Student Loan Intrest

[RedCherries05]

Student Loan Interest

 

[SweetErika]

No, if you pay off the principal, it all goes away, including any future interest. In most respects, it works like any other loan, including credit cards (they don't charge you interest if you pay off the balance each month, or your car/mortgage in one lump sum).

Yes, interest rates vary. With some loans, it doesn't accrue until you're out of school, whereas others start immediately, or the interest is a reduced rate until you graduate (and sometimes there's a 6-12 month deferment period after that). However, if you use certain lenders, you will not be able to change your loan to a lender that has lower rates, so if you haven't gotten the loan(s) already, choose a lender wisely and ask if the lender will "release" your loan to another lender or not.

You should be able to figure out what's best for you and answer your questions by talking to the Financial Aid office and googling (start with 'student loans'). Here are a couple of pretty good resources to start:
http://www.finaid.org/loans/
Suze Orman's Paying for College: http://www.suzeorman.com/igsbase/ig...=20&SnavID=101&TnavID=&AreasofExpertiseID=167
Advice on consolidating (which can save you a ton since interest rates are rising): http://www.suzeorman.com/igsbase/ig...D=20&SnavID=20&TnavID=&AreasofExpertiseID=156

 

[RedCherries05]

Thank you so much! That really helped!

 

[ShinigamiSama]

in BC here we dont pay interest untill 6 months after you leave full time school

and after that its I believe 11%

else where I have no idea
I do know however, I am going to try an pay as much as I can in the first 6 months of my intrest free period

 

[cat_and_bear]

It also varies over the world.

Go to your bank and ask to speak to a financial advisor they should be happy to help you with the basics free of charge. (Here in Australia any way)

The student loans we have here in Australia are not worth paying back. They are only indexed by CPI. Your employer should be withholding some of your income for the minimum payments they will all be paid for you with your tax.

As it’s only indexed by CPI it never really 'grows' so there is no benefit paying it off sooner. In fact if you have the unfortunate luck of being struck down young the upside is that its canceled and your loved ones don’t owe a thing. (so basically don’t pay it, just put your money in to some other investment that can be left to your family on the off chance you get hit by a truck)

Im not very familiar with the way student loans work in the rest of the world but you Americans look like you have one hell of a raw deal.

~Bear

 

[SweetErika]

It also varies over the world.

Go to your bank and ask to speak to a financial advisor they should be happy to help you with the basics free of charge. (Here in Australia any way)

The student loans we have here in Australia are not worth paying back. They are only indexed by CPI. Your employer should be withholding some of your income for the minimum payments they will all be paid for you with your tax.

As it’s only indexed by CPI it never really 'grows' so there is no benefit paying it off sooner. In fact if you have the unfortunate luck of being struck down young the upside is that its canceled and your loved ones don’t owe a thing. (so basically don’t pay it, just put your money in to some other investment that can be left to your family on the off chance you get hit by a truck)

Im not very familiar with the way student loans work in the rest of the world but you Americans look like you have one hell of a raw deal.

~Bear

Yep, it's completely different here, and we do get a raw deal, especially since our monkey of a president decided education wasn't important and helped interest rates rise exponentially in the past few years. My loans (from 2001) are at around 3%, yet the Bushman and his lackeys in Congress pushed the rate up to more than 8% recently, basically saying "the US doesn't care about higher education and having an educated workforce."

 

[bighornedsatyr]

Yep, it's completely different here, and we do get a raw deal, especially since our monkey of a president decided education wasn't important and helped interest rates rise exponentially in the past few years. My loans (from 2001) are at around 3%, yet the Bushman and his lackeys in Congress pushed the rate up to more than 8% recently, basically saying "the US doesn't care about higher education and having an educated workforce."

While I hate Bush as much as the next guy, I don't think you can blame him for the increase in rates. The rates of Stafford loans (which are the type of most college loans) are set by adding a fixed amount to the 3-month T-Bill rate. In 2002, the economy was in recession, and the T-Bill rate was low, if you consolidated your college loans then, you would have received the very low rate of 3.5%. Now the economy is doing better, and the Fed has raised interest rates to keep a lid on inflation and the interest rate is roughly 3 points higher. Add back in the 0.6% discount you would have gotten for consolidating in 2002, and that explains nearly all the difference.

http://transcripts.cnn.com/TRANSCRIPTS/0205/28/ltm.11.html
http://research.stlouisfed.org/fred2/data/DTB3.txt

I don't know if I'd agree that the rates are high. I'd make the case the principal itself has gotten too high.

 

[SweetErika]

While I hate Bush as much as the next guy, I don't think you can blame him for the increase in rates. The rates of Stafford loans (which are the type of most college loans) are set by adding a fixed amount to the 3-month T-Bill rate. In 2002, the economy was in recession, and the T-Bill rate was low, if you consolidated your college loans then, you would have received the very low rate of 3.5%. Now the economy is doing better, and the Fed has raised interest rates to keep a lid on inflation and the interest rate is roughly 3 points higher. Add back in the 0.6% discount you would have gotten for consolidating in 2002, and that explains nearly all the difference.

http://transcripts.cnn.com/TRANSCRIPTS/0205/28/ltm.11.html
http://research.stlouisfed.org/fred2/data/DTB3.txt

I don't know if I'd agree that the rates are high. I'd make the case the principal itself has gotten too high.

I consolidated a couple of years ago (not in 2002; maybe '04, before rates started rising), and am at about 3%. The following is what I was referring to:

http://money.cnn.com/2005/12/22/pf/college/congress_loans/index.htm?postversion=2006020807
Students to face heavier debt burden
Report: Congress cuts $12.7 billion from federal student-loan programs.
February 8, 2006: 7:40 AM EST
NEW YORK (CNNMoney.com) - Congress cut funding for federal student-loan program on Wednesday, raising the cost of attending college for many future students, according to a published report.

The Senate passed a deficit-reduction package that calls for $12.7 billion to be cut from federal student-loan programs over five years, the Wall Street Journal reported Thursday.

It is the largest single cut the federal government has made to student aid programs and is expected to increase the debt burden of students and their families as many borrowers of student loans will face higher interest payments, the newspaper said.

According to the Journal, Congress raised interest rates on Stafford loans to a fixed 6.8 percent. Right now, rates on Stafford loans, which are variable and reset each year, are as low as 4.7 percent, the paper said. Stafford loans are popular among students because they don't have to demonstrate need to qualify for one.

The new legislation also raises interest rates on Parent Loans for Undergraduate Students to a fixed 8.5 percent from a variable rate currently set at 6.1 percent, the Journal said. Also known as PLUS loans, these loans are granted to parents rather than students.

The move to fixed rates will cost students and their families thousands of dollars over the life of the loan, the report said, citing estimates from Mark Kantrowitz, a financial aid expert.

If a student consolidated a typical Stafford loan balance of $20,000 at the new rate compared with the current low rate, he would be paying over $2,000 more in interest over a standard 10-year life of the loan. With PLUS, parents would be paying nearly $3,000 more, the Journal said.

The cuts were part of a $40 billion deficit-reduction package the Senate passed that also affects Medicaid and pension insurance, the report said. Many of the changes would take effect July 1, 2006, the Journal reported.