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Just making sure I'm thinking correctly...

Discussion in 'Financial Aid' started by MJB, May 8, 2007.

  1. MJB

    MJB Senior Member Physician Moderator Emeritus 10+ Year Member

    Apr 12, 2005
    As I look over my options and try to decide who to use as my lender...I want to make sure I've got this straight...

    I've got to believe that having a couple points knocked off the interest rate is way better than say a 1 or 2% reduction in the principal balance...isn't it?
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  3. dpmd

    dpmd Relaxing Physician 10+ Year Member

    Sep 14, 2006
    I calculated this a few times, but somehow ended up with differing answers (I must have screwed something up the first time). I got a pretty big difference the second time I ran the numbers and the interest rate reduction won. This was of course, after I had selected the other option (1% rate reduction later versus 3.33% principal reduction sooner). Perhaps someone else can give their results to confirm.
  4. lvScRb23

    lvScRb23 2+ Year Member

    Apr 4, 2007
    It depends on what your plans are for paying off the loan. For example:

    If you have $60,000 on loans you get 30 years to pay the loans off.

    • If you take 30 years you'll save about $12,000 dollars with 1% off your interest rate (at 36 months)
    • If you get a great job and are able to pay off the loans in just 10 years, you'll only save about $2,000 with that interest rate reduction versus about $3,000 with a 3.33% principal reduction.

    Essentially, the earlier you pay off your loans - the more money you'll save with a principal reduction versus an interest reduction. Interest reductions save you money over time.
  5. MJB

    MJB Senior Member Physician Moderator Emeritus 10+ Year Member

    Apr 12, 2005

    That's what I was thinking...and the max principal reduction possible is like 2% if I remember correctly.

    Lots of options...and no clear cut favorite at this point.

    I don't like a 3% origination fee on the Grad Plus, that's for certain.

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