicer may allow it.

Relativease
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Re: Changing Terms on a Student Loan?

Postby Relativease » Sat Feb 02, 2013 12:03 pm

Thanks. The promissory note doesn't mention it.

This is a federal government loan that has just been transferred to a new servicer, MOHELA. Does anyone know their policy on recasting? Would this policy vary by servicer?

ssarah
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Re: Changing Terms on a Student Loan?

Postby ssarah » Sat Feb 02, 2013 2:42 pm

I had mine recast by DLSS (now it's mohela too). You just have to call and ask them, that's the only way to find out. You can probably choose a 25 year plan if you want to really lower your payment.

I did it for the same reason as you. I plan to pay it off early so it doesn't matter but for my mortgage app the small payment looked better.

Arica
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Re: Changing Terms on a Student Loan?

Postby Arica » Sat Feb 02, 2013 3:52 pm

How many different loans do you have? My payments were almost 500 a month upon graduation.... I had 10 different loans... but all the same service provider (nelnet, In my case) I paid off several loans and my payment is now at 160. I have 4 left at varying interest rates... I pay the minimum and then if I have cash to spare I pay extra on the one with the highest rate. (not sure if that is the same case for you) for every loan I pay off It comes off of my minimum payment I have one at 60 dollars one at 50 and the other 2 at 25 per month ( totaling 160/mo minimum payment) Hope this helps :)

indebtedlawyer
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Re: Changing Terms on a Student Loan?

Postby indebtedlawyer » Mon Feb 04, 2013 9:28 am

You don't have to apply for "recasting" from Mohela for federal loans - they do it automatically. I have been paying more than the minimum for several months and each time they then send you a new notice showing your new balance and that the installment billing will lower your monthly payment. It's pretty painless. Give them a call to talk it through, but it's probably just confusing right now since you are in transition limbo.


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