Student loan payment question

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Royal
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Student loan payment question

Postby Royal » Tue Feb 12, 2013 2:42 pm

This is really a topic for law school graduates more so than current students, but hopefully someone here can help. All my loans are federal and serviced by Great Lakes. I'm graduating in May. On the ten year plan, my monthly payments come to around $1630 a month. Yay for indentured servitude. I'd like to pay it off faster and can afford to throw $2,000 a month at it my first year, and hopefully slightly more in subsequent years.

How do I ensure that those payments go straight to principal and not interest? Will making these early payments reduce my required 10 year monthly payments ($1630) just in case I lose my ability to repay as much in the future?

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tstyler98
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Re: Student loan payment question

Postby tstyler98 » Tue Feb 12, 2013 9:14 pm

Royal wrote:This is really a topic for law school graduates more so than current students, but hopefully someone here can help. All my loans are federal and serviced by Great Lakes. I'm graduating in May. On the ten year plan, my monthly payments come to around $1630 a month. Yay for indentured servitude. I'd like to pay it off faster and can afford to throw $2,000 a month at it my first year, and hopefully slightly more in subsequent years.

How do I ensure that those payments go straight to principal and not interest? Will making these early payments reduce my required 10 year monthly payments ($1630) just in case I lose my ability to repay as much in the future?


Here is a description about how payments and extra payments are applied: https://www.mygreatlakes.org/mglstatic/ ... plied.html

I don't think they'll lower the monthly payment, but if you had trouble making the payments, just call them and they'll work with you. They'll probably be willing to reduce your required payment since you've paid on time and extra, but I can't guarantee it. But they'd rather have you pay something then nothing.

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thesealocust
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Re: Student loan payment question

Postby thesealocust » Wed Feb 13, 2013 1:22 am

Royal wrote:How do I ensure that those payments go straight to principal and not interest? Will making these early payments reduce my required 10 year monthly payments ($1630) just in case I lose my ability to repay as much in the future?


It doesn't matter, there are no games to be played on loan repayment other than "more is better" and "if you have different loans, target the highest interest rate first."

This is an amazingly common mistake in understanding how loan payments work. It's complex, but the takeaway is just throw money at it and it will work out.

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Royal
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Re: Student loan payment question

Postby Royal » Wed Feb 13, 2013 8:35 am

Thanks for the replies. That link is very useful. I guess my question is this: if I'm on the ten year plan but I keep making payments in excess of the ten year plan payment, will it automatically reduce my payment amount (keeping it to ten years) or will it keep my payment the same but reduce the repayment time period?

Pokemon
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Re: Student loan payment question

Postby Pokemon » Wed Feb 13, 2013 5:05 pm

Reduce the amount...

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rinkrat19
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Re: Student loan payment question

Postby rinkrat19 » Wed Feb 13, 2013 5:09 pm

Royal wrote:Thanks for the replies. That link is very useful. I guess my question is this: if I'm on the ten year plan but I keep making payments in excess of the ten year plan payment, will it automatically reduce my payment amount (keeping it to ten years) or will it keep my payment the same but reduce the repayment time period?

I would think it'd reduce the payment period, like it would on a car or home loan. To reduce the payment, the whole thing would have to be recalculated every time you paid extra.

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Anastasia Dee Dualla
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Re: Student loan payment question

Postby Anastasia Dee Dualla » Wed Feb 13, 2013 8:09 pm

When you "overpay" your loans, the first amount is applied to already accrued interest, and then whatever is left over goes toward the principal.




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