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Law Student--Looking for Advice

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jenn_bar
Frequent Contributor

Law Student--Looking for Advice

Hello,

 

I have recently taken much interest in my credit and finances, and I am looking to get some further information.

 

I currently will be entering my second year of law school, accruing about $50,000 (+$2.22/day of interest) of student loans through the Federal Government. I currently do not have any credit card debt (nor undergrad loans), and do not plan on living above my income during school. I have been toying with the idea of beginning to pay $2-300/month off of the loan.

 

FedLoans does not allow you to create "reoccuring payments" towards the loan "until it is due" and I was wondering why this might be. It is just to benefit them by gaining more interest and therefore sinking deeper into my pockets?

 

Do you suggest slowly starting to pay them off or waiting until I am out of law school to take care of it? I am fearful that as the loan increases, my credit score will slowly lower, when I am currently at 716. Is this true? If it is any help, I currently have two Chase cards (Sapphire Preferred and Freedom); each with $5,000 CL. I also always pay it off every three days or so to keep it below 5-10% credit-to-debt ratio. Is there anyway that I can continue to keep my score up with these cards even with my student loans increasing?

 

Thank you!

 

-Frugal, Frugal Law Student

Message 1 of 5
4 REPLIES 4
webhopper
Moderator Emeritus

Re: Law Student--Looking for Advice


@jenn_bar wrote:

Hello,

 

I have recently taken much interest in my credit and finances, and I am looking to get some further information.

 

I currently will be entering my second year of law school, accruing about $50,000 (+$2.22/day of interest) of student loans through the Federal Government. I currently do not have any credit card debt (nor undergrad loans), and do not plan on living above my income during school. I have been toying with the idea of beginning to pay $2-300/month off of the loan.

 

FedLoans does not allow you to create "reoccuring payments" towards the loan "until it is due" and I was wondering why this might be. It is just to benefit them by gaining more interest and therefore sinking deeper into my pockets?

 

Do you suggest slowly starting to pay them off or waiting until I am out of law school to take care of it? I am fearful that as the loan increases, my credit score will slowly lower, when I am currently at 716. Is this true? If it is any help, I currently have two Chase cards (Sapphire Preferred and Freedom); each with $5,000 CL. I also always pay it off every three days or so to keep it below 5-10% credit-to-debt ratio. Is there anyway that I can continue to keep my score up with these cards even with my student loans increasing?

 

Thank you!

 

-Frugal, Frugal Law Student


Hi and welcome to MyFICO forums!

 

I think that the effect of an increasing federal loan balance is minimal to your score.  At most it will keep your AAoA low, but then, six months after the loan is opened, things should return to normal.

I think you can set up a recurring payment from your bank or credit union's online bill pay service with no problem, therefore "pushing" the payment to them each month.

FICO 9:
Filed Chapter 13 on 6/1/2017 after job loss. Discharged 6/1/2022.

Goal: Gardening!


Message 2 of 5
SCF
Valued Contributor

Re: Law Student--Looking for Advice

I suspect the reason you can't set up auto-pay has more to do with the servicer's computer system than a desire to get more interest out of you.  They may just not have a way to set up a payment without having an amount due and due date for your account.  It's also not the most common request, while some students will make occasional payments to reduce interest and prevent it from capitalizing, I suspect only  a small minority have enough extra money (and discipline) to make a steady payment each month during their studies.  The suggestion of using your bank's bill pay to "push" the payment is a solid one.

 

Utilization is really only an important factor on revolving accounts, it has basically no impact on your score for installment accounts (like student loans), so I wouldn't worry about a large loan balance decreasing your score.

Message 3 of 5
GST2008
Frequent Contributor

Re: Law Student--Looking for Advice

The amount your student loans will affect your credit score are minimal, maybe a point or two.  I monitored the amount throughout graduate school and there was really no effect on score, with the exception of when I consolidated and then had them transferred to a different company.  These changes were only a point or two and had more to do with the AAoA rather than the actual amount.  The changes in more score over the past few years have been more heavily influenced by CC usage.

 

Now that I am done with school, I have a huge student loan balance reporting and my scores still haven't decreased.  As long as you are making the payments on time, you should be good.


Current:
TU (5/14/14): 796 (Inquiries; 8/23/13)
EQ (3/23/14): 791 (Inquiries: 8/23/13)
EX (9/24/13): 780 (Inquiries: 7/2/12; 11/20/12; 7/30/13; 8/23/13)

Goals: No new inquiries for 2014, 800 for all CRs by 12/31/14
Message 4 of 5
jenn_bar
Frequent Contributor

Re: Law Student--Looking for Advice

Thanks so much and I am so happy to hear how little they affect your credit score. Smiley Happy

Message 5 of 5
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