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    Paying off Student Loans

    Hello everyone,

    I'm am entering repayment on my loans and am unsure of how to approach doing so. Please help!
    The total debt is about 60K.

    All of my loans are federal loans..
    #1 $8,988 Unsubsidized at 2.3% Interest
    #2 $9,294 Unsubsidized at 6.8% Interest
    #3 $40,700 Subsidized at 6.8% Interest

    I also work for a non-profit organization so I believe I would qualify for the Public Service Loan Forgiveness program that forgives student loan debt after 10 years of repayment, but the thing is that I do not know how long I will stay with the organization and so may not make it for the 10 year duration so dragging it out may only increase the interest owed.

    My other option would be to pay off the loans ASAP. If I chose this route, would you suggest consolidating the loans? Is it allowed to pay off the subsidized loans or at least allocate more $ towards that loan than the unsubsidized loans? I also qualify for the $2,500 tax deduction on the loans, which would be another reason to extend my loans.

    Any information/resources you can give would be helpful. Thank you!

    #2
    First things first, you need to double and triple check that you qualify for loan forgiveness. Many of these programs require you to send in an application years before and then pester them constantly. My husband uses the APLE (Assumption Program of Loans for Education) and it is a pain. Before you make any loan payment decisions, check that you qualify for loan forgiveness. Additionally, there are some programs that provide a yearly benefit. You should look into these.

    Comment


      #3
      If it were me, I wouldn't consolidate. Yes, you would have one payment instead of three, but they can round the interest up (perhaps only a "modest" 0.25%, but still).

      I just paid off my student loans (6 of them, each one between $5,000 and $9,000), and I did not consolidate. And, the company mine were through had an incentive that if you signed up for automatic monthly payments, the interest rate of each would drop by 0.25%. And I think it was more fun to get 6 "account has been paid in full" emails each time one was paid off.

      I would pay off the higher interest ones first. If it were me, I would throw all the money I could at the $9,294 balance one, since it would be paid off faster than the $40,700 one. Pay minimums on the low interest loan and the $40,700, and put any extra you can on the $9,294.

      In my experience, I could put more money toward any of my loans, and I had a few subsidized and a few unsubsidized (all were Staffords). The only benefit to not putting extra money on your subsidized would be during your grace period (6 months after graduation), since you are not responsible for the interest until the actual repayment period begins.

      I personally don't feel the tax advantage of student loan interest is better than just paying them off if you can is worth it at all. And if you can pay the loans off in less than 10 years, I don't think it'd be worth it to wait that long even if you do qualify for forgiveness.

      Comment


        #4
        Originally posted by bdoubleu View Post
        If it were me, I wouldn't consolidate. Yes, you would have one payment instead of three, but they can round the interest up (perhaps only a "modest" 0.25%, but still).

        I just paid off my student loans (6 of them, each one between $5,000 and $9,000), and I did not consolidate. And, the company mine were through had an incentive that if you signed up for automatic monthly payments, the interest rate of each would drop by 0.25%. And I think it was more fun to get 6 "account has been paid in full" emails each time one was paid off.

        I would pay off the higher interest ones first. If it were me, I would throw all the money I could at the $9,294 balance one, since it would be paid off faster than the $40,700 one. Pay minimums on the low interest loan and the $40,700, and put any extra you can on the $9,294.

        In my experience, I could put more money toward any of my loans, and I had a few subsidized and a few unsubsidized (all were Staffords). The only benefit to not putting extra money on your subsidized would be during your grace period (6 months after graduation), since you are not responsible for the interest until the actual repayment period begins.

        I personally don't feel the tax advantage of student loan interest is better than just paying them off if you can is worth it at all. And if you can pay the loans off in less than 10 years, I don't think it'd be worth it to wait that long even if you do qualify for forgiveness.
        Great answer.

        - Dont consolidate (normally the rate is higher)
        - Pay towards the highest interest rate loan
        - Once that loan is paid off, apply that money towards the next

        Comment


          #5
          Thank you!

          Are there any advantage of paying off the 9K loan before the 40K loan since they both accumulate interest at the same rate other than just knowing that you have knocked off the loan?

          Comment


            #6
            I'd knock off the 9K one first then just so you can put more towards the 40K one.
            You'll still take the same amount of time really, but at least you wont have to worry about both every month.

            Comment


              #7
              Best Insurance policy life, car, travel, health- Policy Mantra

              First things first, you need to double and triple check that you qualify for loan forgiveness. Many of these programs require you to send in an application years before and then pester them constantly. My husband uses the APLE (Assumption Program of Loans for Education) and it is a pain. Before you make any loan payment decisions, check that you qualify for loan forgiveness. Additionally, there are some programs that provide a yearly benefit. You should look into these.

              Comment


                #8
                You have over $30K in federal student loan debt, so I would recommend consolidating & signing up for the income based repayment plan.

                Take a look at studentaid.edu.gov site to see all the repayment options that are open to the specifics of your loans.

                What are the benefits of IBR?

                PAY AS YOU EARN Under IBR, your monthly payment amount will be less than the amount you would be required to pay under a 10-year standard repayment plan, and may be less than under other repayment plans. Although lower monthly payments may be of great benefit to a borrower, these lower payments may result in a longer repayment period and additional accrued interest.

                INTEREST PAYMENT BENEFIT If your monthly IBR payment amount does not cover the interest that accrues on your loans each month, the government will pay your unpaid accrued interest on your Subsidized Stafford Loans (either Direct Loan or FFEL) for up to three consecutive years from the date you began repaying your loans under IBR.

                25-YEAR CANCELLATION If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be canceled.

                10-YEAR PUBLIC SERVICE LOAN FORGIVENESS If you work in public service, on-time, full monthly payments you make under IBR (or certain other repayment plans) while employed full-time in a public service job will count toward the 120 monthly payments that are required to receive loan forgiveness through the Public Service Loan Forgiveness Program. Through this program, you may be eligible to have the remaining balance of your Direct Loans forgiven after you have made the 120 qualifying as described above. The Public Service Loan Forgiveness Program is available only for Direct Loans. If you have FFEL loans, you may be eligible to consolidate them into the Direct Loan Program to take advantage of the Public Service Loan Forgiveness Program. However, only the on-time, full monthly payments made under IBR or certain other repayment plans while you are a Direct Loan borrower will count toward the required 120 monthly payments.

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