Anyone know anything about student loans?

[KatieNK]

I have about $55k in federal student loans that are currently on deferment due to no income. But I just got a new part-time job and want to start paying them back. I called to learn more about the payment options and they have one that is income-based which I will do. Your spouses income is counted, too, but between us we make $35k now so my monthly payment will be $165. But with federal loans you do not have to pay longer than 25 years (I think from starting a new plan, so for me I have until 2035). So with my monthly payment of $165 over the course of 25 years is about $22k, if I recall correctly from the amortization schedule. You do have to report your income annually but I doubt we will ever make much more than that and anyone, let's just assume that for my following question. Let's say I come into a windfall of $20k (or am able to save that) and am able to pay that balance off. Will I then be considered done or will they apply that to my $55k balance and I just continue paying until my 25 years is up? When I asked the direct loan lady she said that I would be completely paid off then but I find that hard to believe. In fact I am so skeptical that if I did ever have the balance in savings that I would want to hang onto it and continue paying my $165/month for 25 years so that I didn't end up paying more. I know I sound horrible for not wanting to pay it all back but I have no other excuse than I just don't feel like my degrees were worth that much and that I don't want to pay it. Obviously I will pay whatever they make me pay but I don't know anyone who would not choose to pay $24k over the $55k!

[bjl584]

Focus on Principal Balance. That is what you owe on your loans. I think what you are referring to is the interest that accrues over time should you continue to make the minumim payment each month. From the numbers you gave you will pay about $31K in interest over a 25 year period. You are only obligated to pay this amount if you chose to make the minimum payment for the life of the loan. You can pay off the Principal Balance at any time if you have the means and the loan will be paid off and done.

So, in your example, if you come into $20K a few years from now and that amount happens to be what you owe on your loans, you can pay them off right then and there and be done with them. There will be no more interest due and no penalties of any kind.

[KatieNK]

Thanks! The different amoritization schedules are so confusing! I swear to you, one plan looked like I would end up paying over $1,000,000 over 25 years!!

[dczech09]

Your math is incorrect. Your payment is $165. If you pay that for one year, that is a total of $1,980. Multiply that by 25 years, and the total is $49,500. Where did you get $22,000? That must be the total INTEREST you will pay. There are two components to a debt payment: interest and principle. Basedon your $165 per month, you will pay a total of $49,500. This means that you will be forgiven $5,500 plus interest. Here is a link:

IBRinfo :: What are these programs?

You took out $55,000 in student loans. That means that you owe $55,000 back plus interest. It does not matter if you do not think your degree was worth it. The fact is you borrowed that money and promised to pay it back with interest. With this program, you will pay only $49,500 so you are getting a bargain. Guess how much of my loans I have to pay back? All of it plus interest. Do I care? Not really, because I strongly believe that a man pays back what he owes.

The Federal government is subsidizing your interest and paying off $5,500 of your principle. Do you know who pays that which you are being forgiven? Tax payers- yourself included. So, while you may think that you are saving a lot of money, the taxes you pay are financing this and then some. Pretty faulty tax system if you ask me; we're basically giving our money to a middleman who then pays it to himself over the span of time.