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To which loans should I apply early payments?

Contributor

To which loans should I apply early payments?

I graduated from college in 2008 with ~$18K in student loans. Then, I immediately began graduate school (all-expenses paid PhD program). I'm still in grad school and will be until July 2014, so no payments are required on my loans yet.

 

Of my 5 loans, 2 are subsidized, and 3 are unsubsidized -- so I have already accrued interest on 3 of them. My loans will go into repayment in about 22 months (16 more months "in school," 6 months grace period), but I would like to make monthly payments of $50-100 until then to save myself money in the long run.

 

I'm not sure which loans I should be paying off, though. I realize that the accrued interest on the unsubsidized loans will capitalize if I haven't paid that off by the time they go into repayment -- but they have lower balances, and two have much lower interest rates (1.79%) compared to the subsized loans (6.8%).

 

Here are the details on the 5 loans. Can anyone suggest which loans I should put money toward for my remaining 22 months before they go into repayment? Thanks in advance.

 

                              Principle     Accrued interest    Interest rate

1-01 Stafford--Subsidized     $ 4462.00     $  0.00             6.8%

1-02 Stafford--Subsidized     $ 5500.00     $  0.00             6.8%

1-03 Stafford--Unsubsidized   $ 3201.96     $ 589.25            1.79%

1-04 Stafford--Unsubsidized   $ 4287.84     $ 795.95            1.79%

1-05 Stafford--Unsubsidized   $ 1455.42     $ 417.42            6.8%

 

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4 REPLIES
Established Contributor

Re: To which loans should I apply early payments?

The loans with 6.8 percent interest should be paid first. I would also pay off the unsubsidised loan interest now and while you remain in school. Once you are out of school and in repayment, I would make any extra payments above regular payment to the 6.8 interest rated loans.

Message 2 of 5
Established Contributor

Re: To which loans should I apply early payments?


greenpang wrote:

I graduated from college in 2008 with ~$18K in student loans. Then, I immediately began graduate school (all-expenses paid PhD program). I'm still in grad school and will be until July 2014, so no payments are required on my loans yet.

 

Of my 5 loans, 2 are subsidized, and 3 are unsubsidized -- so I have already accrued interest on 3 of them. My loans will go into repayment in about 22 months (16 more months "in school," 6 months grace period), but I would like to make monthly payments of $50-100 until then to save myself money in the long run.

 

I'm not sure which loans I should be paying off, though. I realize that the accrued interest on the unsubsidized loans will capitalize if I haven't paid that off by the time they go into repayment -- but they have lower balances, and two have much lower interest rates (1.79%) compared to the subsized loans (6.8%).

 

Here are the details on the 5 loans. Can anyone suggest which loans I should put money toward for my remaining 22 months before they go into repayment? Thanks in advance.

 

                              Principle     Accrued interest    Interest rate

1-01 Stafford--Subsidized     $ 4462.00     $  0.00             6.8%

1-02 Stafford--Subsidized     $ 5500.00     $  0.00             6.8%

1-03 Stafford--Unsubsidized   $ 3201.96     $ 589.25            1.79%

1-04 Stafford--Unsubsidized   $ 4287.84     $ 795.95            1.79%

1-05 Stafford--Unsubsidized   $ 1455.42     $ 417.42            6.8%

 


I would start with the 5th one.

1) It's your lowest balance so will be quickest to pay off

2) It's unsubsidized so you will continue to accrue interest, get rid of it!

3) It's one of your highest %rates

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Frequent Contributor

Re: To which loans should I apply early payments?

Pay #5 off first then #4 and finally # 3. Paying them off in that order that will save you the most money in the long run.Smiley Happy


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New Contributor

Re: To which loans should I apply early payments?

 


greenpang wrote:

                              Principle     Accrued interest    Interest rate

1-01 Stafford--Subsidized     $ 4462.00     $  0.00             6.8%

1-02 Stafford--Subsidized     $ 5500.00     $  0.00             6.8%

1-03 Stafford--Unsubsidized   $ 3201.96     $ 589.25            1.79%

1-04 Stafford--Unsubsidized   $ 4287.84     $ 795.95            1.79%

1-05 Stafford--Unsubsidized   $ 1455.42     $ 417.42            6.8%

 


I know about paying bills like this. Start with the unsubsidized loans because they are actively accruing interest. Then go in this order:

 

#5 because it is both the lowest balance in the unsubsidized group and the highest interest rate.

#3 because although it is the same interest rate as #4, it is the next highest balance

#4 because this is the next highest balance

#1 same as above

#2 same as above

 

The trick is to roll the payments into the next loan. For example: Say your minimum payment for the first loan, #5, is normally $25, and the minimum payment for your second loan, #3, is normally $50. You destroy the first loan as fast as you can, throwing every penny you can at it. When you move on to the second loan, you'll be paying a total minimum payment of $75 because the minimum payment for the first loan is absorbed and rolled in to accelerate the process. See how it works? The more of this debt you pay off, the faster it gets paid with this method.


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