breaking down the LIBOR index rate

LIBOR (acronym, proper noun) - London InterBank Offered Rates, see also, "bane of my existence."

Having essentially knocked Wells Fargo out of the running as a lender to consolidate my private student loans (remember? they need me to apply with a cosigner, and right now, I don't have anyone to who can do that for me), I'm back to cuStudent Loans.

cuStudent Loans offers only a variable interest rate, as I mentioned in my first post on this topic. When they receive your application in full, they review your credit and offer you an interest rate between 4.25-6.75%. That base rate is then COMBINED with the LIBOR index rate to give you what you actually will pay every month. In the simplest terms (for me, I'm a finance dummy), LIBOR is the international market standard for short-term interest rates. Yep, that's it! It's published by the Wall Street Journal. (Here's a good article on LIBOR.)

Currently, LIBOR rates are at a historic low. We're talking .22% in September.

Say I had already consolidated with cu and they gave me an interest rate of 5%. For September, I would have paid 5.22%. Pretty amazing.

Base rate 5%
+
LIBOR index September .22%
=
Interest rate for September 5.22%

The downside to having this variable rate, that includes the LIBOR, is that rates haven't been and won't always be as low as they are right now. This math is also NOT PERFECT -- cuStudent Loans gives you a quarterly rate - so it would really be the average of 4 months you would pay. This is just an example.

You can see a full chart of LIBOR rates dating back to its inception in 1989 here.

The historically highest rate is 9.125%, reached in November 1990. (Please feel free to correct me if you catch something I missed!) By my findings, it has only reached 9% one other time - 9.063% in September 1989.

That's a long time ago. There are only a handful of times since 1989, that LIBOR has reached 8%, as well.

The trend, in my rudimentary analysis, seems to be the rates rise from 1-2% to 5-6% over a few years, then dip back down. Those highs of 8 & 9% and historic lows we're at now are rare.

Now, let's do the math again.

Base rate 5%
+
LIBOR hypothetic rate 8%
=
I pay 13%

That's a big number. Sadly enough, though, when I broke down the numbers of what I'll owe Sallie Mae over the next 17 years, even at 13-14% during higher interest rate times, I'll be paying less than what I would through Sallie Mae. But what if shit hits the fan, and I hit cu's interest rate ceiling of 18%? That means my combined base rate + LIBOR index can never be above 18%. I will never pay more than that.

Well, my payments would be $650. That's $90 more than I will pay with Sallie Mae at the peak of my repayments. That's bad. ON the other hand, I'm scheduled to pay Sallie Mae $465 for six years. Judging by the LIBOR trend, I 1) will most likely never hit the ceiling and 2) if I ever did, it's hugely unlikely it would be sustained for any amount of time.

In the end, FOR ME, the math comes out on the side of consolidating, even with a variable interest rate.

Total amount repaid to Sallie Mae over the next 17 years (not including the 3 years I've already been paying): $93,500

Total estimated amount repaid with cu consolidation (my math): $72,000.

I got there by assuming a payment of $400/month over the 15 year repayment term with cu. That's more than I will pay with interest rates as low as they are right now and probably less than I will pay at some points in the next 15 years. In the end, maybe I'll only save $10,000 and end up having to pay $13,500 because interest rates hit higher marks. Or, maybe I'll get lucky and save even more than I estimate.

For me, the gap of $21,500 of potential savings is worth the risk.

**Please feel free to leave me tips or advice or correct any math mistakes you see. I'm open to constructive criticism and learning more about these topics!

//quote on top is courtesy of Mel at thethingtheymade.blogspot.com. Thank you for being a friend.

falling for fall

I went apple picking this weekend. Zan, his brother and sister-in-law and I went out to Stribling Orchard in Markham, Virginia. Stribling is a 200 year old orchard, situated in Virginia wine country, near the Blue Ridge Mountains. You can't ask for a more stunning view. It's the only orchard I've ever been to, but I'd still put money on them having the best treats. We overindulged on hot cider, apple cider donuts, apple cake and, of course, apple pie. I was tipsy and silly off sugar, before we ever had a drink. The apples were pretty picked over, but we still managed to bring home too many.

