Loans question

[Anonymous]

Good morning my FICO, I got a few questions about possible repayment of student loans. I am currently a junior (semester ahead from taking extra classes) at the top in state university. I am a business major (3.842 GPA), I currently get all tuition and books paid for thanks to scholarships. My family also owns a small business which I work at during the summer and have finally made a budget and stuck to it, so I have been working 45-50 hour weeks so pay has been super nice.

So as of the end of the summer I will have

1,400 in checking (food and spending money)

600-650 in a separate checking account that is for my student loan interest payments for the year

4,700ish in a discover savings account

I also have 100 in a local savings account making .01% a year.

My expenses for the year will be as followed

Rent with utilities – 330 (this is the most it could be)

Food – 150-200

Spending cash and dates – 50-60

Which would be 590 tops a month will more than likely be about 500-550.

I am looking to work during the year as I did last year and should make 9-11 dollars an hour and work 15-20 hours a week.

Work – 460.38 – 736.38 (varies because of hours and pay)

Parents – 150 (help me with food)

Which leaves me with 610 – 886.38 revenue. I could also go home a weekend a month and work to make an extra 100.

I currently have loans out with the following amounts and rates

Loan 1: 5,289/5,000 Federal loan @ 4.29% - pay $25 a month autopay

Loan 2: 4249/4250 @ 2.75%

Loan 3 2000/2000 @ 2.75%

The last two I pay interest off monthly.

My questions are 1. What should I do with the extra money every month?

1. Should I take out a loan with the 2.75% to pay off loan 1 (saves me about 100 dollars a year)
2. Should i close the small savings account and put it towards loan interest?

The expenses are purposely high to make sure I am safe for a random extra expense. I also don’t have any other expenses as I don’t have to pay for a car(paid for) or gas. Thanks for the input, I am open to any help.

[SouthJamaica]

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@Anonymous wrote:

Good morning my FICO, I got a few questions about possible repayment of student loans. I am currently a junior (semester ahead from taking extra classes) at the top in state university. I am a business major (3.842 GPA), I currently get all tuition and books paid for thanks to scholarships. My family also owns a small business which I work at during the summer and have finally made a budget and stuck to it, so I have been working 45-50 hour weeks so pay has been super nice.

So as of the end of the summer I will have

1,400 in checking (food and spending money)

600-650 in a separate checking account that is for my student loan interest payments for the year

4,700ish in a discover savings account

I also have 100 in a local savings account making .01% a year.

My expenses for the year will be as followed

Rent with utilities – 330 (this is the most it could be)

Food – 150-200

Spending cash and dates – 50-60

Which would be 590 tops a month will more than likely be about 500-550.

I am looking to work during the year as I did last year and should make 9-11 dollars an hour and work 15-20 hours a week.

Work – 460.38 – 736.38 (varies because of hours and pay)

Parents – 150 (help me with food)

Which leaves me with 610 – 886.38 revenue. I could also go home a weekend a month and work to make an extra 100.

I currently have loans out with the following amounts and rates

@Loan 1: 5,289/5,000 Federal loan @ 4.29% - pay $25 a month autopay

@Loan 2: 4249/4250 @ 2.75%

@Loan 3 2000/2000 @ 2.75%

The last two I pay interest off monthly.

My questions are 1. What should I do with the extra money every month?

1. Should I take out a loan with the 2.75% to pay off loan 1 (saves me about 100 dollars a year)
2. Should i close the small savings account and put it towards loan interest?

The expenses are purposely high to make sure I am safe for a random extra expense. I also don’t have any other expenses as I don’t have to pay for a car(paid for) or gas. Thanks for the input, I am open to any help.

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In my opinion you should be applying it towards your outstanding loans.

[Anonymous]

I agree with SouthJ.   Apply your extra cash toward paying down the highest interest loan. 

But also explore with the loan handler exactly how they handle making additional payments.  Some handlers will consider that "pre-payment" which means you are paying down the principal, but they also extend the next "due date" way into the future.  That means that you can pay the loan to a small balance (e.g. $70) and then keep the loan open for a long time with no payments.  The interest is trivially small and you get to keep this tradeline open for a long time.  When you finally do close it, it will be much older than if you had paid it off entirely in the next two years.

That's just an option, you'll know what is best for you.