Loan Repayment Question

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EyeTeeFarmer

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Hey, I was wondering if anyone knew the answer to this question regarding Federal Student Loans.

Is there a payment plan shorter than 10 years?

My plan is to try and pay off my balance in 5 years or less (around 140k). If the answer above is yes, is there a net difference in what is coming out of my pocket between selecting 5 years and paying it off, or selecting 10 years and still paying it off in 5 years?

I'm thinking yes, since when we determine a payment plan, the interest is calculated ahead like with a house, but I honestly have no clue.

Thanks for any input.

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Depends on the lender, but I'm sure there are shorter than 10-year plans. See if you can contact your lender. As you mentioned, you can always use a 10-year plan and make extra payments as your situation permits and allow you to pay it off as early as 5-years. There's practically no difference, other than that you have to manually make the extra payments. Technically, there will be a difference, as an auto-deduction will make payments on-time (regularly) better than you can.

If you make extra payments every 6 months, then the difference is that you'll have 6 months of interest on the money owed to pay vs than if you had them auto-deducted every month, in which case after 6 months, you'd only have paid 6 months of interest on the amount owed after the 1st month's extra payment, then 5 months of interest on the amount owed after the 2nd month's extra payment, and so on. Honestly, most people feel this difference is marginal. I feel it can add up though, which is why auto payments always better if you can predictably afford them. If your financial situation is not as stable, the 10-year plan may give you more flexibility, since you can just pay extra as your situation permits and on months you are tighter for money, you can forego the extra payment or pay less.
 
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I did a refi with first republic. Great, low rate and easy process. Although, you have to be in a city that has a physical first republic location and open a checking account.

Great service so far and saving a lot of interest. ;) I think they require credit score above 720 to qualify.
 
I'm down to 35K in loans and don't qualify for firstrepublic :( Wish I knew about it sooner, I've been paying my loans off extremely aggressively at 6.8% interest.
 
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Check out https://www.firstrepublic.com/fundyourdreams

If you qualify you can get a 1.95% fixed rate 5-year student loan refinance. This is the best rate out there. If you are currently paying 6.8% the lower interest will make a huge difference.

East Coast, Florida, or NE. Sad day for me. Oh well. But thanks for putting these ideas in my head. I never even thought about a refinance. Maybe I'll try one of those if I can find one where I live, with no refinance fees and non-variable APR.
 
East Coast, Florida, or NE. Sad day for me. Oh well. But thanks for putting these ideas in my head. I never even thought about a refinance. Maybe I'll try one of those if I can find one where I live, with no refinance fees and non-variable APR.

Did you call a representative? I don't live in those areas and they were willing to set up a distance account for me.
 
What if you have never had a credit card or financed anything? Isn't "no credit score" the same thing as "really bad credit score?"
 
What if you have never had a credit card or financed anything? Isn't "no credit score" the same thing as "really bad credit score?"
Then you should start right away, as credit scores take time to be built up. You need a credit history. The best lenders will only lend to those with good credit scores.
 
Then you should start right away, as credit scores take time to be built up. You need a credit history. The best lenders will only lend to those with good credit scores.

Thanks, so do I actually need to spend money on the credit card that I get? Or can I get a card, never use it, and still build up good credit? I just have never really had a reason to spend so much money on stuff that I need a credit card.....
 
Thanks, so do I actually need to spend money on the credit card that I get? Or can I get a card, never use it, and still build up good credit? I just have never really had a reason to spend so much money on stuff that I need a credit card.....
You do need to use it, because inactive accounts get closed, but you only need to use the card once in a while. Length of credit history is important - the longer your history, the better your credit score, which is why credit cards are important to have as soon as possible, regardless of your spending needs. Even if you spend only $5 a month, put it on your card so that you have history of using a credit line.

It generally benefits you to put payments on credit cards because you get perks like points that you can redeem for various stuff, depending on the reward program. Cashback is always nice.
I recommend Sallie Mae Barclaycard...5% cashback on groceries, gas, and books (including Amazon purchases), 1% on others. Doesn't sound like much, but it adds up over time.

Also, you should look into what affects your credit score, so you have a plan. Having several cards (at least 2 or 3) would be a good idea in the long term, for example, because you'll have a maximum credit limit, even though intitially, that may look bad if you open them all at once. Keep your spending for each card well-below its credit limit. Set up auto-payments from your bank accounts so you never miss a payment and have a derogatory remark on your report. Even a single missed payment is huge.
Check out here: http://www.nerdwallet.com/blog/finance/how-to-build-credit/
 
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You do need to use it, because inactive accounts get closed, but you only need to use the card once in a while. Length of credit history is important - the longer your history, the better your credit score, which is why credit cards are important to have as soon as possible, regardless of your spending needs. Even if you spend only $5 a month, put it on your card so that you have history of using a credit line.

It generally benefits you to put payments on credit cards because you get perks like points that you can redeem for various stuff, depending on the reward program. Cashback is always nice.
I recommend Sallie Mae Barclaycard...5% cashback on groceries, gas, and books (including Amazon purchases), 1% on others. Doesn't sound like much, but it adds up over time.

Also, you should look into what affects your credit score, so you have a plan. Having several cards (at least 2 or 3) would be a good idea in the long term, for example, because you'll have a maximum credit limit, even though intitially, that may look bad if you open them all at once. Keep your spending for each card well-below its credit limit. Set up auto-payments from your bank accounts so you never miss a payment and have a derogatory remark on your report. Even a single missed payment is huge.
Check out here: http://www.nerdwallet.com/blog/finance/how-to-build-credit/

Thanks, I'll check into it! I definitely want to be able to qualify to have my loans refinanced by First Republic when I graduate in 2020, especially since I'll probably be looking at having $200k+ to pay back.
 
I tried to seek approval and they said I need to live near one of their branches. Who did you speak with that let you set up a distant account? Thanks. Currently preapproved with LendKey at 3.25% but 1.95% looks real nice
 
What other refinance options are there for student loans that you guys have heard? I got some info from SoFi and was looking into their rates. And as I understand, the main downside of these plans is no "government help" if you can't afford payments down the road, right? Am I missing anything else like a negative impact on credit or something?
 
What other refinance options are there for student loans that you guys have heard? I got some info from SoFi and was looking into their rates. And as I understand, the main downside of these plans is no "government help" if you can't afford payments down the road, right? Am I missing anything else like a negative impact on credit or something?

The only real downside is that you lose the option of IBR or going into forbearance.

If you don't refinance your loans I'm pretty sure with the federal loans the interest rate stays the same no matter what payment plan you choose. So choosing a 10 year plan and paying it off in 10 years would be the exact same thing as choosing a 20 year plan and paying it off in 10 years.

I'm pretty sure SoFi offers a 5 year plan and maybe even a 3 year plan. The difference here is that with the shorter plan your interest rate drops. So not only are you paying less interest because you are paying off the loan faster but the interest rate itself is also less.

To refinance you will need a strong credit score and most likely need to have been employed for at least a few months with proof of income. You have plenty of time to build up a credit score... I only got my first credit card at the beginning of this school year and my credit score is ~750 (though I had previously went into repayment on my undergrad loans for a brief period which also contributed to this score).

And regarding your last question... it's a complicated question but refinancing shouldn't really hurt your credit score. Even if it does the entire benefit of having a good credit score is to get lower interest rates so if you are not taking advantage of this then there really is no point in having the score to begin with.

Just pay off your credit card each month and try to never go beyond ~30% of your credit limit.
 
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