Federal Loans Repayment Strategies

[STAR3URY]

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Hi Guys,

General question: What is the best strategy to pay off federal loans?

I am currently a 5th Year student and started thinking about repaying my loans because this year I had to borrow a large amount of the unsubsidized stafford loan. Does anyone have any suggestions on the best way to pay it off? Is it best to pay jus the interest or is it best to put as much money as possible towards the loan. For example currently I have 10k worth of unsub loans @ 6.8% interest. Should i just pay off the outstanding interest which in my case is around $309 or should I pay off ~ $3,000 right now which is what I have saved up? I am really confused lol anyone have any advice on the best way to pay off loans?

 

[museabuse]

Hi Guys,

General question: What is the best strategy to pay off federal loans?

I am currently a 5th Year student and started thinking about repaying my loans because this year I had to borrow a large amount of the unsubsidized stafford loan. Does anyone have any suggestions on the best way to pay it off? Is it best to pay jus the interest or is it best to put as much money as possible towards the loan. For example currently I have 10k worth of unsub loans @ 6.8% interest. Should i just pay off the outstanding interest which in my case is around $309 or should I pay off ~ $3,000 right now which is what I have saved up? I am really confused lol anyone have any advice on the best way to pay off loans?

10k is alot? Lmfao

 

[mustang sally]

I wouldn't put all of my savings towards student loans personally. If it is no financial hardship to pay the interest, I would just pay that for now.

 

[Ackj]

10k is alot? Lmfao

Get a pharmacist job, pay that off in 2 months, no more debt. Hooray!

 

[aboveliquidice]

Get a pharmacist job, pay that off in 2 months, no more debt. Hooray!

For an RPh, paying 2k per month against your liabilities is more than doable.

Don't worry about the interest, as the loan will be gone in under 5 months anyway.

 

[schamj01]

You should feel good. With the amount of debt that I'll have at graduation (probably in the range of 190k), I'll be using one paycheck per month to pay mortgage/student loans, and the other to meet all my other financial needs. I'll be hoping to work some OT too, so I can put close to 3k a month toward my loans. Luckily, I live in the Midwest, where cost of living is rock bottom, and my family and I will probably live with my in-laws the first 6 months or so after I'm licensed while we look for a house.

 

[STAR3URY]

10k is alot? Lmfao

Before this year I had very little, and this year and next im borrowing like 24+K from unsubsidized thats why its a lot for me

 

[a runner]

Should i just pay off the outstanding interest which in my case is around $309 or should I pay off ~ $3,000 right now which is what I have saved up?

So, correct me if I'm wrong, but you are a 5th year (out of 6) student with 10k debt and will have ~$65k when you graduate, and you are wondering if you should make a payment right now while you are still in school?

No, you should not take that $3000 and pay it towards your loan. I wouldn't pay the $309 interest either. If you took out more than you needed for this year in loans, then that's another story, I suppose you could make a payment to basically cancel out some of the unsubsidized portion of your loan. Make sure you won't be needing it later (ie. next summer) before you give it back though. The fact is 2 years of interest on $309 or $3000 at 6.8% isn't much and I wouldn't worry about. Keep that money for your rainy day fund.

With as little debt as you will have ($65k), you should be able to pay it off quickly once you graduate, maybe over ~3 years or so.

 

[timbutt2]

I would pay off the principle first, as the interest is accrued off it. Less principle, less interest. Once your 6 month grace period ends, the interest is added to the principle anyway (capitalized interest) - and the 6.8% interest accrues off of the sum total. You won't have the option of selecting principle vs interest at that time.

 

[xiphoid2010]

I will echo what a few others have mentioned.

Your loan amount is small and well within manageable levels. Sure paying back the loan right now will prevent capitalization of the interest which could be thought of as a 6.8% return in investment, but you have no tax deduction to take advantage of.

The first half year after you graduate is the best time to pay back. You have the full RPh income but don't make enough to be excluded from student loan interest deduction. Paying as much back at that time, you get the 6.8% return + around 25 % tax deduction on the amount of interested you paid off. Too bad the tax deduction goes away after that.

Besides, everyone needs a bit of a raining day fund to prevent even small unforeseeable things from derailing the entire plan (e.g breaking an arm in a car accident, and now have to cough up co-pay, deductible and car repair money).

