Loan Repayments Forum
Forum rules
Anonymous Posting
Anonymous posting is only appropriate when you are revealing sensitive employment related information about a firm, job, etc. You may anonymously respond on topic to these threads. Unacceptable uses include: harassing another user, joking around, testing the feature, or other things that are more appropriate in the lounge.
Failure to follow these rules will get you outed, warned, or banned.
Anonymous Posting
Anonymous posting is only appropriate when you are revealing sensitive employment related information about a firm, job, etc. You may anonymously respond on topic to these threads. Unacceptable uses include: harassing another user, joking around, testing the feature, or other things that are more appropriate in the lounge.
Failure to follow these rules will get you outed, warned, or banned.
-
- Posts: 432537
- Joined: Tue Aug 11, 2009 9:32 am
Loan Repayments
Basic question: if I have enough money to pay down a significant chunk (~10%) of my student loans now, is there any reason not to? I'm a graduating 3L with a job lined up paying around $50,000 and around $75,000 in debt. I can pay off $5-10,000 of my debt right now and still have a couple thousand dollars in financial cushion. That seems like it'll save me a couple hundred dollars in interest over the next couple of months, right? I technically don't have to start repaying any of my loans for another six months, but a bunch of them are already earning interest.
- fatduck
- Posts: 4135
- Joined: Mon Sep 13, 2010 10:16 pm
Re: Loan Repayments
it'll save you more than a couple hundred dollars in interest. that shit's compounding. it's almost certainly better to pay sooner than later.
- dingbat
- Posts: 4974
- Joined: Wed Jan 11, 2012 9:12 pm
Re: Loan Repayments
Pay the highest interest loan down first. Any time you have extra cash, pay down that loan until it's gone. Then start paying extra cash towards your next highest interest rate loan
-
- Posts: 432537
- Joined: Tue Aug 11, 2009 9:32 am
Re: Loan Repayments
OP here--so might it make sense to set my low interest loans to a long repayment schedule (30 years) and pay off my higher interest loans all at first? In other words, if I was going to pay $1,000/month in loans, shift which loans I'm paying?
E.g., assuming that I only have two loans, $30,000 @ 5% and $30,000 @ 7%, I would set my low interest low on the longest possible repayment schedule and pay off the minimum on that every month while using the remainder of my monthly loan budget to pay off the high interest loan faster? Instead of paying $500/m to the 5% loan and $500/m to the 7% loan, paying $300/m at the low interest loan (30 year repayment minimum in this made-up world) and $700/m to the high interest loan until the high interest loan is all gone, and then paying $1000/m to the low interest loan until it's all gone?* I'd be paying as much per year as before, meeting my loan minimums as before, but paying off my high-interest loans much more quickly than my low-interest loans.
*Why doesn't everybody do this? It seems easy and safe.
E.g., assuming that I only have two loans, $30,000 @ 5% and $30,000 @ 7%, I would set my low interest low on the longest possible repayment schedule and pay off the minimum on that every month while using the remainder of my monthly loan budget to pay off the high interest loan faster? Instead of paying $500/m to the 5% loan and $500/m to the 7% loan, paying $300/m at the low interest loan (30 year repayment minimum in this made-up world) and $700/m to the high interest loan until the high interest loan is all gone, and then paying $1000/m to the low interest loan until it's all gone?* I'd be paying as much per year as before, meeting my loan minimums as before, but paying off my high-interest loans much more quickly than my low-interest loans.
*Why doesn't everybody do this? It seems easy and safe.
-
- Posts: 1923
- Joined: Thu Jan 22, 2009 12:45 am
Re: Loan Repayments
Some people fuck up and consolidate everything thinking it will be "easier". Others can't do math.Anonymous User wrote:OP here--so might it make sense to set my low interest loans to a long repayment schedule (30 years) and pay off my higher interest loans all at first? In other words, if I was going to pay $1,000/month in loans, shift which loans I'm paying?
E.g., assuming that I only have two loans, $30,000 @ 5% and $30,000 @ 7%, I would set my low interest low on the longest possible repayment schedule and pay off the minimum on that every month while using the remainder of my monthly loan budget to pay off the high interest loan faster? Instead of paying $500/m to the 5% loan and $500/m to the 7% loan, paying $300/m at the low interest loan (30 year repayment minimum in this made-up world) and $700/m to the high interest loan until the high interest loan is all gone, and then paying $1000/m to the low interest loan until it's all gone?* I'd be paying as much per year as before, meeting my loan minimums as before, but paying off my high-interest loans much more quickly than my low-interest loans.
