Paying Down Undergrad Loans with leftover Grad Loans

Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
chebbyshev
Posts: 21
Joined: Thu Oct 21, 2010 4:36 pm

Paying Down Undergrad Loans with leftover Grad Loans

Postby chebbyshev » Tue May 10, 2011 10:46 pm

The subject basically says it all. I have about 30k of loans from undergrad (of which about 23k are unsubsidized and slowly growing) and I'm wondering if you think it would be worth it to use any leftover grad loan money to pay down these undergrad loans.

Some important background info on my financial situation: I'm going to be paying sticker (out of state) at UCLA, and will probably have to take out an additional 20k per year for living expenses in grad student loans. I am applying for a lot of outside scholarships and think that my family will be supporting a small portion of my living expenses (no more than 5k annually), so I may have some leftover money from the 20k in living expense loans that could be used to pay down the undergrad loans.

Why would I do this? I remember reading somewhere that you can give your credit score a huge boost by paying off student loans or even a small portion of them while you are still in school. Can anyone confirm this? Also, I might be able to take advantage of a difference in interest rates between my undergrad and grad loans. Does anyone know what graduate loan interest rates are? I think my undergrad stafford loans are at 6.8%.

Thanks all.

bdubs
Posts: 3729
Joined: Sat Feb 06, 2010 2:23 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby bdubs » Tue May 10, 2011 10:51 pm

Take out fewer grad school loans. The rate on grad plus is higher (7.9%) than the undergrad equivalent.

Also, even if repaying your undergrad loans with additional loans benefited your credit score (which I highly doubt since the loans are of a similar credit class), why does it matter? Unless you are buying a house or a car your credit score is irrelevant.

chebbyshev
Posts: 21
Joined: Thu Oct 21, 2010 4:36 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby chebbyshev » Tue May 10, 2011 10:56 pm

Good point on the credit score, and yikes on the increase in interest rate for grad loans. Here we go 200k + in loan debt....

User avatar
northwood
Posts: 4872
Joined: Fri May 14, 2010 7:29 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby northwood » Tue May 10, 2011 11:00 pm

dont pay for a loan with a loan.

If you can pay the interest while you are in school. If not, lower your monthly living expenses as much as possible. But make sure since you cant work as a 1L that you have enough money to live on before you return the loans.

sarahlawg
Posts: 1001
Joined: Fri Jun 25, 2010 5:59 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby sarahlawg » Wed May 11, 2011 6:08 pm

northwood wrote:dont pay for a loan with a loan.

If you can pay the interest while you are in school. If not, lower your monthly living expenses as much as possible. But make sure since you cant work as a 1L that you have enough money to live on before you return the loans.


I would and definitely have paid a loan with a loan that had lower interest. No regrets.
The problem here is that the gradplus loan has higher interest.

cowgirl_bebop
Posts: 901
Joined: Sun Aug 15, 2010 2:32 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby cowgirl_bebop » Fri May 13, 2011 7:44 pm

sarahlawg wrote:
northwood wrote:dont pay for a loan with a loan.

If you can pay the interest while you are in school. If not, lower your monthly living expenses as much as possible. But make sure since you cant work as a 1L that you have enough money to live on before you return the loans.


I would and definitely have paid a loan with a loan that had lower interest. No regrets.
The problem here is that the gradplus loan has higher interest.


This.

I plan on taking out as much as I can without using Grad Plus loans to pay off some private loans that I have in undergrad. My amount of debt may be the same, but the difference in interest rate will make a HUGE difference.

User avatar
northwood
Posts: 4872
Joined: Fri May 14, 2010 7:29 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby northwood » Fri May 13, 2011 8:13 pm

Taking a loan witha lower interest rate and using it to pay off higher interest loans is a good idea. However, if you need to take out a higher interest rate- then dont.

Your graduate plus loan has an interest rate of 7.8% Your undergrad loans generally have a lower interest rate. Thats why I said not to take out the loan to pay off the loan.

