When Student Debt Comes Home to Roost and Fast Track Mortgage Payoff

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Dear Mary: Several years ago I decided to become a medical transcription. I had no knowledge how school loans work and signed a student loan from Sallie Mae for $7,000 with a 12-month deferment on payments. It took 15 months to finish school, so my payments started before finishing. I am still paying $134 a month on the loan wherein the principal has now grown to more than $12,500! I have looked into transferring the balance to a lower-rate loan as we are currently paying 15% variable on this one. But I can’t find anyone to agree to an unsecured loan. Is there another avenue I can pursue or am I stuck with this out-of-control student loan? — Yvonne D., email

Dear Yvonne: My first instinct is to blast any lender that signs up students for loans without fully disclosing all of the ramifications of deferred interest and variable interest rates. And then to warn students to grow up, do some independent research and pay attention to what they’re getting into! It’s a lot easier to borrow than to pay back. But I’ll refrain and get right to your question.

Your loan through Sallie Mae is not a federally guaranteed loan, but rather a private student loan. This means you do not have access to options that could potentially lower your interest or offer forgiveness.

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There is an organization, U.S. Student Loan Center (https://usstudentloancenter.org/) that offers consolidation for private student loans, which you may want to check out. Typically, that means taking a number of loans and consolidating them into one. However, it is possible they can assist you with refinancing into a better rate of interest. Just be careful. Never sign anything you do not fully understand and couldn’t explain to another person in 50 words or less.

All that being said, your best bet may be to approach a family member who believes in you and your ability to make repayment. I wish you well with your new career and getting your student debt repaid as quickly as possible.

Dear Mary: Our mortgage company has offered to enroll us in a plan that would change our current single monthly payment of $2,445 into two payments of $1,225 (every other week). Biweekly payments would be automatically deducted from our checking account. The letter states that we would save $107,692 in interest on our mortgage as well as pay our 30-year mortgage off nearly 7 years early. There is a one-time enrollment fee of $595 and a $5.42 monthly participation fee. I tried to set up the same deductions electronically, but the bill pay service will only allow for one payment per payee per month. Also, if I want to apply extra toward the principal each month, it can only be scheduled for the same date the mortgage payment is deducted. Thanks for the help. — K.G., email

Dear K.G.: I wrote an entire section in Chapter 9 of my book, “Live Your Life For Half The Price” (Revell, 2015), on this matter of biweekly mortgage payments. Here’s a brief explanation for how it works:

When you pay half of your payment every two weeks, in one year you make 26 half-payments, which equates to 13 regular monthly payments. It is that extra full payment that makes all the difference. But for a mortgage company to allow you to send half payments, you must enroll in a biweekly program and pay all those fees. Once you start, you can’t just switch back to monthly payments if you need to pull back.

Here is a simple way you can do the same thing on your own with no fees:

Each month when you pay your regular monthly payment, write a second check (or make a second principal payment) for one-twelfth of one payment. Make it very clear that this additional amount is for principal prepayment only and not to be held to cover future interest. Do this for 12 months and you will have made the equivalent of 13 monthly payments. Bingo!

If something comes up and you need to pull back, just stop sending that second check. And start back up when you like. No permission required; no fees assessed. Watch your mailbox. I’m sending you an autographed copy of my book.

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