*Why doesn't everybody do this? It seems easy and safe.
That said, I'm not sure whether most servicers will allow you to have some loans on a 30-year repayment and others on a 10-year. But that doesn't matter: the right move is to put everything into 30-year (unless you qualify for a partial financial hardship under IBR, in which case you should do IBR because the feds continue to subsidize the interest on subsidized stafford loans for a few years*). You may also have to use a certain repayment plan to qualify for your school's LRAP program, if that's something that is important to you.
*I don't know whether this is true anymore now that there are no subsidized loans for grad students.
Want to continue reading?
Register now to search topics and post comments!
Absolutely FREE!
Already a member? Login
- 20130312
- Posts: 3814
- Joined: Wed Nov 09, 2011 8:53 pm
Re: Loan Repayments
Interest doesn't compound on student loans. It's simple interest. However, it does capitalize after you graduate, so pay off as much of that interest as possible before it capitalizes.fatduck wrote:it'll save you more than a couple hundred dollars in interest. that shit's compounding. it's almost certainly better to pay sooner than later.
Also, just put the entire thing on 30 year repayment and then pay down the high interest loans with the money you are saving.
-
- Posts: 1923
- Joined: Thu Jan 22, 2009 12:45 am
Re: Loan Repayments
Pretty sure it does compound once you're in repayment or if you're in forbearance.InGoodFaith wrote:Interest doesn't compound on student loans. It's simple interest. However, it does capitalize after you graduate, so pay off as much of that interest as possible before it capitalizes.fatduck wrote:it'll save you more than a couple hundred dollars in interest. that shit's compounding. it's almost certainly better to pay sooner than later.
Also, just put the entire thing on 30 year repayment and then pay down the high interest loans with the money you are saving.
- 20130312
- Posts: 3814
- Joined: Wed Nov 09, 2011 8:53 pm
Re: Loan Repayments
All federally guaranteed loans use a method of interest accrual known as the Simple Daily Interest Formula (regardless of whether the loan is in repayment or forebearance).ToTransferOrNot wrote:Pretty sure it does compound once you're in repayment or if you're in forbearance.InGoodFaith wrote:Interest doesn't compound on student loans. It's simple interest. However, it does capitalize after you graduate, so pay off as much of that interest as possible before it capitalizes.fatduck wrote:it'll save you more than a couple hundred dollars in interest. that shit's compounding. it's almost certainly better to pay sooner than later.
Also, just put the entire thing on 30 year repayment and then pay down the high interest loans with the money you are saving.
-
- Posts: 1923
- Joined: Thu Jan 22, 2009 12:45 am
Re: Loan Repayments
Well, it's true that it doesn't capitalize on a daily basis unlike many other loans. If your monthly payments cover simple daily interest, you're fine. But if you're in repayment or forbearance, and your monthly payments don't cover interest (in repayment, that can happen pretty easily if you're under the IBR plan), the accrued interest capitalizes when you have a change in status.InGoodFaith wrote:All federally guaranteed loans use a method of interest accrual known as the Simple Daily Interest Formula (regardless of whether the loan is in repayment or forebearance).ToTransferOrNot wrote:Pretty sure it does compound once you're in repayment or if you're in forbearance.InGoodFaith wrote:Interest doesn't compound on student loans. It's simple interest. However, it does capitalize after you graduate, so pay off as much of that interest as possible before it capitalizes.fatduck wrote:it'll save you more than a couple hundred dollars in interest. that shit's compounding. it's almost certainly better to pay sooner than later.
Also, just put the entire thing on 30 year repayment and then pay down the high interest loans with the money you are saving.
Anyway, TCR is still to put everything in 30-year repayment and pay the higher interest loans down first.
- 20130312
- Posts: 3814
- Joined: Wed Nov 09, 2011 8:53 pm
Re: Loan Repayments
Ah, I see where the confusion is. Capitalization doesn't mean compounded interest. Federal loans all use simple interest. However, if you are in forebearance and then go back into repayment, any simple interest that has accrued will capitalize (which means it becomes part of the principal and is no longer considered interest). It isn't referred to as compounding interest because interest is still only accruing on the principal (though the capitalized interest is now included in that principle).
Compounding interest on student loans would be a stupendously bad idea.
Compounding interest on student loans would be a stupendously bad idea.
- dingbat
- Posts: 4974
- Joined: Wed Jan 11, 2012 9:12 pm
Re: Loan Repayments
I'm so proud of this thread - it describes how I treated my loans perfectly
-
- Posts: 432537
- Joined: Tue Aug 11, 2009 9:32 am
Re: Loan Repayments
dingbat--any downsides? Can you do this with a loan repayment system or does it screw up your LRAP payments?
