topic Re: Payment/Credit Score Optimization in Student Loans

Payment/Credit Score Optimization

Anonymous — Tue, 06 Oct 2015 18:17:42 GMT

Background: I currently have 11 student loans on my reports, from various lenders. Each one shows up as an individual open account. I am still in school so no loan payments are due yet. I work full time and would like to start paying for these now, before I graduate.

I know these report as insyallment loans in good standing, but they are also 11 open accounts...this has been a reason for a recent CC denial (too many open accounts).

Knowing that open and regularly paid student loans can actually help my CS, am I better off paying them off one at a time (starting with highest interest) until I get to the last open one, which I would make the monthly payments on, or trying to consolidate now, even though I know I'll need more loans over the next two years? If I do keep them seperate to pay off, would paying them one at a time in a single lump sum hurt my score? In other words, would one single student loan with a big borrowed amount look better than <11 student loans with smaller balances?

None of these loans are in default, since I'm still a student. They report each month as "current", "pays as agreed", and "student loan deferred".

Thanks for reading!

Re: Payment/Credit Score Optimization

SCF — Wed, 07 Oct 2015 01:31:49 GMT

If you're still in school, there's no reason to consolidate. Ultimately, consolidating has very little impact on your score because the original loan accounts will remain on your report for ~10 years. Paying off your loans starting with the highest interest rate first is a great idea, and will save you more money than other pay-off strategies.

If you have money to pay off loans now, you should first pay toward any loans disbursed in the last 120 days. Those payments will count as a cancellation payment and reduce the principal of the loan. Any origination fees or interest paid on the cancelled amount will be refunded, it will be like you never borrowed that money in the first place. After that, focus on unsubidized loans (which usually have a higher interest rate) because they are accruing interest while you are in school. If you have them, private loans should be a priority for the same reason.

Re: Payment/Credit Score Optimization

Anonymous — Wed, 07 Oct 2015 01:55:08 GMT

Thanks, that was a thorough answer and just the sort of good advice I was looking for!

Re: Payment/Credit Score Optimization

Anonymous — Tue, 13 Oct 2015 04:13:52 GMT

It's always a good idea to pay on your SLs while in school because it will lessen the amount you owe after graduation. Best of luck!