If you are in the position to do so- pay off your smallest loans first- then take that monthly payment and use it to pay off your next larger loan. Then continue on until you are debt free. The reason behind this is that instead of spending that money on other things, once you pay of the smaller loan- and put that money towards the principle of the second smallest loan( that you use to pay for the loan) and keeping the rest of your monthly budget the same will help you pay off the loans quicker. Once you get to the final loan- you are paying more towards the principle of the loan- and know how to live off the rest of the montly budget. If you run itno an unexpected cost- no need to fret- just accomodate that and go as planned.

However, I realize many people arent in this position to do it. Just make sure to do your homework firsrt.

User avatar
MTal
Posts: 854
Joined: Tue Dec 11, 2007 6:47 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby MTal » Fri May 13, 2011 8:26 pm

Why are you borrowing 200k? Are you insane?

Tsispilos
Posts: 125
Joined: Sun Oct 12, 2008 3:37 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby Tsispilos » Sat May 14, 2011 12:22 am

MTal wrote:Why are you borrowing 200k? Are you insane?

dude, that's what every t14 costs.

User avatar
MTal
Posts: 854
Joined: Tue Dec 11, 2007 6:47 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby MTal » Sat May 14, 2011 9:15 pm

Tsispilos wrote:
MTal wrote:Why are you borrowing 200k? Are you insane?

dude, that's what every t14 costs.


And according to you that's justified?? He's not even going to a T14 for God's sake!

crossem
Posts: 32
Joined: Tue Jun 21, 2011 12:09 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby crossem » Thu Aug 11, 2011 9:50 am

Will paying off higher interest rate private loans from UG with surplus grad plus loans affect IBR at all? Since "IBR is not available for private, non-federal, or alternative loans," (ibrinfo.org) do you think they will check/make sure that you haven't done this?

A response from someone who has done IBR would be useful.

duckmoney
Posts: 886
Joined: Sun Jun 13, 2010 2:21 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby duckmoney » Thu Aug 11, 2011 10:05 am

crossem wrote:Will paying off higher interest rate private loans from UG with surplus grad plus loans affect IBR at all? Since "IBR is not available for private, non-federal, or alternative loans," (ibrinfo.org) do you think they will check/make sure that you haven't done this?

A response from someone who has done IBR would be useful.


You should be able to use federal loans to pay off private loans in order to get into IBR. However, you probably can't pay very much. Schools will only give you about $20k to live off of, and you would have to use that to both live off and pay down loans. I'd be impressed if you could squeeze more than $8k / yr into loan repayment. And even if it would help you qualify for IBR, $24k in private loans isn't so bad when you're looking at 200k in federal loans anyway.

They won't "check" to see how you used your federal loan funds. They disburse them as cash and that's the last they ever hear of them. You can realistically use them however you want without repercussion (other than having to pay them back, of course).

User avatar
cinephile
Posts: 3469
Joined: Sun Jul 18, 2010 3:50 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby cinephile » Thu Aug 11, 2011 10:11 am

sarahlawg wrote:
northwood wrote:dont pay for a loan with a loan.

If you can pay the interest while you are in school. If not, lower your monthly living expenses as much as possible. But make sure since you cant work as a 1L that you have enough money to live on before you return the loans.


I would and definitely have paid a loan with a loan that had lower interest. No regrets.
The problem here is that the gradplus loan has higher interest.


I thought about this too, and I definitely would have done it if my undergrad loans weren't MUCH lower.

crossem
Posts: 32
Joined: Tue Jun 21, 2011 12:09 pm

Re: Paying Down Undergrad Loans with leftover Grad Loans

Postby crossem » Thu Aug 11, 2011 12:14 pm

Awesome, yeah I won't have a lot but every bit counts. Thanks!




Return to “Financial Aid”

Who is online

Users browsing this forum: No registered users and 1 guest