Money/tuition question/woes...

I started a $$$$ doctoral program. I was approved for the maximum amount of loans, and can defer repayment until I graduate in three years. I am working full-time now, so I don't know if I should start paying back right away. I think I could afford $500-700 repayment a month now. In three years even if I will be making more we want to sell our condo and buy a house, so I don't know if totally deferring makes much sense now...I have to hand in my loan request soon and cannot decide what to do.

ETA: The rate for the loan is 2.77% now, and will probably be higher in three years...

do it now.

Trust me - loans are rotten!

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Posted by Shorty McBride

do it now.

Trust me - loans are rotten!

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Either way, it's $45,000 of loans. $500 a month is a drop in the bucket.
ETA: Thanks though!

i would play it by ear.... its always best to repay sooner then later.. intrest rates on education loans or low but it will add up.
if i were in this position...i would split half and half between loan payment and saving. if you have enough money saved up, you can make an additonal payment in the furture...or say somthing comes up (buying books, etc..), you will have access to it. you just have to be good about it.

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Posted by hbradio

If you can do it, do it now!!!! You never know when there will be a time when you cant for whatever reason and doing it now will make you that much ahead! I lost my job in Oct 02 and I called my loan place to tell them and they said not to worry cause I was current up to March 03.

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That's true! Also, should I put the majority of my savings into the tuition, or just take loans instead? I like having $ in the bank, and the rate it is getting in the bank is almost the same as the loan rate.

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Posted by MCDO15

i would play it by ear.... its always best to repay sooner then later.. intrest rates on education loans or low but it will add up.
if i were in this position...i would split half and half between loan payment and saving. if you have enough money saved up, you can make an additonal payment in the furture...or say somthing comes up (buying books, etc..), you will have access to it. you just have to be good about it.

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Thanks--the good thing is everything is covered in tuition--I got all 52 textbooks and a laptop at Orientation!

I think I would pay it off now.

That's one of the things that kept me out of grad school... the debt would have been enormous and I couldn't pay it off while I was in the program.

Good luck!!

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Posted by MonkeyLuv

I think I would pay it off now.

That's one of the things that kept me out of grad school... the debt would have been enormous and I couldn't pay it off while I was in the program.

Good luck!!

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Thanks--the white lab coat will make it all worthwhile (it doesn't matter that it is an EdD program, does it? )

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Posted by nov04LIbride

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Posted by MonkeyLuv

I think I would pay it off now.

That's one of the things that kept me out of grad school... the debt would have been enormous and I couldn't pay it off while I was in the program.

Good luck!!

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Thanks--the white lab coat will make it all worthwhile (it doesn't matter that it is an EdD program, does it? )

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As long as 'Doctor' is involved in the title, I'd be writing out prescriptions!

It's so funny that you posted this because I just resolved today that I have to start thingking about my next degree. I think it really depend son your situation. But I would really try to pay now because even if you defer interest will still be accruing even though payments are not due. I could have continued to defer my loans for undergrad since I have no yet graduated and I'm partially disabled, but FH decided to just start helping me pay it off. It's better in the long run. You'll end up paying less and if it's a variable rate, the rates are only going to go up. you just never know what's going to happen in the future, so it's probably better to just start paying it now.

Best of luck

Since I just graduated law school and have several loans, I recently had a meeting with a financial advisor to discuss the same situation that you're discussing here. I also got a 2nd opinion (yes, I take this $hit more seriously than having my arm cut off) and was given the same information.

Basically, it all boils down to whether you have federal subsidized, federal unsubsidized or private loans. If you have federal subsidized loans the gov't pays the interest on them while you're in grad school, and you have a 6 month deferral period after you complete your degree. If you have federal unsubsidized loans they do accure interest while you're in school, but you can choose to either pay that interest when the 'bill' comes in, or you can defer it until 6 months after graduation as well. They're not big payments at all, so I paid that interest while I was in school (some were as low as $18). All of your federal subsized and unsubsidized loans can be consolidated either during your deferment or after you have to start paying them, but not during school. By consolidating the loans you can fix your rate. They also give you incentive programs (ex.- if you pay on time for 24 months, your interest rate drops by 1%, and if you have it automatically deducted from your checking acct. it reduces your rate by another .25%). I got lucky b/c the rates were incredibly low when I consolidated, after 2 years I will be paying about 1.25%. They warned that these rates are expected to increase, probably sharply during the next few years.

If you have private loans, they cannot be consolidated or fixed. They will always have a higher interest rate, and those are expected to continue to increase as well.

So with that information in hand, I was told never to pay off federal subsized or unsubsidized loans early when you can get such a good rate. Reason? You will generally always have something with a higher interest rate that should be paid off first (i.e.- mortgage, car loan, credit card bills). Since private loans have a her interest rate, if you have these then you should be dumping any extra money you have into them to get rid of them ASAP. Since the rates on the other loans are so low, they are basically free money...so unless you have absolutely nothing with a higher interest rate to pay off, and tons of extra cash laying around, there is no reason to pay it off early.

Sorry so long...but I sat through long meetings for that.

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Posted by FTRBRIDE

Sorry so long...but I sat through long meetings for that.

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My FI just sat through those same meetings...that was a good explanation of it!!

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Posted by acre730

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Posted by FTRBRIDE

Sorry so long...but I sat through long meetings for that.

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My FI just sat through those same meetings...that was a good explanation of it!!

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So even though rates are now raising dramatically, it is better to do the federal unsubsidized and pay back gradually (and pay off interest while in school)? I do have savings I can dip into, but I don't know if that makes financial sense. It is making about 3% interest in the bank, but I don't know if I can consolidate the loan now (I started this summer) to keep the 2.77% rate it is now.

You can consolidate while you are still in school.. that is what I did (I am in my last semester and don't need any more money)...

Basically what I did was take 2 lumps of $$$ (10K 2 times) for my degree (which wound up being like 21k)... Basically the money would go right to the school and then the second half would come to me, which I put in a separate savings account at 3% until I needed it... so basically the money was earning the interest I was paying back to the government... does that make sense?