Paying interest Forum
- rayiner
- Posts: 6145
- Joined: Thu Dec 11, 2008 11:43 am
Paying interest
So interest on federal loans capitalizes at the end of the deferral period. During the in-school deferral period, if I make any money, does it make any difference whether I use that to pay off accrued interest before it capitalizes verses using it to offset additional loans I'd otherwise need to take?
Accountants in the audience?
Accountants in the audience?
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- Posts: 3727
- Joined: Sat Feb 06, 2010 2:23 pm
Re: Paying interest
If you will pay down the same amount either way you are better reducing your principal balance for semester 5 (assuming that you will earn money 2L summer and immediately reduce your borrowing).
It becomes trickier if the amount that you are reducing your borrowing by will switch you from GradPlus into Stafford territory.
It becomes trickier if the amount that you are reducing your borrowing by will switch you from GradPlus into Stafford territory.
Last edited by bdubs on Fri Jul 01, 2011 11:32 am, edited 1 time in total.
- D-hops
- Posts: 678
- Joined: Wed Jan 20, 2010 5:48 pm
Re: Paying interest
Aren't interest payments on education loans tax deductible? Is so, there could be some benefit to paying down the interest.
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- Posts: 3727
- Joined: Sat Feb 06, 2010 2:23 pm
Re: Paying interest
Not if you make a BigLaw salary, but this is credited if your earnings this year are below the threshold ($75k)D-hops wrote:Aren't interest payments on education loans tax deductible? Is so, there could be some benefit to paying down the interest.
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- Posts: 1986
- Joined: Tue Jul 08, 2008 10:05 pm
Re: Paying interest
Assuming you are entering BigLaw, what's the typical timescale like before you start work and get your first paycheck? As a 0L it's not of immediate concern to me, but I was curious as to whether that 2L summer income is often necessary to tide you over before you start work, at least for those students who don't have the option of moving back in with their parents for weeks or months.bdubs wrote:If you will pay down the same amount either way you are better reducing your principal balance for semester 5 (assuming that you will earn money 2L summer and immediately reduce your borrowing).
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- rayiner
- Posts: 6145
- Joined: Thu Dec 11, 2008 11:43 am
Re: Paying interest
Depends who you work for and where you work. Chicago firms generally give a bar stipend (Kirkland gives $10,000) that'll tide you over for the summer. NYC firms generally give you a salary advance in the $5-10k range. Note that in NYC you might need to front a ton of cash to rent an apartment, so plan accordingly.albanach wrote:Assuming you are entering BigLaw, what's the typical timescale like before you start work and get your first paycheck? As a 0L it's not of immediate concern to me, but I was curious as to whether that 2L summer income is often necessary to tide you over before you start work, at least for those students who don't have the option of moving back in with their parents for weeks or months.bdubs wrote:If you will pay down the same amount either way you are better reducing your principal balance for semester 5 (assuming that you will earn money 2L summer and immediately reduce your borrowing).
- thesealocust
- Posts: 8525
- Joined: Mon Oct 20, 2008 8:50 pm
Re: Paying interest
Also note that historically NYC firms would give wickle stub year bonuses to first-quarter-years and a salary advance while non-NYC firms would often not give the stub bonus but give straight stipends for bar studying. This likely changed during financial Armageddon, but I believe the system was in rough parity back in the day.rayiner wrote:Depends who you work for and where you work. Chicago firms generally give a bar stipend (Kirkland gives $10,000) that'll tide you over for the summer. NYC firms generally give you a salary advance in the $5-10k range. Note that in NYC you might need to front a ton of cash to rent an apartment, so plan accordingly.albanach wrote:Assuming you are entering BigLaw, what's the typical timescale like before you start work and get your first paycheck? As a 0L it's not of immediate concern to me, but I was curious as to whether that 2L summer income is often necessary to tide you over before you start work, at least for those students who don't have the option of moving back in with their parents for weeks or months.bdubs wrote:If you will pay down the same amount either way you are better reducing your principal balance for semester 5 (assuming that you will earn money 2L summer and immediately reduce your borrowing).
- smokyroom26
- Posts: 253
- Joined: Tue Jun 29, 2010 4:56 am
Re: Paying interest
Indeed - but if I remember correctly, they are only deductible up to $3K. Helpful to be aware of that if you have a lot of debt and are counting/budgeting every dollar.bdubs wrote:Not if you make a BigLaw salary, but this is credited if your earnings this year are below the threshold ($75k)D-hops wrote:Aren't interest payments on education loans tax deductible? Is so, there could be some benefit to paying down the interest.