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Paying interests on loans (please reply)
Started by JTubule1386
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Obviously ur not referring to subsidized loans, for unsubsidized/private loans, I'm paying interest and some principal bcos if u don't, the interest gets capitalized (added on principal) and now you pay interest on top of interest and b4 you know it, your original loan has had octuplets which have produced more octuplets!!! So if you can afford the interest, PAY IT OFF!!!
1) If you have the money to pay off the interest why would you take out the loan in the first place?
2) Keep in mind that the interest doesn't capitalize until repayment after graduation. In other words, interest is not compounding on interest until then. So think of the interest that is building up during school as in a separate column from the principal (the amount you actually take out). So obviously the loans from M1 will have the largest interest column by the end of school but there isn't much you can do about it and it doesn't count against you having that interest because it is not compounding.
3) I recommend you make a $2500 interest payment in your final semester so that you can take the full Student Loan Interest Deduction for your first year of income as a resident. It isn't much, but it helps.
2) Keep in mind that the interest doesn't capitalize until repayment after graduation. In other words, interest is not compounding on interest until then. So think of the interest that is building up during school as in a separate column from the principal (the amount you actually take out). So obviously the loans from M1 will have the largest interest column by the end of school but there isn't much you can do about it and it doesn't count against you having that interest because it is not compounding.
3) I recommend you make a $2500 interest payment in your final semester so that you can take the full Student Loan Interest Deduction for your first year of income as a resident. It isn't much, but it helps.
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So wait, interest doesn't capitalize on any of the direct loans? Sub, Unsub, or Plus?
I'm starting to worry about this too, because I had originally planned on paying off the interest as I went. But now I'm asking, as you mentioned, why take out loans at all if you can afford to pay the interest?
But let's say you have other funds coming in, not saved up, but coming in as a result of someone working. A spouse, for example. Does it make sense to pay the interest each month, or save up and pay it all at once at the end of the four years?
Finally, my personal situation is that my parents want to help me out a little. I was thinking of just asking them to help pay my interest, but it sounds like trying to avoid some loans in the first place and having them pay more up front might be better. I'm kind of confused because I realize that all of us have to take out loans - that's just the way it works. But for those of us who are lucky enough to have some other kind of support, what's the most effective and realistic way to deal with loans? My parents aren't loaded, so it's not like I could just say 'here's the bill for school, can you lend me this much and I'll pay you back?' I'll let them help me a little, but I'm not really sure what to ask for.
Thanks in advance.
I'm starting to worry about this too, because I had originally planned on paying off the interest as I went. But now I'm asking, as you mentioned, why take out loans at all if you can afford to pay the interest?
But let's say you have other funds coming in, not saved up, but coming in as a result of someone working. A spouse, for example. Does it make sense to pay the interest each month, or save up and pay it all at once at the end of the four years?
Finally, my personal situation is that my parents want to help me out a little. I was thinking of just asking them to help pay my interest, but it sounds like trying to avoid some loans in the first place and having them pay more up front might be better. I'm kind of confused because I realize that all of us have to take out loans - that's just the way it works. But for those of us who are lucky enough to have some other kind of support, what's the most effective and realistic way to deal with loans? My parents aren't loaded, so it's not like I could just say 'here's the bill for school, can you lend me this much and I'll pay you back?' I'll let them help me a little, but I'm not really sure what to ask for.
Thanks in advance.
All federal loans are in deferment. Private loans may have different terms. So yes there is no capitalization until repayment and it makes no difference when you pay the interest during deferment. Though if your spouse has some income you may want to pay $2500 per year to get the student loan interest deduction on top of the lifetime learning credit you get for your normal tuition.
duh...who wants to pay interest while in school? Unless u have extra money that you don't need or want. But sometimes it is hard to find subsidized loans, and I'm thinking whether a private loan is better than unsubsidized loan... Does anyone have any experience borrowing private loans?
Stafford unsubsidized loan interest doesn't capitalize until after you graduate. If you want to put money towards your unsubsidized Stafford interest, put it in an interest bearing account until just before the capitalization deadline.
But, you'd save money if you just take out less loans-- unless Obama starts mixing things up. Anyway, you can take out loans during M4 to pay for the interest on the other loans before it capitalizes, which would result in a marginal net gain.
But, you'd save money if you just take out less loans-- unless Obama starts mixing things up. Anyway, you can take out loans during M4 to pay for the interest on the other loans before it capitalizes, which would result in a marginal net gain.
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