Student Loan Question

**qtkitty** · 01-08-2010, 09:39 PM

What is the best way to pay off a student loan? Is it to pay the regular payments and pay a little extra on the principal when you can? Or is it better to pay the regular payments and save back money and pay a lump sum close to the end of the repayment schedual to pay off the loan?

duva1080 · 01-08-2010, 10:31 PM

I think it depends on the interest and tax write off. Depending on your income, and you might want to talk to an account or financial planner.

**qtkitty** · 01-08-2010, 10:50 PM

Tax write off?

duva1080 · 01-08-2010, 11:35 PM

Not sure what it is actually called or if it is just s deduction.

Accountant speak I am not well versed in, but I do know when I enter in the interest I paid, i get more money in my return.

**KeithBC** · 01-08-2010, 11:51 PM

I don't know about student loans in particular, but the general rule for loans is to pay of as much as you can as early as you can. Paying a lump sum into the principal early in the loan will save you a lot more than paying the same lump sum later, because it saves you all the outstanding interest on that sum.

If you pay the lump sum when your payment is, say, 10% principal and 90% interest (i.e. early in the loan period), each dollar you pay extra into the principal will save you $10 in interest. If you wait until your payments are 90% principal and 10% interest (i.e. late in the loan), each dollar you pay extra will only save you $1.10 in interest.

This certainly applies to mortgages. I can't think of any reason why it wouldn't apply to student loans too.

**Contrary Housewife** · 01-09-2010, 01:01 AM

Pay as much as you can as early as you can. The interest stacks up and adds to your principal. It's just like a credit card.

Interest paid on a student loan is tax deductible. Unfortunately I didn't find this out until close to the end.

**Greebo** · 01-09-2010, 07:01 AM

Do not even think about the tax write off except at tax time.

Yes, the interest is tax deductible. I don't care. If you pay 25% taxes, and your student loan interest is $10,000 in one year, then you just paid $10,000 to save $2,500. Not a good deal.

With ANY debt - it is always the most beneficial to pay as much as you can as early as you can. Usually only paying one extra payment monthly is fine - with the exception of Credit Cards, most loans don't add interest daily.

The earlier you pay down the principal, the lower the interest is for the life of the loan, which means you can pay it down all the faster and save all the more going forward, so never wait more than a month to pay extra.

**JoJoBean8** · 01-09-2010, 08:32 AM

My student loans have a daily interest based on the daily principal amount so I try to pay weekly on them. But I also have no other debts. When we were in credit card debt we paid all extra money to them and paid the minimum to the student loans. Now we can put some of that money into the student loan pay off and also put some into savings. I would only suggest you save money and pay it in a lump sum if you can get a savings account that has a daily interest rate that is higher then the interest rate you are paying on the loan. That is the only way it would be worth your while but getting that now a days is slim to none.

**qtkitty** · 01-09-2010, 03:53 PM

Now that i know that on my taxes I include the interest i paid on my student loan that will definately help some. I will have to pay a little each month thanks.

JoJoBean8~ you made me laugh .. i think i am paying 7% if i am not mistaken finding a savings or checking that would get that.. ohh got a good laugh .. i do not think that CD's would even get that its like a pot of gold to find one for 3-4%

**shoiji** · 01-09-2010, 04:05 PM

Most student loans it is best to pay off as much as possible before you need to make payments. This is usually applied to the principal. It is usually the interest rate that makes the loan repayment so long to finally payoff the loan.

Call you student loan provider about paying off the before it matures. Another option is to see about volunteering in the americorps. They also give money towards college tuition.

Do as much research as possible since there may be ways to repay your loan by working at a non-profit. Think it may depend on what type of non-profit, etc.

But I would definately go with repaying as much as possible before the loan matures. You really do not want to be working and paying ungodly large student loan payments, especially if you are just starting out in the work force.

**qtkitty** · 01-09-2010, 09:29 PM

I have been out of school for years and having consolidated, and had the loan put in forebarance, because of financhial reasons. Which has already made my loan balloon out of proportion. I had started with $17K and now the principal is $24K. ( when they say you pay for your mistakes they soooooo aren't kidding, right now I am seeing money as an evil evil thing)

I start my $175 a month payment this month, which i could probubly get lowered easily since even though I have a great job I still have medical under the state for my daughter. I have other debt that effects my credit score that I am working on now as well and trying to pay it down asap. I am putting $400 a month to just paying down debt, which thats the low end and I can pay more as I can.

For the area I am living in I am making good money, but it is not enough to live off of when you have a child. I live with my mom, so i do not have much over head. If i was on my own I litterally would not be able to pay for rent and electric on what i am making.

The mass majority of people who live in my area could or are on assistance programs. Sad but true.

As for working more, no offense, but I hardly spend time with my daughter as it is now. She gets up at 5 or 6 i get her dressed for daycare and get dressed and out the door by 7am and I am not home til 5:30-6pm depending on the weather. So when I get home I feed my daughter dinner get a bite to eat and then get her ready for bed and she is asleep by 8pm. The weekends which are interupted only by a normally 4 hour grocery shopping adventure with a list of items my mom wants ( i do not pay rent so thats my contribution.. usually a scary close to if not $200 a week granted i do get $16 in fs a month which almost pays for the milk my daughter drinks .. and our cuboards are PACKED and stuff spoils.. and yes i have talked to my mom about that issue and i get the pitty party story of poor poor mom paying everything when i have offered and even tried to hand her money to pay for actual bills instead of groceries ). I have actually been told by my own mother maybe if i was around more often that i would know what my daughter is doing. When i do happen to do something its on Friday and that is far and few between occations. * sighs * yeah i went on a total side line rant didn't I.. Opps sorry