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barty
 
paying back student loans

Having just recently graduated college I now get the chance to repay my student loans. I have some money saved up but was wondering what the best way to do this would be. I was thinking of paying off all the accrued interest on all loans with my savings and then with the remainder paying off several of the loans before I consolidate them into one loan. Is this the best route to go? All the relevant info should be below, if you need something else let me know. thanks!

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Old 02-05-2010, 03:03 PM barty is offline  
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Dongboy
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have you looked at what the consolidation will do as far as rates?

you'll likely not want to consolidate that cp002 becuase the rate is so good, also a possibility on the cp001.

if you have any other debts you want to pay those off first becuase while student loan interest is tax deductible you still have to pay the interest.

you would be better off to look at a consolidation loan in the meantime pay minimums on all the loans and make any extra payments on the higher interest loans. you'd be better off from a total cost basis to blow away a few of the smaller 6.8% loans completely with some of your savings then to pay off the accrued interest
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Old 02-05-2010, 03:23 PM Dongboy is offline  
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barty
 
I have no other debts besides a about $200 on a credit card.

What about the accrued interest on the larger CP001 and CP002? dont bother just paying the accrued interest on those instead focus on paying loans off completely like NE002, NE006, and NE007?

I'm also in my grace period into July should make any payments before then not til that time and just keep saving some money up?

My understanding of loan consolidation was that they take the average of your rates, i maybe wrong and I plan on going to my bank to talk to them about it.
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Old 02-05-2010, 03:29 PM barty is offline  
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Dongboy
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Quote:
Originally Posted by barty View Post
I have no other debts besides a about $200 on a credit card.

What about the accrued interest on the larger CP001 and CP002? dont bother just paying the accrued interest on those instead focus on paying loans off completely like NE002, NE006, and NE007?

I'm also in my grace period into July should make any payments before then not til that time and just keep saving some money up?

My understanding of loan consolidation was that they take the average of your rates, i maybe wrong and I plan on going to my bank to talk to them about it.

your interest accrued will effect your monthly payments but same rate = same cost of money, just different payment amounts.

if you pay off your interest accrued it will just effect your payment and total payoffs. why not clear a few of the line items on your credit report as paid satisfactorily instead of leaving all of them as in-payment for no extra cost.

generall loan consolidation will be a single rate - it's supposed to be less then your sum average rate but isn't always. shop around, lots of places can consolidate them. just call one up and ask them what it'll be, how they'll structure your payment, etc.

except for the stafford loans even though you are in 6 month grace period your interest is still accruing at the normal rate.

also don't overextend yourself to rush to pay these off and leave yourself cash poor if you need to move into a new apartment or city for a new job.
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Old 02-05-2010, 03:40 PM Dongboy is offline  
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illig
 
also keep in mind that interest on school loans is deductible until you get beyond $75K IIRC... so you essentially pay a bit less than it seems
Old 02-05-2010, 07:11 PM illig is offline  
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barty
 
The reason I'm thinking about paying these off because of the money it would save me in the long run, which would be a decent amount right?
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Old 02-05-2010, 07:35 PM barty is offline  
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studioeschaton
 
ive been defering student loans for like 4 years
Old 02-05-2010, 09:33 PM studioeschaton is offline  
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wwilliam54
 
Since student loan interest is tax deductible to a certain extent, I would pay them like normal.
http://www.irs.gov/taxtopics/tc456.html
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Old 02-05-2010, 10:52 PM wwilliam54 is offline  
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Pay your highest apr balances first, and for the ones under 5% you might even want to just pay minimum, since you can probably make more on your money in the market than youre losing by carrying those loans.
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Old 02-06-2010, 12:50 AM Nano is offline  
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Dongboy
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Quote:
Originally Posted by wwilliam54 View Post
Since student loan interest is tax deductible to a certain extent, I would pay them like normal.
http://www.irs.gov/taxtopics/tc456.html

yes, they are tax deductible but as I already said you still have to pay the interest in the first place. It does NOT mean you get free interest like some people think.

ROUGH EXAMPLE - say you paid ~1200 in INTEREST (not principle and interest, so more like ~2k total payments) in a year - you would save something like ~50, maybe a 100 bucks on your taxes, you still had to lay out the 1200 to "save" a 100
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Old 02-06-2010, 01:29 AM Dongboy is offline  
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mohavewolfpup
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maybe i'm too old school, but getting rid of the debt saddle as fast you can sounds like the better option to me. Why have your wages tied up for years with this garbage hanging over your head?
Old 02-06-2010, 05:04 AM mohavewolfpup is offline  
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-=Antimatter=-
 
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Paying off your loans is a guaranteed ~6% return on investment for you. Make sure you at least have an emergency fund of 6 months rent + enough for food and basic bills and then attack your loans with everything you've got. If you can pay them off in less than 3 or 4 years then I wouldn't even bother consolidating.

Edit: Also keep in mind that you can defer your loans further if you are in grad school on at least a half-time basis. That means you are enrolled half-time at least one semester during that tax year. For example, last year I took 1 class in the spring, 1 in the summer, and 2 in the fall. Because I was half-time in the fall my loans went into deferment and I didn't have a monthly bill anymore, but I could still pay them down.
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wwilliam54
 
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yes, they are tax deductible but as I already said you still have to pay the interest in the first place. It does NOT mean you get free interest like some people think.

ROUGH EXAMPLE - say you paid ~1200 in INTEREST (not principle and interest, so more like ~2k total payments) in a year - you would save something like ~50, maybe a 100 bucks on your taxes, you still had to lay out the 1200 to "save" a 100

rly?
I thought it was 1:1 deductible
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Old 02-06-2010, 09:10 AM wwilliam54 is offline  
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RyanVM
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It's 1:1 deductible, but that just means that it reduces your AGI and therefore your total tax liability by your marginal tax rate.

Say you've got a 20% marginal tax rate. A $1200 deduction would save you $240 total in taxes.
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Old 02-06-2010, 02:37 PM RyanVM is offline  
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wwilliam54
 
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It's 1:1 deductible, but that just means that it reduces your AGI and therefore your total tax liability by your marginal tax rate.

Say you've got a 20% marginal tax rate. A $1200 deduction would save you $240 total in taxes.

OIC
k
So looking at what tax bracket he is in vs. possibly getting into a lower one would be the only worthwhile tax break
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