We followed the orchard visit with a trip to Naked Mountain Winery, less than two miles down the road. Besides enjoying the fun name and their "drink naked" slogan, we also loved the wine. Their tasting is $7/person for six wines or $12/person for 11. We opted for the classic tasting. Each of us had a different favorite - mine is their Viognier. We all enjoyed the Cab Franc so we got a bottle of it and a charcuterie and cheese plate to enjoy on their open-air patio.

I felt so alive at the orchard, reaching and jumping for apples just a little too far out of our reach, and at the winery, laughing with people who have quickly become close and special to me. It was a perfect fall day - the sun shining, making the crisp air feel almost warm standing in just the right place, the company warming me to my core.

Fall has never been my favorite season - that's specially saved for the sunshine and sundresses of summer, but this year, there's something special about it. The leaves are taking their time changing, making sure we can't miss the beauty of it, and the weather is calm, holding back, providing us a few more weekends to retreat into the sensational colors, flavors, sounds and smells of the season.

How are you celebrating fall?

do you understand your student loans? (private consolidation pt 2)

My loans are a hot mess.

The last week I've been touting my responsibility, how I've never missed a loan payment, patting myself on the back for learning about private student loan consolidation and working to go that route - all. for. nothing.

Did I mention my loans are a hot mess?

Let me explain.

After my last post on looking into private student loan consolidation, I received a lot of feedback. Everyone said the same thing: do not do anything with a variable interest rate. I did my research, too. Major articles on private student loan consolidation: Forbes, Student Loan Consolidator & Faith & Finance.

I quickly discovered how precious few lenders take on private loan consolidation these days. I came up with three: cuStudent Loans, the one that conditionally approved me to start with; Wells Fargo & SunTrust - both of which offer fixed and variable plans.

I applied for both Wells Fargo & SunTrust. FYI - both are very open about wanting borrowers to have cosigners. Even if your credit is good, you may not get approved. And that is exactly what happened to me. SunTrust denied me outright (zinggg outch!), and Wells Fargo asked me to submit with a cosigner. The depressing truth of it is... I don't have anyone to ask to cosign with me.

Y'all, when I say I come from little, I mean I come from nothing. I don't have a single family member with credit-worthiness to cosign for a loan for me. After dwelling in bitter rage, hating all the privileged people with families who can help them and throwing myself a giant, massive, ice-cream fueled pity-party, I got over myself and kept on researching. I'm not the type to give up.

And I'm glad I didn't.

(I promise, I'm getting back to that point about my loans being a hot mess!)

Today I logged into my Sallie Mae account and did some fishing. I mean some deep water, middle of the ocean, delved into that website and dug up the biggest, grossest stuff I could find. And it really seriously made me about as nauseated as catching a real fish actually would! Here's the low down...

I'm currently paying $390/month for my private student loans. I repeat, that does not include my federal loans. I thought that was already insane enough! When applying and researching consolidation, I was basing all my math and decision-making on that number. WRONG! I didn't understand my repayment terms. In reality, I owe another 17 payments of $390. After that, are you sitting down? I will owe 71 payments - SIX YEARS - of $564. Then I get a wee little break for five years and pay the low low price of $445 all before trailing off for another five years, paying $310.

And did I mention they're all at 9.75%?!

Before you all judge me and call me crazy for ever taking out these loans, remember when I said no one in my family has any credit-worthiness? I'm a textbook example of a first-generation student with no know-how or access to information about higher education financial aid. I had no clue what I was doing. I fought and clawed my way through college, financially. I worked 2-3 jobs at a time every semester. I thought I was doing the right thing and, at the time, was proud that I could get approved for enough money to stay in school. How's that for the pull yourself up by the boostraps American Dream?!

