Paying on subsidized loans while in school

[Anonymous]

I have a few subsidized loans (a total of around $3000). I and currently a sophomore. I am thinking of using my tax return and few extra dollars to pay one of the loans off completely. I would also like to pay whatever I can on the loans perhaps $20-$50 a month.

Would there be any issue doing this? Would it prevent loans in the future if I should need them? Is there anything I should keep in mind?

[Anonymous]

Paying off a loan while you are still in school would be great. Basically amounts to an interest free loan. I would have done the same but all my money went to bills and other expenses. I only borrowed what I couldnt pay on my own.

It will still be a positive on your credit report. My student loans are 3 and 2 years old respectively even though I only started paying them back this summer when the grace period ran out, definitely a boost to my AAoA.

It should only help you if you seek new loans or credit down the road by paying them off whenever you can by lowering your total debt.

[p-]

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@Anonymous wrote:

I have a few subsidized loans (a total of around $3000). I and currently a sophomore. I am thinking of using my tax return and few extra dollars to pay one of the loans off completely. I would also like to pay whatever I can on the loans perhaps $20-$50 a month.

Would there be any issue doing this? Would it prevent loans in the future if I should need them? Is there anything I should keep in mind?

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If you have a mix of different loan types, prioritize private loans over federal, and also pay highest interest loans first, to save money when you get out of school.  In any case, the less debt hanging over you at graduation the better.

[Anonymous]

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@p- wrote:

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@Anonymous wrote:

I have a few subsidized loans (a total of around $3000). I and currently a sophomore. I am thinking of using my tax return and few extra dollars to pay one of the loans off completely. I would also like to pay whatever I can on the loans perhaps $20-$50 a month.

Would there be any issue doing this? Would it prevent loans in the future if I should need them? Is there anything I should keep in mind?

---

If you have a mix of different loan types, prioritize private loans over federal, and also pay highest interest loans first, to save money when you get out of school.  In any case, the less debt hanging over you at graduation the better.

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+1

I would also like to chim in that if you have CC debt or private loans to actually consider applying for another subsidized loan and paying off the higher interest loans. I did the above a while back by applying for a computer loan which was subsidized and ended up getting a cheap computer and paying off some of my CC balance.

[Anonymous]

Well I have two loans at this point. One from freshman year and the one from this year. Both are subsidized. I have no credit card debit as I PIF and save if I want something big.

The one I was planning on paying off is for about $700 and it has a rate of 3.5%. The other is for about $2000 and is at 3.5%. My plan is to get rid of the first as after graduation that would be one less payment as I will have the money to pay it off. 

[Tazman81]

Nice work Kilps.  Keep up the good work.  I know that you are anxious to pay off your debts (which is good), but I would recommend that you keep some money in a savings as an emergency fund.  If you already have a nice amount saved up, then yes, start paying off your debt and it will have no impact on you getting new loans in the future.  Validate that both are truly subsidized loans.  If you have any unsubsidized, pay those off first.

[Anonymous]

Both loans are verified as subsidized loans. I do have about $1000 as an emergency fund put away and am adding to it little by little so I think I am going to pay it. As you said, I am just a little anxious about it.

[thebanjoman]

If I were you, I'd set the money aside in a bank account (some in a savings account, and/or some CD's) while you're still in school.  As long as you're in school, those subsidized loans are interest free (to you).  You'll make a few bucks in interest, and won't be any farther behind.  Heck, if you've got something like Ing Direct (or anywhere else you can slap on a new savings account like it's nothing), you can even name the account "Student Loan Payment" so you don't touch it inbetween.

While your first two loans are subsidized, there's always a possibility that (for some reason) your Junior/Senior year loans may become unsubsidized loans.  There's also a very, very powerful amount of freedom that can come from the flexibility that a turbo-charged emergency fund can give.  As long as you don't touch the funds, you'll have that money there to pay off your loans on graduation day before you have to pay any interest.  If something does arise in the mean time, you've got the funds there if and when needed.  

As others said, if there's non-student loan debt, or non-subsidized loans, you may want to pay those off first.