Student Loan Advice

[peplaw06]

I just wanted to echo WG's comments. I won't even tell you how much I have to pay back in student loans, it's embarrassing. Hint: 7 years of schooling at private schools

But my plan after I consolidate is just to pay more than the minimum every month. Pay what you can afford, and just budget for it. On virtually every loan I believe, whatever you pay extra goes straight to principle. That will help drop that principle owed number, and save you interest over the life of the loan. And you're not going to get a better rate than 2.8% at any bank.

 

[needforspeed]

Well, if this helps anyone, my payment schedule looks like this:

167 months @ 96.92

It'll be paid off in 2020.

So depressing.

No, Red. This is depressing.

360 months @ 527.00

It'll be paid off in 2032.

 

[theebs]

At that rate, you're foolish for worrying about it. Just listen to WG and double or triple payments up.

After you've paid off the car of course.

exactly right. At 2.875% for 15 years @ 96.92 that is a good loan.

With an ammortization table you would be able to see exactly what making extra payments would do for you time wise in paying off the note.

 

[theebs]

I disagree to a certain extent. First, it's never a neccessity for anyone to finance a vehicle. People may want to finance because they'd like more vehicle than they can afford but anyone who can't scrape a couple of hundred dollars together for an '89 Camry with 250,000 miles can't get traditional financing anyway.

Second, most credit cards start out with relatively low limits but it's nothing for someone to go $20,000+ in the hole on a car note when just starting out in life.

Lastly, if someone was willing to keep a car for ten years and hence be driving a ten year old vehicle when they are conceivably making a better living, why not just cut to the chase and get an eight year old car from the start with cash, drive it until the wheels fall off and then repeat the process?

I agree and dissagree!!

For some especially out of college, a car loan is the perfect credit builder and responsibility builder. Good training if you will.

NOthing wrong with spending 13000 on a honda.

Its the people that buy beamers and other expensive vehicles that get in trouble, because chances are they probably spend on their credit cards the same way..so they create a ton of debt at once.

If you have a car loan/student loan and then you get credit card debt that is tough. Compound interest on credit cards is why the country is so far in debt!!

 

[LittleRed212]

I just wanted to echo WG's comments. I won't even tell you how much I have to pay back in student loans, it's embarrassing. Hint: 7 years of schooling at private schools

But my plan after I consolidate is just to pay more than the minimum every month. Pay what you can afford, and just budget for it. On virtually every loan I believe, whatever you pay extra goes straight to principle. That will help drop that principle owed number, and save you interest over the life of the loan. And you're not going to get a better rate than 2.8% at any bank.

I hear ya. The fact that I *only* have $14,000 to pay back is actually quite good. I went to a private college as well. I got my first year completely free because my dad worked there and then a lot of it was taken away by a scholarship I received.

And this is what my lender said if I pay more than the minimum amount:

What if I want to send larger payments to pay down my principal balance?
If you send an amount greater than your monthly installment, we will automatically apply those funds toward your next monthly payment unless you tell us otherwise.

The payment is first applied to unpaid late fees and charges, then to the accrued interest due on the loan, and the remaining amount is applied to the principal balance. Payments cannot be applied to future interest because interest accrues under the simple daily interest formula (see How does my interest accrue?).

So unfortunately, it seems as if the extra money will go to everything BUT the principal balance at first.

No, Red. This is depressing.

360 months @ 527.00

It'll be paid off in 2032.

Whoa, I'm sorry. Is that just your undergrad?

I agree and dissagree!!

For some especially out of college, a car loan is the perfect credit builder and responsibility builder. Good training if you will.

NOthing wrong with spending 13000 on a honda.

Its the people that buy beamers and other expensive vehicles that get in trouble, because chances are they probably spend on their credit cards the same way..so they create a ton of debt at once.

If you have a car loan/student loan and then you get credit card debt that is tough. Compound interest on credit cards is why the country is so far in debt!!

I agree with you there. I needed to have credit. Everything I've ever had at that point was given to me, so I had no credit whatsoever. My car is a good one - leather, V6, one previous owner, low milage, two door, sporty... I like her. The payments are not bad either...only $252/month. I go ahead and pay $150 on the 1st and 15th of every month, and the original balance truly has shrunken at an alarmingly (albeit, pleasantly) fast rate.

 

[theebs]

I ammortized your loan. It is pennies off, because I just kept getting 96.66 as your payment. so this is relative.

When all is said and done you will pay
$3,279.48 in Interest

If you were to pay 100 dollars extra a month this would be the result

your total payments would go from 180(15) years to 79(6.5) years
your toal interest paid would be $1,393.16
Making your early payment total amount $7,876.42

your interest savings would be
$3,279.48
-
$1,393.16
=
$1,886.32


If you could swing 150 a month extra....

Your total payments would go from 180(15) years to 62(5.2) years
your total interest paid would be $1,085.30
Total of your early payments would be $9,211.90

your interest savings would be
=$2,194.18


so the answer is keep this loan at all costs and pay extra. Make sure to mark the extra as payment

on principal. also about 32 dollars of your payment is going to interest right now.

 

[AbeBeta]

2.875%

I don't want to hear any complaining from someone with a <3% rate. If you graduated in the 90's you'd be rolling at 7-8%.

Here's what you do -- pay more each month. Set that up in an excel spreadsheet -- each month add .02875 / 12 times your balance in interest and subtract your payment -- you'd be surprised what an extra $25 or $50 a month can do in terms of finishing your payments.

 

[AbeBeta]

And this is what my lender said if I pay more than the minimum amount:

What if I want to send larger payments to pay down my principal balance?
If you send an amount greater than your monthly installment, we will automatically apply those funds toward your next monthly payment unless you tell us otherwise.

