Loan consolidation: for better or worse

As I mentioned before, currently we are completely consumer-debt free. That means no credit card debt, no car payments, and definitely no pay day loans. However, we do have student loan debt for our 2nd B.A. (him) and a Master’s (her). Due to the economy taking a hit while both of us were still in school, our lending situation is a bit… complex.

Her: original lender stopped offering student loans one year before graduation, so went with a new lender. New lender sold loans to government upon graduation. Old loans were requested to be consolidated on August 8, 2009. Status: consolidation payments made, but not yet processed, so loans are in two places. Don’t even get me started.

Him: only had one lender to begin with, but half of the loans were sold to the government upon leaving school. The other half were requested to be consolidated in September 2009. The other half then moved servicers (oh, joy), and the original half was consolidated with the old servicer. Huh? So, loans are in two places, as well.

Honestly, at this point, the goal is to overpay the heck out of his, and pay off one of his loans within the year, and the 2nd loan next year, since we are still used to living like students. As for hers, that will take a while longer, but the hope is that the bulk will be paid off within a few years, as well, barring any unforeseen bumps. We’re using the Snowball method, meaning that, once the first loan is paid off, we’ll pay that amount toward the 2nd loan, and so on, until we’re paying a huge amount toward the last loan so it’s paid off quickly. This will save us a huge amount of interest. Student loans at 6.5% when we could get a mortgage for around 5% is awful.

So, how do you deal with debt? Pay off your credit card in full at the end of every month? Hide your head in the sand and hope it will disappear?

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