@Anonymous wrote:
Lol you are the only.one who has ever replies to anything I poated it seems. I do wanna say I may not have made myself clear in that I know how the forgiveness works overall and that the loan won't be forgiven any sooner by paying towards it. The goal is to overall reduce my debt to income ratio as I'm gonna take a big hit on that with the loan amts as they are. My question was more of the does it make the most sense to pay down on the highest loan dollar amt which is also the highest interest rate and newest loan therefore making it be the one furthest away from being forgiven anyway or to try to pay off one of the lower amt ones completely and closing it out even though it has lower interest rate and would be forgiven and therefore gone sooner.
Haha! I guess we just have similar things going on in our credit profiles!
I understood the question, that is why I was saying that none of them will get forgiven faster. They will all take the same number of required months before forgiveness unless they are all on different plans? If you pay it off before the required number of months on your forgiveness track, then you will simply be paying them off and not speeding up any forgiveness amount.
Like my SO with $0 payments, it is not in his benefit to pay a penny because then he is throwing money in the wind otherwise, as the entire balance should be forgiven as long as he maintains his IBR annual certification. Nothing will be forgiven gaster if he pays it, he will simply be paying towards the balance to reduce the amount owed, but again, likely for nothing because those monies owed were being forgiven anyway. It is a waiting game. They can only hope his income goes up so that he woll be required to make payments on these loans at some point.
Also, no matter what you choose to pay, it still will reduce your DTI overall. They will not see it individually when calculating your DTI for a mortgage. I believe they calculate that themselves. They will not say, "oh she has 20% DTI on this loan and 300% DTI on this other loan". They will usually take the entire balance of the student loans combined and calculate 0.5% or 1% of that total balance owed as your monthly payment, and yes, even if you have a $0 monthly payment. That is just not how banks calculate these things. They want to know that you can repay all your monthly obligations at a more standard repayment level, not at a level that fluctuates and relies on yearly certification. They want to know what the monthly payment would be if it took, say, 10 years to pay off (give or take). Then they will your calculate your overall DTI by adding the rest of your debts in. If they have fixed monthly payments they will add that up, and if not, they will likely calculate your monthly obligation another way and then add up all those monthly obligations and that is your monthly debts. They will then divide that number by your monthly income (calculated usually from AGI on your tax returns) and that will be your DTI that they use for the mortgage app.
I hope that made more sense as to what I was trying to say above!
If you are trying to reduce your DTI and disregard forgiveness altogether, you would pay more towards the principle of any of your loans. I would look at the terms of your loans, though, as they are assuming based off your certfication that you cannot afford to make any payments, and I would be a little concerned that they may then decide next certification period that you can make payments. You also need to see if you make any payments (since your payment amount is $0) what that would be applied to? Interest or principle? Since you have $0 payments, it might he possible to request that any funds go towards reducing the principle. Just remember the more you pay, the less that is forgiven. I am no expert on forgiveness trqck and making additional payments. Most aim to get the lowest payment possible and ride it out until they are forgiven because the more time that goes by with reduced payments, the interest keeps building, and the higher your DTI, on the loans themselves, becomes. Not to sound alarming, I just would make sure to see where any paymenys you make are going and I know you have to specify where any overpayment is applied or it automatically goes towards the interest, which will not lower your principle balance nor the amount of interest accumulating daily. If it is applied towards the principle, the interest that accumulates daily will be reduced. I hope I have not made this more confusing, but SLs are quite confusing at times!
Perhaps someone else can chime in with some experience in this arena.
I would really reach out to a low income mortgage specialist and see if they can somehow count those $0 as just that since you are on IBR, instead of going the traditional route of calculating the monthly obligation for them. That would save your money for better use, like a downpayment, then throwing it in the wind where it would have been forgiven, anyway.
There are mortgages that calculate 0.5% for SLs, as I mentioned above, which would bring your monthly obligation down to $340-ish a month.
You would have to pay off a large chunk to make a real change in the calculation. To get $200/mo payment at the 1% calculation, that would mean paying down $48k on your SLs. Or $28k at the 0.5% calculation. Is that something that is feasible? That is a downpayment in itself. So before you start spending your money on your SLs, I would really would consider talking to mortgage specialtist to see what they can do to maybe assist somehow in the process.
Good luck!