-
- Posts: 432537
- Joined: Tue Aug 11, 2009 9:32 am
Re: Loan Repayments
Get a Business loan, max out credit cards, use it all to pay off student loans and then declare bankruptcy on the new debt. Why not?
Register now!
Resources to assist law school applicants, students & graduates.
It's still FREE!
Already a member? Login
- dingbat
- Posts: 4974
- Joined: Wed Jan 11, 2012 9:12 pm
Re: Loan Repayments
Character & Fitness - I recall reading about someone who did this and was disbarredAnonymous User wrote:Get a Business loan, max out credit cards, use it all to pay off student loans and then declare bankruptcy on the new debt. Why not?
- dingbat
- Posts: 4974
- Joined: Wed Jan 11, 2012 9:12 pm
Re: Loan Repayments
Honestly, I don't plan on using LRAP, so I have no idea. I also figure, I'd you qualify/need LRAP, you probably won't have extra cash to make the extra payments, which makes it a moot point.Anonymous User wrote:dingbat--any downsides? Can you do this with a loan repayment system or does it screw up your LRAP payments?
-
- Posts: 1923
- Joined: Thu Jan 22, 2009 12:45 am
Re: Loan Repayments
Also the bankruptcy judge would laugh your attempt at a discharge out of court.dingbat wrote:Character & Fitness - I recall reading about someone who did this and was disbarredAnonymous User wrote:Get a Business loan, max out credit cards, use it all to pay off student loans and then declare bankruptcy on the new debt. Why not?
-
- Posts: 142
- Joined: Wed Dec 01, 2010 3:32 pm
Re: Loan Repayments
Sorry if this is dumb, but is this because you will end up paying less interest if you pay off the loans faster? For example, I can choose a 10-year repayment plan or a 30-year. If I choose the 30-year plan, but then pay off my loans in 10 years, will I pay less interest than if I just chose the 10-year plan?TCR is still to put everything in 30-year repayment
Get unlimited access to all forums and topics
Register now!
I'm pretty sure I told you it's FREE...
Already a member? Login
- 20130312
- Posts: 3814
- Joined: Wed Nov 09, 2011 8:53 pm
Re: Loan Repayments
No, either way the interest is still accruing for 10 years. The point is that by paying off your higher interest loans first you will pay less in interest.hurldes wrote:Sorry if this is dumb, but is this because you will end up paying less interest if you pay off the loans faster? For example, I can choose a 10-year repayment plan or a 30-year. If I choose the 30-year plan, but then pay off my loans in 10 years, will I pay less interest than if I just chose the 10-year plan?TCR is still to put everything in 30-year repayment
-
- Posts: 432537
- Joined: Tue Aug 11, 2009 9:32 am
Re: Loan Repayments
seen it done more than once. The credit cards don't show up to contest. No one asks what you bought with them.ToTransferOrNot wrote:Also the bankruptcy judge would laugh your attempt at a discharge out of court.dingbat wrote:Character & Fitness - I recall reading about someone who did this and was disbarredAnonymous User wrote:Get a Business loan, max out credit cards, use it all to pay off student loans and then declare bankruptcy on the new debt. Why not?
-
- Posts: 48
- Joined: Tue Feb 10, 2009 10:19 pm
Re: Loan Repayments
+1 This is exactly what I do with my loans.Anonymous User wrote:OP here--so might it make sense to set my low interest loans to a long repayment schedule (30 years) and pay off my higher interest loans all at first? In other words, if I was going to pay $1,000/month in loans, shift which loans I'm paying?
E.g., assuming that I only have two loans, $30,000 @ 5% and $30,000 @ 7%, I would set my low interest low on the longest possible repayment schedule and pay off the minimum on that every month while using the remainder of my monthly loan budget to pay off the high interest loan faster? Instead of paying $500/m to the 5% loan and $500/m to the 7% loan, paying $300/m at the low interest loan (30 year repayment minimum in this made-up world) and $700/m to the high interest loan until the high interest loan is all gone, and then paying $1000/m to the low interest loan until it's all gone?* I'd be paying as much per year as before, meeting my loan minimums as before, but paying off my high-interest loans much more quickly than my low-interest loans.
*Why doesn't everybody do this? It seems easy and safe.
Communicate now with those who not only know what a legal education is, but can offer you worthy advice and commentary as you complete the three most educational, yet challenging years of your law related post graduate life.
Register now, it's still FREE!
Already a member? Login