Friday, February 19, 2010

Student loans

I got a letter in the mail today alerting me that my six-month grace period for repaying my student loans has kicked in--even though I'm still in school!

I was under the impression that the grace period extended until graduation, but since I am only taking one seminar class this semester, I'm considered less than half time so my six months has started. Tonight I started looking into consolidation, and what I found was very interesting!

(A lot of this might not be new to some people, but I was very lucky and had no student loans in undergrad, so it's all new to me.)

First of all, during my grace period, the government will continue to pay the 6.8% interest on my subsidized loans (which total $19,568) until June or so. They won't pay the interest on the $263 I have in unsubsidized loans (also at 6.8%).

Now, if I consolidate, I can lock in the "fabulous" rate of 6.875%--.075% HIGHER than the rate I have currently. If I elect to do electronic debit, I shave off 0.25% for a rate of 6.625%--but then I'm stuck with the minimum payments (I think...I could probably make additional payments but I'm not sure that the .25% "savings" makes sense compared to the plan I'm about to outline).

I currently have $3,941 in the tuition reimbursement fund and I will get an additional $5,000 for 2010, plus I'm putting away $250 a month for repayment. I will have to pay another $2,500 or so for my final summer seminar out of pocket.

So my plan is to begin repaying my loans today--I'll pay off the $263 in unsubsidized loans and knock them out entirely. Tonight. Then, I'm going to take advantage of the fed's generosity and leave my $3,941 in ING where I'm earning 1.15% (ooooouuuuucchhhhh--that used to be nearly 5%!). The day my grace period is over, I will drop the entire student loan repayment fund onto the balance, and start paying what's left back on an aggressive, accelerated schedule (at least double the minimum).

I'll keep checking in on the consolidation options and see if the interest rates get any lower and give me additional savings, but I think this is a pretty good plan.

What do you think?

2 comments:

  1. This is exactly what I would have suggested.

    I consolidated my loans, and now I can't pay off just my unsubsidized loan. It made me bitter, especially when they were deferred during grad school.

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  2. Great plan, if we can't earn a good interest rate anymore, at least you can avoid paying high interest rates as well. And good dodging the consolidation trap with your unsubsidized loan as well.

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