Student Loans Repayment

[Cowgirl]

One of my current loan payment amounts is only $25/mo, which means I'll be paying that amount for around 12 yrs. I have been paying almost twice that in order to pay it off quicker. I was messing around with their repayment options, and it said that $50/month would mean I'd pay the least amount of interest over the life of the loan. I can pay that, but is there any reason why I should reset my payment amount to $50? Can I just leave the payment amount at $25 and send $50? I want to make sure I'm still getting the benefit of the higher payment, but if something happens (like an unexpected financial hardship), it would be nice to be able to pay only the $25 and not get penalized.

Does it matter? :shrug:

 

[Warron]

I personally chose to not change the terms of my loan and just pay more each month. You might save some money by changing your loan to require a higher payment, but only if you get a lower interest rate by doing so. I preferred to have the option to pay less if needed though.

 

[mAlice]

Make sure they apply the additional payment to the principal, and not the interest.

 

[Cowgirl]

Make sure they apply the additional payment to the principal, and not the interest.

They are.

 

[itsbob]

One of my current loan payment amounts is only $25/mo, which means I'll be paying that amount for around 12 yrs. I have been paying almost twice that in order to pay it off quicker. I was messing around with their repayment options, and it said that $50/month would mean I'd pay the least amount of interest over the life of the loan. I can pay that, but is there any reason why I should reset my payment amount to $50? Can I just leave the payment amount at $25 and send $50? I want to make sure I'm still getting the benefit of the higher payment, but if something happens (like an unexpected financial hardship), it would be nice to be able to pay only the $25 and not get penalized.

Does it matter? :shrug:

I know you didn't ask.. BUT!

If you have more than one federal student loan you may benefit from consolidating your loans into a single payment.

I consolidated all of mine, and my ex's and have a single payment about 1/2 of what the original payment was.

I THINK my interest is less than 2%. Got a huge interest deduction for consolidating, than another interest deduction for direct payment, then another interest deduction after paying on time for the first year.

Food for thought, that is all.

 

[Cowgirl]

I know you didn't ask.. BUT!

If you have more than one federal student loan you may benefit from consolidating your loans into a single payment.

I consolidated all of mine, and my ex's and have a single payment about 1/2 of what the original payment was.

I THINK my interest is less than 2%. Got a huge interest deduction for consolidating, than another interest deduction for direct payment, then another interest deduction after paying on time for the first year.

Food for thought, that is all.

Hmm...I think I have already consolidated as much as possible. I think the other two are not federal. I'll have to check it out though.

Here's a stupid question....if my monthly payment is less, wouldn't that delay the payoff? Or is it just reduced because of lower interest and payoff would not be delayed?

 

[itsbob]

Here's a stupid question....if my monthly payment is less, wouldn't that delay the payoff? Or is it just reduced because of lower interest and payoff would not be delayed?

I think in my case it was both.

Longer payback period, but a much lesser interest rate too.

 

[Chasey_Lane]

Here's a stupid question....if my monthly payment is less, wouldn't that delay the payoff? Or is it just reduced because of lower interest and payoff would not be delayed?

Rather than paying a percentage on several accounts, you would only be paying a fixed percentage on one account, which would be lower than all combined.

 

[Cowgirl]

I think in my case it was both.

Longer payback period, but a much lesser interest rate too.

Well, lower payment would definitely help if you're trying to buy a house.

 

[Chasey_Lane]

Well, lower payment would definitely help if you're trying to buy a house.

The account is still shown as debt. Even if it is just $25 monthly, the balance goes against you. I'd pay it off as soon as possible since it's such a small payment amount each month.

 

[itsbob]

The account is still shown as debt. Even if it is just $25 monthly, the balance goes against you. I'd pay it off as soon as possible since it's such a small payment amount each month.

True.

But the debt income ratio for qualifying for a loan takes your monthly payments, not your total debt into consideration.

Don't remember specifics, but I think it's around 38% of your monthly income including mortgage payment.

 

[Cowgirl]

The account is still shown as debt. Even if it is just $25 monthly, the balance goes against you. I'd pay it off as soon as possible since it's such a small payment amount each month.

True.

But the debt income ratio for qualifying for a loan takes your monthly payments, not your total debt into consideration.

Don't remember specifics, but I think it's around 38% of your monthly income including mortgage payment.

I understand that, but the mortgage lender gave me an amount I'd probably qualify for, and I didn't feel comfortable with that payment. If I had lower monthly loan payments, if would free up some money each month.

 

[Rael]

Make sure they apply the additional payment to the principal, and not the interest.

Good point, I wonder if I'm paying the additional to principal or interest on my equity loan. I just sent myself a reminder to check. Thx for that.

 

[Cowgirl]

I think in my case it was both.

Longer payback period, but a much lesser interest rate too.

I filled out the online application to consolidate my loans yesterday! I have to call them in 5 days to check the status. My rate will be locked in and the payment is lower!

 

[Chasey_Lane]

I filled out the online application to consolidate my loans yesterday! I have to call them in 5 days to check the status. My rate will be locked in and the payment is lower!

Did you check w/your loan officer (mortgage) before doing so? Sometimes they don't want to see any new activity while trying to obtain a mortgage.

 

[Cowgirl]

Did you check w/your loan officer (mortgage) before doing so? Sometimes they don't want to see any new activity while trying to obtain a mortgage.

No, I didn't. I was thinking it was a good thing, because it would free up some money each month. I'll look into it.

 

[Chasey_Lane]

No, I didn't. I was thinking it was a good thing, because it would free up some money each month. I'll look into it.

It is good, I just know that some mortgage lenders actually have in their application/contract that you won't seek any "new" loans until settlement. I don't think you have to worry, but it is probably good to give them a heads up.