 

[Ackj]

One thing I would look into, in terms of paying now, see what rates your loans are. You have low debt now, so it's probably just Stafford loans, but a friend of mine was in a position where they had to take out some Grad Plus loans (which are terrible loans to have). This year, their financial situation was better, and they only needed some money from subsidized /unsubsidized loans, but didn't need the full amount offered. They took out a little more of those Stafford loans than they needed because of the lower interest rate, and used the $ to get rid of the Grad Plus loans.

I didn't do this firsthand, so I'm not sure of all the details and whatnot. Just thought it was a cool idea to share.

 

[confettiflyer]

One thing I would look into, in terms of paying now, see what rates your loans are. You have low debt now, so it's probably just Stafford loans, but a friend of mine was in a position where they had to take out some Grad Plus loans (which are terrible loans to have). .

Private loans are worse, at least grad plus loans qualify for a whole bevy of federal repayment/forgiveness programs.

 

[PharmaTope]

is this a troll post op?


you are asking about repayment strategies for a loan that is only 10,000 dollars? do you realize most people have 10x that debt? get out of here with that crap

 

[Ackj]

Private loans are worse, at least grad plus loans qualify for a whole bevy of federal repayment/forgiveness programs.

Very true. I meant the worst of the federal loans. At least if you die, the federal ones are forgiven. Private loans haunt you beyond the grave.

 

[xiphoid2010]

Very true. I meant the worst of the federal loans. At least if you die, the federal ones are forgiven. Private loans haunt you beyond the grave.

I think the law states loans and liability can not be pass on beyond death. So your family is not on the hook for your loans unless they co-signed it.

 

[SoylentGreen]

Pay the interest because it's tax deductible (up to a point, but with your little loan you won't reach that point).

 

[confettiflyer]

I think the law states loans and liability can not be pass on beyond death. So your family is not on the hook for your loans unless they co-signed it.

Correct, no co-sign = no liability.

Keep this in mind with any debt if you have a family member die, banks/businesses will still try to collect from family members, invoke federal debt collection laws and require mailed letters or tell them to piss off. 👍

 

[xiphoid2010]

Correct, no co-sign = no liability.

Keep this in mind with any debt if you have a family member die, banks/businesses will still try to collect from family members, invoke federal debt collection laws and require mailed letters or tell them to piss off. 👍

Indeed, many of them like to play the guilt card, making you feel responsible for your family member's debt. But the old saying goes "just say no". Anyway, there is a decent CNN article not long ago on it: http://money.cnn.com/2011/09/01/pf/debt_death/index.htm

 

[confettiflyer]

Indeed, many of them like to play the guilt card, making you feel responsible for your family member's debt. But the old saying goes "just say no". Anyway, there is a decent CNN article not long ago on it: http://money.cnn.com/2011/09/01/pf/debt_death/index.htm

Granted, if you become the executor to the estate and are a beneficiary, it's like they're taking money from you, even though it's technically the estate that's settling the debt.

But now we're just splittin' hairs here, if you're in this situation you should probably have an attorney anyway and not rely on SDN for legal advice.

 

[Trent Steele]

Hi Guys,

General question: What is the best strategy to pay off federal loans?

I am currently a 5th Year student and started thinking about repaying my loans because this year I had to borrow a large amount of the unsubsidized stafford loan. Does anyone have any suggestions on the best way to pay it off? Is it best to pay jus the interest or is it best to put as much money as possible towards the loan. For example currently I have 10k worth of unsub loans @ 6.8% interest. Should i just pay off the outstanding interest which in my case is around $309 or should I pay off ~ $3,000 right now which is what I have saved up? I am really confused lol anyone have any advice on the best way to pay off loans?

how about moving this joke of a post to the financial aid forum

 

[STAR3URY]

is this a troll post op?


you are asking about repayment strategies for a loan that is only 10,000 dollars? do you realize most people have 10x that debt? get out of here with that crap

10,000 currently up to this semester at end of this year its going to be 22,000 of just UNSUB....+ sub...i have more >45k...so if u have nothing smart to say please don't respond to this post.

 

[confettiflyer]

10,000 currently up to this semester at end of this year its going to be 22,000 of just UNSUB....+ sub...i have more >45k...so if u have nothing smart to say please don't respond to this post.

yeah that's still low, try close to $200k

i'm going to take any job after school at practically any salary so i'm probably going to help drive everyone else's salaries down too, wahooo!