What are my options for this high interest student loan?
"There is no magic formula to this, quite simply: earn, cut expenses, and pay.  It sounds like you can use a little bit of help in the earning area.  While it sounds like you are career focused (which is great) what else can you do to earn?   Can you start a low cost of entry side business?  Examples would include tutoring, consulting, or even baby sitting.  Can you work a part time job that is outside of your career field (waiter, gas station, etc...)? One thing that will help greatly is a written budget each and every month.  Have a plan on where to spend your money.   Then as you pay off a loan throw that money at the next one. No matter if you use the smallest loan first or highest interest rate first method if you do that your debt payments will ""snowball"", and you will gain momentum. I'd encourage you to keep good records and do projections.  Keeping good records will give you hope when you begin to feel discouraged (it happens to just about everyone).  Doing projections will give you goals to meet and then exceed.   The wife and I had a lot of success using the cash envelope system and found that we almost always had money left over at the end of the pay cycle.  For us that money went to pay off more debt.     Do you contribute to a 401K?  I'd cut that to at least the match, and if you want to get crazy cut it to zero.   The main thing to know is that you can do it. I'd encourage you to pay off all your loans not just the high interests ones."
"Without all the details it's hard to tell what options you may have, but none of them are good.  When you cosign you are saying that, you believe the primary signer will make good on the loan, but that if he doesn't you will. You are 100% responsible for this debt. As such, there are some actions you can take. First, really try to stress to your friend, that they need to get you outta this loan. Urge them to re-finance with out you if they can. Next look for ""better"" ways of defaulting on the loan and take them. Depending on what the loan is for you could deed-in-lue or short sale. You may just have to admit default. If you work with the bank, and try not to drag out the process, you will likely end up in a better place down the line.  Also of importance is ownership. If you pay the loan, do you get ownership of the thing the loan was secured against? Usually not, but working with an attorney and the bank, maybe. For example, if it's a car, can the ""friend"" sign over the car to you, then you sell it, and reduce your debt.  Basically as a cosigner, you have some rights, but you have all the responsibilities. You need to talk to an attorney and possibly the bank, and see what your options are. At this point, if you think the friend is not that much of a friend anymore, it's time to make sure that any conversation you have with them is recorded in email, or on paper." "The interest rate is determined by your 401(k) provider and your plan document.  Of course you may be able to influence this, depending on your relationship with the provider.  I'm very certain that prime+1% is not the only rate that is possible.  However, your provider is constrained by IRC 4975(d), which states that the loan must be made ""at a reasonable rate of interest.""   The definition of ""reasonable rate of interest"" would probably need to go to court and I do not know if it has.  The IRS probably has internal guidelines that determine who gets thrown to the dogs but they would not make those public because it takes away their discretion.  Because of the threat of getting pounded by the IRS, I think you will have a hard time getting a provider to allow super high or super low interest rate loans. Note: I am not a lawyer." If you have (other) high interest debt, say over 8%, pay it back first. Else, you are likely best off paying this loan back and getting the money working for you long term. "There will be many who will judge your proposal on the idea that subsidized loans should be available to those who need them, and should not be used by others who are simply trying to profit from them. Each school has a pool of money available to offer for subsidized and unsubsidized loans. If they are giving you a subsidized loan, they cannot allocate it to someone else who needs it. Once you weigh the investment risks, I agree that it is analogous to investing rather than repaying your mortgage quickly. If you understand the risks, there's no reason why you shouldn't consider other options about what to do with the money. I am more risk averse, so I happen to prefer paying down the mortgage quickly after all other investment/savings goals have been met. Where you fit on that continuum will answer the question of whether or not it is a ""bad idea""." There are loan options for those in your situation.  It is very common.  I am a licensed loan officer nmls 1301324 and have done many loans just like this.  Your schooling is counted as your work history Contrary to popular belief.  We want to write loans and guidelines are easing.  Banks are a different story and their loan officers aren't licensed.  If you talk to a bank you aren't getting an educated loan officer.  They also have what are called overlays that make guidelines stricter. Pay off the Highest interest loan rate first. You must be doing something funky with how long your terms are... If you give a bit more info about your loan's such as the term and how much extra you have right now to spend it could be explained in detail why that would be the better choice using your numbers. You have to make sure when you are analyzing your different loan options that you make sure you are comparing apples to apples. IE make sure that you are either comparing the present value, future value or amortization payments...  