The payment is first applied to unpaid late fees and charges, then to the accrued interest due on the loan, and the remaining amount is applied to the principal balance. Payments cannot be applied to future interest because interest accrues under the simple daily interest formula (see How does my interest accrue?).

So unfortunately, it seems as if the extra money will go to everything BUT the principal balance at first.

I think you are misreading this -- the interest becomes part of your balance otherwise (i.e., is added to your principal).

Seriously -- you shouldn't complain here -- you've got a nuthing interest rate.

 

[CF74]

Here is a good loan calculator:

http://www.bankrate.com/brm/popcalc2.asp



If I were you I'd keep that awesome low rate and just send em like $150 to $300 a month to pay it off sooner...

 

[theebs]

I don't want to hear any complaining from someone with a <3% rate. If you graduated in the 90's you'd be rolling at 7-8%.

Here's what you do -- pay more each month. Set that up in an excel spreadsheet -- each month add .02875 / 12 times your balance in interest and subtract your payment -- you'd be surprised what an extra $25 or $50 a month can do in terms of finishing your payments.

I already did that. I ammortized her loan in the post above.

I told the outcome if she pays 100 or 150 extra a month, what the savings would be and the time frame of completion of the note.

 

[DallasCowpoke]

I was lucky that Uncle Sam paid for my edumacation but I did have to give up almost 4 yrs of my life. It was worth it though.

Ummm, I just checked with "Uncle Sam", and he wasn't so sure! :

 

[AbeBeta]

Here is a good loan calculator:

http://www.bankrate.com/brm/popcalc2.asp



If I were you I'd keep that awesome low rate and just send em like $150 to $300 a month to pay it off sooner...

Actually student loans can't be refinanced -- they can be consolidated -- but the rate of consolidation is just the weighted average of all your rates. These aren't like mortgages.

 

[AbeBeta]

I already did that. I ammortized her loan in the post above.

I told the outcome if she pays 100 or 150 extra a month, what the savings would be and the time frame of completion of the note.

and I was just describing how someone could do it themselves - Much of what accountants do (and people pay them to do) is really simple math.

 

[CF74]

Actually student loans can't be refinanced -- they can be consolidated -- but the rate of consolidation is just the weighted average of all your rates. These aren't like mortgages.

Why would you wanna refinance 2.87%? I never said anything about refinancing the loan, just sending more money..

 

[AbeBeta]

Why would you wanna refinance 2.87%? I never said anything about refinancing the loan, just sending more money..

I assumed by "keep that low rate" you believed there was another option

 

[WoodysGirl]

I assumed by "keep that low rate" you believed there was another option

She was considering taking out a personal loan to attempt to pay it off sooner. That was the point of the original post.

A personal loan would probably come with a higher rate, so his advice was to just the keep the loan she has and just put more towards her monthly payments.

 

[Danny White]

And this is what my lender said if I pay more than the minimum amount:

What if I want to send larger payments to pay down my principal balance?
If you send an amount greater than your monthly installment, we will automatically apply those funds toward your next monthly payment unless you tell us otherwise.

The payment is first applied to unpaid late fees and charges, then to the accrued interest due on the loan, and the remaining amount is applied to the principal balance. Payments cannot be applied to future interest because interest accrues under the simple daily interest formula (see How does my interest accrue?).

Little Red,
The key here is the phrase, "unless you tell us otherwise." So when you send in your extra amount per month, make sure you stipulate that it should ONLY apply towards the principle. If you don't stipulate, then those bastids will put it towards the interest.

If you have a monthly loan payment form or coupon that you send in with your payment, they often have a space for listing "additional principle" that you are including.

I'll echo what others have said here that paying additional amounts is a good way to get your loan paid off quicker.

But there is another way you could go. Your interest rate is amazingly low. If you were so inclined, you could INVEST that extra $100 a month and you should be able to at least double that interest.

Instead of looking at this loan as a curse, you could view it as a blessing. The lender is letting you have this money at a well-below-market rate. You should be able to get a better return on that extra principle than paying off a 2.8&#37; loan. $3000 of interest over 15 years is nothing! You're basically getting that money for free. $96 bucks a month sounds like a lot now that you're just out of college, but in 2-3 years you won't even notice it once you've gotten a raise or two. The economy is great here in the Virginia area (I guess I'm assuming you're in Northern Virginia) so your employment prospects should be good.

So I'd suggest just holding on to that great loan. Pay the $96 bucks a month, and if you have extra disposable income, invest it in something that pays more than 3% and you're coming out on top.

But if you do decide to pay extra every month, just make sure you stipulate that it goes towards principle.

Good Luck!

 

[AbeBeta]

Little Red,
The key here is the phrase, "unless you tell us otherwise." So when you send in your extra amount per month, make sure you stipulate that it should ONLY apply towards the principle. If you don't stipulate, then those bastids will put it towards the interest.

I've got some experience with this -- and that isn't what it means. This means that if you say, have a $100 payment and you pay say $250 on it that the next month, you owe nothing as you've already covered both months of payment. So if you send an extra payment they won't bill you the next month. Unless you tell them otherwise.

 

[AbeBeta]

A personal loan would probably come with a higher rate, so his advice was to just the keep the loan she has and just put more towards her monthly payments.

I must have misread that -- some banks broker consolidation (or buy consolidated loans) so that's what I thought she was talking about

 

[Danny White]

I've got some experience with this -- and that isn't what it means. This means that if you say, have a $100 payment and you pay say $250 on it that the next month, you owe nothing as you've already covered both months of payment. So if you send an extra payment they won't bill you the next month. Unless you tell them otherwise.

That's almost as bad... in that you're still probably chiefly paying interest then. I'm just saying make sure you stipulate that the extra needs to go towards principle.