So with all this information, I'm reconsidering the only consolidation option currently available to me - cuStudent Loans, where I'd have that dreaded variable interest rate. The next step in this process is reviewing, analyzing and understanding the LIBOR index rate and how it would dictate my payments. If it hits historical highs in the 15 years that I'd be in repayment, would my payments be above the $565 Sallie Mae has me paying for six years? Stay tuned...

Unless, of course, anyone wants to cosign on a $50,000 loan for me?! ...That's what I thought :)

Protip: print out, read and know your repayment terms on your loans.

my least favorite things

[caption id="attachment_271" align="aligncenter" width="538"] but this guy is my favorite thing[/caption]

I embrace positivity. I'm all hippie-dippie and believe that a positive, sense of humor-infused outlook on life will steer the trajectory of events the way you'd like them to go, and when it doesn't, you'll be able to laugh at it. Today is one of those, "you'll be able to laugh at it" kind of days. Like nothing so serious is wrong that I can't see the ridiculousness in my hurt feelings and pity-party bummed out'ness. My problems are relatively minor. So when I joked with my roommate and old friend, Matt, over a picnic lunch today (bomb), about wanting to ditch the rainbows and sunshine and be all Debbie Downer, he jumped on board. He asked me a dozen of my least favorite things, until I laughed. He took it to the extreme, letting me see that all that negativity isn't me... but it sure can be fun.

my least favorite DC

quadrant Virginia.

cliche black, blue, gray. repeat.

profession consultant. WHAT DO YOU DO AND FOR WHOM DO YOU DO IT, FOR GODS SAKE?

restaurant I feel like the politically correct answer is, "The Chick-fil-a food truck."

bar Smith Commons... be careful where you step, the floor is cluttered with douchebagsss (oh snap, burn, sizzle!)!

traffic circle I have yet to navigate one without getting hopelessly lost.

twitter trend  ALL OF THE THINGS

obsession novelty, boutiquey Mexican restaurants. The burrito should not be a high class, privileged affair.

bus G2. If the gaps between buses were any longer, it would stop running.

politician John Boehner would filibuster a poker game if he weren't winning.

Beantown, frosting included

I visited my best and oldest friend, Mel, this weekend in Boston. In case there's any question of authenticity on this blog, I bussed up there - we're talking $80 roundtrip, 10 hours both way, sleeping with my head inside my sweatshirt because it was so cold, cost-saving measures. But it was worth it.

She and her boyfriend recently got a place together. Right after they signed the lease, they celebrated her 26th birthday. When she offhandedly invited me to come celebrate both at her new apartment, I surprised us both, I think, by saying yes. The last time I went to Boston was almost two years ago (why is time moving at WARPED SPEED?!). The morning I got there (at 5:00am!) off my overnight bus, she laughed as she hugged me and introduced me to the guy she'd been talking to for a few weeks and gone on her first date with the night before. Fast forward to this weekend, and I finally had the chance to get to know that guy.

With us, it's so easy to be reunited.  There's no pomp and rarely are there extravagant plans; we're at our best in PJs. We were at our best a lot this weekend. We baked, shopped, baked some more and talked our way through the two days we had together. As Mel said, "I'm glad this isn't a one time thing." That's exactly how I felt about the chocolate espresso cake we made from scratch, frosting included.

your face is a variable APR rate, Sallie Mae

I'm considering consolidating my private student loans. I have a substantial amount of student debt, and sadly I don't have a graduate degree to back it up. Nope, this is all the work of obtaining the dream undergraduate experience at the University of Nebraska-Lincoln. I wanted out of Georgia that bad. Anywho, I've been steeped in debt data all morning.

It all started when Credit Karma sent me a friendly little email update, "Hey! Idiot - you'll pay a lot less if you consolidate your loans!" Loan. Consolidation. Why have I never thought about this before?! I thought to myself. I have, actually, but I looked at it when I graduated in 2008. I didn't have the credit, the means or the know-how to even attempt the daunting task of finding the proverbial needle in the haystick within the endless amounts of garbage most of these lenders spew.