EDIT: using some of your numbers lets say you have 5000 dollars in your pocket you have 3 options. excel makes these calculations easier... Do nothing: in 80 months your Student Loan will be payed in full and you will have 54676.08 owing on your mortgage and 5000 in your pocket(assuming no bank interest)  for mortgage: Pay off Student loan and allocate Student loans amortization to Mortgage: in 80 months you will have $47,910.65 owing on mortgage and student loan will be paid in full For mortgage: Pay 5000 on Mortgage: in 80 months student loan will be paid in full and you will have $48,204.92 owing on mortgage For mortgage: They were kind and let you extend the repayment time on the loan. But that does mean additional interest accumulated during that additional time. You agreed to this; you can't change the contract now. What you can do is find the money to pay off the loan faster, to reduce the total amount of interest you'll be charged. "I think you're right that from a pure ""expected future value"" perspective, it makes sense to pay this loan off as quickly as possible (including not taking the next year's loan). The new student loans with the higher interest rates have changed the balance enough that it's no longer automatically better to keep it going as long as possible. The crucial point in your case, which isn't true for many people, is that you will likely have to pay it off eventually anyway and so in terms of net costs over your lifetime you will do best by paying it off quickly. A few points to set against that, that you might want to consider: Not paying it off is a good hedge against your career not going as well as you expect, e.g. if the economy does badly, you have health problems, you take a career break for any reason. If that happens, you would end up not being forced to pay it off, so will end up gaining from not having done so voluntarily. The money you save in that case could be more valuable to you that the money you would lose if your career does go well. Not paying it off will increase your net cash earlier in life when you are more likely to need it, e.g. for a house deposit. Having more free cash could increase your options, making it possible to buy a house earlier in life. Or it could mean you have a higher deposit when you do buy, reducing the interest rate on the entire mortgage balance. The savings from that could end up being more than the 6% interest on the loan even though when you look at the loan in isolation it seems like a very bad rate." Reading Great Lakes' page How Payments Are Applied, I think you are probably correct about how the payments are applied: Interest first, minimum on each loan next, then any extra is applied to the highest interest loan.  If I were you, I would make one payment a month, and I would make that payment as large as I possibly could. Trying to make more than one payment in a month is too complicated (and you aren't sure exactly how those payments get credited), and saving up for a big payment every few months is pointless and will cost you interest. The £500 are an expense associated with the loan, just like interest. You should have an expense account where you can put such financing expenses (or should create a new one). Again, treat it the same way you'll treat interest charges in future statements. While this question is old and I generally agree with the answers given I think there's another angle that needs a little illuminating: insurance. If you go with an 84 month loan your car will likely be worth less than the amount owed for substantially all of the entire 84 month loan period; this will be exacerbated if you put zero down and include the taxes and fees in the amount borrowed.  Your lender will require you to carry full comprehensive/collision/liability coverage likely with a low maximum deductible.  While the car is underwater it will probably also be a good idea to carry gap insurance because the last thing you want to do is write a check to your lender to shore up the loan to value deficit if the thing is totaled.  These long term car loans (I've seen as high as 96 months) are a bear when it comes to depreciation and related insurance costs. There is more to this decision than the interest calculation.   Obviously, if you had the cash at the front of this decision presumably you'll have the cash later to pay off the loan at your convenience.  But while the loan is outstanding there are costs beyond interest to consider. "You have 1998-2011 income-contingent student loans, where the interest rate is the lower of (1% + base rate) or RPI (retail price inflation). For the next few years the it's likely to be (1% + base rate) as interest rates stay low and inflation shoots up. These loans only need to be repaid in proportion to your salary, and if they aren't repaid for long enough (e.g. the holder takes a career break for children) they are written off. So all-in-all, they are pretty good debt to have: low interest rate, and you might not have to repay them ever. It's likely that your mortgage will have a significantly higher rate than the student loan, so you'd be better off reducing your mortgage. Also, the higher deposit might mean you can get a lower interest rate on the whole mortgage because the lender will see you as a lower risk, so the return from ""investing"" it in