topic Re: Paying off Student Loans in General Credit Topics

Paying off Student Loans

Anonymous — Mon, 03 Aug 2009 19:39:10 GMT

If I pay off my student loans by the end of this year (remaining balance is approx. $25,000), how much of an impact will that have on my credit score?

Re: Paying off Student Loans

llecs — Mon, 03 Aug 2009 20:58:39 GMT

If your score changes, it would go up or down, but only but a few single points, assuming you have no other open loans.

Re: Paying off Student Loans

Anonymous — Tue, 18 Aug 2009 16:59:16 GMT

It could bring it up or down. More information is needed. If that is your only account besides a CC then the mix will be decreased, which will be negative for your score.

However, if you have other mixes (auto loans, mortgage, etc) then it might do nothing or it might bring you up, since your DTI will be lower. I paid off a $15,000 private student loan and nothing happened (I have CC, one more SL still on my CR).

Do you have credit cards that have a balance? What are you looking for scorewise? If you need scores for a mortgage or something, that would make a difference.

Please post more information about your scores, debt, income, etc and a more detailed answer will probably come along. Otherwise I hope that helped you a little.

Re: Paying off Student Loans

Anonymous — Wed, 19 Aug 2009 18:42:28 GMT

From my knowledge, student loans shouldn't be a priority to pay off (if there are other active credit card balances or auto). This is due to the fact all interest paid to your student loans can be written off on your taxes. I think by showing on-time student loan payments over the years will aid your score and increase your account length / history.

Then again... paying them off in a lump sum would feel good.

Re: Paying off Student Loans

Anonymous — Wed, 19 Aug 2009 19:57:59 GMT

2,500 dollars of qualified student loan interest can be taken a deduction per year. I am unsure if married filing joint will get you double the deduction, maybe, maybe not.

Anything over the balance from normal stafford loan borrowings for a 4 year eduction will make out the 2500 dollar cap pretty fast.

Re: Paying off Student Loans

Anonymous — Thu, 20 Aug 2009 15:25:56 GMT

Regarding deducting interest in Student Loan Debt, only a portion of it is deductible AND, it is only deductible if you fall below a certain level of income in your tax filing (I believe it is $65K?) Even if you are married and filing Married but Separate they still take your spouses income into the equation. If you are filing Married/Joint chances are slim that you will be able to deduct the interest, because in all likelihood, you will be above the minimum threshold. However, in this type of economy, with so many people out of work, and joint incomes lowered, it is definitely worth looking into.

Filing jointly does not get you double the deduction.

IMO, that is one of the biggest problems with the student loan industry. We take out a fortune in education loans to try and get a better job, career, etc. With a better career comes a higher salary, and you are then unable to write off the interest that you pay in student loan debt....debt that students are almost encouraged to get. I pay close to $5K a year in just interest on my student loan debt, yet can't deduct a penny of it. I basically took out a mortgage ($140K with undergrad and law school) on my education...if I can write off the interest on my mortgage, I think I should also be able to write off the interest on my loans too.

Re: Paying off Student Loans

Anonymous — Thu, 20 Aug 2009 19:22:06 GMT

I guess if you had equity in a home, and a good rainy day cash reserve to cover multiple months you could roll some of the student loan interest into a cash out refinance.

I agree, it is the pits. I am unhappy enough with 60K of student loan debt that maxes out the 2500 cap.

Not a worry for those that get grants, subsidized loans, and tuition waivers. The go getters will shoulder the load!

Message Edited by DougH on 08-20-2009 12:22 PM

Re: Paying off Student Loans

Anonymous — Thu, 20 Aug 2009 21:43:29 GMT

We had actually discussed refinancing our mortgage to encompass my debt, but thankfully (and this is the only plus), my loans are consolidated at such a low level, that to roll them into the mortgage would actually increase the interest rate. However, the interest paid at that point would at least be tax deductible. We worked out the math, and at this point, it just doesn't make sense to convert student loan debt to mortgage.

Also...depressing thought, but if there is some horrible tragedy (like death), your loans die with you. Converting them into a mortgage extinguishes the "death" benefit. (horrid, right).

My student loan servicing center does several nice things though:

1. If you make online payments (EFT payments), they lower your interest rate by .25%

2. If you go 48 months with no late payments, they lower your interest rate by 1% and put the excess directly against the principal of the loan (thus driving it down).

It doesn't sound like very much, but believe me...it's really starting to add up!

Re: Paying off Student Loans

Anonymous — Fri, 21 Aug 2009 13:33:59 GMT

Mine a variable, but I had a very credit worthy cosigner (thanks Dad!) so they are very low right now.

What concerns me, and it would concern me just the same if I had some other variable interest rate that was pegged to the prime or libor, is the coming wave a big big inflation that I see in the not so distant future.

I would love to reconsolidate my loans into a fixed instrument, even if it was higher than what I have for APR currently. The comfort of knowing that these monthly payements aren't going to spike up 200-300 extra a month in a year or two would be worth the extra interest paid today.