But I like Credit Karma. It has become a trusty friend, helping me build my credit, repair damage I (unknowingly) did in college and work my way into the grand 'ole "good" credit category. For private loan consolidation, they recommend cuGrad. I recognize they're probably partners, or cuGrad is a sponsor or has otherwise financially incentivized Credit Karma to get me to click their link. I did it anyway, thinking it's a starting point, right?

Several hours and multiple lender websites later, I'm just totally and utterly confused.

cuGrad would take my 20 year repayment plan with the devil, er, Sallie Mae, and reduce it to 15. On the surface, it looks as though I would pay less. That all sounds great, and I got so excited I filled out the preliminary application (ding! the sound of my Credit Karma account, warning me that too many inquiries is a bad thing! But they told me to! Sigh.). I got conditionally approved, which made me proud that my credit has come so far since graduation. Then I read the fine print. You gotta just always read the fine print! I made stupid financial mistakes in college, and I blame that on a lack of access to information on how all that loan stuff works. But now? Now I'm 27, and there are no excuses. It's time to just read the fine print.

It wasn't actually all that fine, though - in pretty bold typeface, they spell out that they don't do fixed interest rates. They offer variable APR rates or some yata yata. In essence, I understand this to mean my monthly payments will never be consistent, never exactly the same, down to the $.02 I know I owe Sallie Mae every month. They'll be dependent upon the market. I know in the financial investment world (and in life...) they say when you're young you can afford to take risks, but this is my budget we're talking about messing with - my beloved budget!

So how much does a variable interest rate swing? By how much is it possible for my payments to change month by month? Am I looking at $10 here or there or, like, a budget demolishing $100? (Yo, I'm poor. Re: title of the blog.)

There are, of course, other options that can offer fixed rates. Most of them would involve working with a major bank - like Wells Fargo. I'd look more seriously into that if Wells Fargo weren't the devil's right hand man. I hate Wells Fargo. This cuGrad place is a not-for-profit thingy mabobber. That sounds more my speed.

Am I being stupid here? What's the right path? Have you looked into private loan consolidation? And for the love of all that is neither Sallie Mae nor Wells Fargo, why aren't there more easy-to-understand resources on these issues?! It's 2012, and nobody can afford college. Journalists, lenders, ivory towers - get your act together and put. out. information. We'd all be more willing to sell you our souls if we knew what we were getting in return.

How I felt when I booked tickets to Mexico

I took a deep breath - who am I kidding? I didn't even breathe - and I, without another thought, hit the "take me far away" button on Kayak and BAM, I'm going to Mexico next February! This trip has been a long time coming. I feel like I've been opining about all things Latin and Latin American and Mexican for SOME TIME now. I've drug Zander into my daydreams of Mayan ruins and beautiful Caribbean shorelines, too. He hasn't been quite as gung-ho as I am (I don't fault him, it'd be hard to match my manic level of pumped!), but he excitedly jumped on board when, due to an AirTran mess-up, I received a complimentary round trip voucher to any of their destinations.

For months, we've waged war over whether to travel to Mexico (me, obvi!) or Costa Rica (him, also a worthy destination...... I suppose!), but in the end, AirTran flies to Cancun, which is only a two-hour bus ride from Tulum, my current dream Mexican adventure destination and thus, due to a glitch, Mexico it is!

I have 4.5 months to figure out how to budget out the cost of the rest of the trip (hotels aren't cheap, even in kinda-sorta-off-the-beaten-path Tulum!), and I've already broken out my pen, pad, calculator and budget notebook. Zan says he doesn't travel much because ultimately he'll end up putting more on his credit cards while he's trying to pay them off. Clearly, this boy hasn't traveled with me! My goal is for us both to have anything we pre-pay for this trip paid off by the time we leave + a guesstimated amount of spending money saved. Eeeeek! Think we can do it?! I'm sure to chart our progress on that uphill battle right here.

And with that, well, I'm back :)