your mortgage would be even greater than the raw interest rate. Having the student loan outstanding might make some difference to the ""affordability"" check for your mortgage payments, but lenders will be very familiar with how they work. Reducing your mortgage payments with the higher deposit should easily counterbalance that. Your own suggestion is to invest the £30K in a ""reasonably safe portfolio"" making 5%. There'll inevitably be some risk in that - 5% is a relatively high return in today's climate - but if you're willing to take that risk, you can investigate the effect on your mortgage to see if it's worth it or not." Do you know how SoFi's business model works? They're usually pretty conservative with their loans and refinancing. But I guess if they were looking to expand into riskier loans then it sounds like they've got some red tape that'd hold them back. Thank you for the explanation, much appreciated. "I had about $16k in student loans. I defaulted on the loans, and they got  > passed to a collection type agency (OSCEOLA).  These guys are as legitimate as a collection agency can be. One thing that I feel is very sketchy is when they were verifying my identity they said ""Does your Social Security Number end in ####. Is your Birthday Month/Day/Year.""  That is not sketchy. It would be sketchy for a caller to ask you to give that information; that's a common scheme for identity theft. OSCEOLA are following the rules on this one. My mom suggested I should consider applying for bankruptcy Won't help. Student loans can't be discharged in bankruptcy. You have the bankruptcy ""reform"" act passed during the Bush 43 regime for that. The loan itself is from school. What school? Contact them and ask for help. They may have washed their hands of your case when they turned over your file to OSCEOLA. Then again, they may not. It's worth finding out.   Also, name and shame the school. Future applicants should be warned that they will do this.  What can I do to aid in my negotiations with this company? Don't negotiate on the phone. You've discovered that they won't honor such negotiations. Ask for written communications sent by postal mail. Keep copies of everything, including both sides of the canceled checks you use to make payments (during the six months and in the future). Keep making the payments you agreed to in the conversation six months ago. Do not, EVER, ignore a letter from them. Do not, EVER, skip going to court if they send you a summons to appear. They count on people doing this. They can get a default judgement if you don't show up. Then you're well and truly screwed. What do you want? You want the $4K fee removed. If you want something else, figure out  what it is. Here's what to do: Write them a polite letter explaining what you said here. Recount the conversation you had with their telephone agent where they said they would remove the $4K fee if you made payments.  Recount the later conversation. If possible give the dates of both conversations and the names of the both agents.   Explain the situation completely. Don't assume the recipient of your letter knows anything about your case. Include evidence that you made payments as agreed during the six months. If you were late or something, don't withhold that.  Ask them to remove the extra $4K from your account, and ask for whatever else you want. Send the letter to them with a return receipt requested, or even registered mail. That will prevent them from claiming they didn't get it. And it will show them you're serious. Write a cover letter admitting your default, saying you relied on their negotiation to set things straight, and saying you're dismayed they aren't sticking to their word. The cover letter should ask for help sorting this out. Send copies of the letter with the cover letter to: Be sure to mark your letter to OSCEOLA ""cc"" all these folks, so they know you are asking for help. It can't hurt to call your congressional representative's office and ask to whom you should send the letter, and then address it by name. This is called Constituent Service, and they take pride in it. If you send this letter with copies you're letting them know you intend to fight.  The collection agency may decide it's not worth the fight to get the $4K and decide to let it go.   Again, if they call to pressure you, say you'd rather communicate in writing, and that they are not to call you by telephone. Then hang up.  Should I hire a lawyer?  Yes, but only if you get a court summons or if you don't get anywhere with this. You can give the lawyer all this paperwork I've suggested here, and it will help her come up to speed on your case. This is the kind of stuff the lawyer would do for you at well over $100 per hour. Is bankruptcy really an option Certainly not, unfortunately. Never forget that student lenders and their collection agencies are dangerous and clever predators. You are their lawful prey. They look at you, lick their chops, and think, ""food."" Watch John Oliver's takedown of that industry.  https://www.youtube.com/watch?v=hxUAntt1z2c Good luck and stay safe." The second choice is a normal payment, just made early. This guards you against forgetting to make the payment later and incurring late payment fees -- which in this kind of loan are added to the balance and themselves accrue compounded interest. The first option is an extra payment, applied entirely to the principal. That lets you avoid years of accrued interest on that portion of the loan, and reduces the loan's actual cost. I think the extra payment is a better investment.