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Paying Student Loans early...where to start?

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Sobo
New Contributor

Paying Student Loans early...where to start?

I will graduate in September 2014. I have student loans right now and then am relying on further student loans to finance the rest of school.

 

Would it be better to pay for the new school in cash and repay these loans when I graduate? Or should I pay off some of these loans early and continue to take student loans for the last year?

 

If I am going to repay loans early....do I "debt snowball it" and pay the lowest loan off first? Or do I attack those that are accruing interest right now? So I would pay unsibsidized first? Let Stafford sit .... would that save me the most $$ on interest?

5/17/13 Starting 627
Current Score 776
Goal 800
Message 1 of 6
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Simply827
Established Contributor

Re: Paying Student Loans early...where to start?

Pay for new schooling in cash and pay the interest on any current unsubsidized loans.


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Message 2 of 6
SCF
Valued Contributor

Re: Paying Student Loans early...where to start?

I think the best plan is the one that has you graduating with the fewest loans possible.  The less debt you have when you graduate, the more options you'll have financially going forward.  You may want to balance a concern for having some cash on hand as a small emergency fund (maybe $1000?) with taking out another small loan to help finish schooling, but pay for what you can in cash.

 

The choice between a debt snowball and starting with the highest interest rate is really a personal one.  You can use a calculator or spreadsheet to see how much interest you will save for one plan over the other, then consider if the savings for going with the highest interest rate is worth the trade-off of the pyschological benefits of going with a snowball.

Message 3 of 6
Simply827
Established Contributor

Re: Paying Student Loans early...where to start?

I rank my loans in terms of how dangerous/expensive they are when determining payoff. If you have any private loans, definitely get rid of them first. As for your Federal loans, it's again a personal choice, but If you have any loans with outlier interest rates (eg 3 vs 6.8), I'd knock those higher ones out first. 


Starting Score: 515
Current Score: EQ08 711 EX08 731 TU08 735
Goal Score: 740+

Amex BCP $25k | Discover IT $15.7k | Cap 1 QS $10k | PSECU $10k | Citi DC $9300 | Citi DP $6800 | Barclay Ring $6500 | PayPal Extras MC $5045 | DCU $5000 | Chase Slate $5000 | Barclays AA $4100 | Chase Freedom $4000 | Union Plus $1000 | Target $500
Message 4 of 6
Sobo
New Contributor

Re: Paying Student Loans early...where to start?

Thanks everyone. I appreciate the feedback.

5/17/13 Starting 627
Current Score 776
Goal 800
Message 5 of 6
SnackTrader
Valued Contributor

Re: Paying Student Loans early...where to start?

After having unsubsidized debt accrue since day 1 of college almost 7 years ago, and still not hitting the original principal, my advice would be hit that first. The only exception would be if you could avoid ADDITIONAL unsubsidized loans at a higher interest rate by paying cash for schooling today.

Let's put it this way - you will be paying interest on top of interest. It's always better to attack that first. By not spending a few thousand to avoid unsubsidized loans back in 2006 and 2007, I have been paying multiple thousands on capitalized principal and interest during the 3 years since graduation. It has been brutal.

Good Luck to you!

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Last App: June 27, 2015
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