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Student Loan Interest Rates 2010

Debbie Said:

Should I pay off my student loan or wait until I finish my Ph.D.?

We Answered:

I say do a 3rd option, and that would be pay off half of your loan. That way you still have that cushion in emergency's, but the debt is less and you wont pay as much interest in the end. If you had more then $1000 left in your account I would say go ahead and pay it off in full to avoid the interest accruing each year, but you don't and cr@p happens when you don't have the money, lol. So pay off half to at least make your mind more at ease with the whole thing.

Willie Said:

Balance of student loan onto a credit card!?

We Answered:

Credit card rates are much higher then student loan rates.

If you believe you can pay a credit card payment then make arrangements to open an account at a local credit union or a local bank of your choosing that is not your regular bank. Any where but Bank Of America. Then write a check and deposit it every month. Don't look at the balance and don't check on it. Then, build up a nest egg that you can have to pay that loan or get you out of a jam if need be.

It is recommended that you put away three months salary.

This will protect you and is much better then a credit card.

Is there any way he can apply for subsidized loans?

Jackie Said:

Cap student loan payments and forgive them for those in public service? More Lib giveaways?

We Answered:

Okay, let's THINK and find everything wrong with this.

1) We can't get kids to finish high school. Funding college is not the problem. Let's identify the problem and fix it. Obama's plan will help a very small percentage of kids in poverty.

2) Why is it a good message to say we should take a loan out and it will be forgiven in 20 years? What is my incentive to pay it off sooner? Why should others pay for my education?

3) Even if we were able to create this wonderful land of gum drops and candy canes, and every single person were able to then go on and get a 4-year degree, do you know what would happen? Do you understand supply and demand? If everyone has one, it's useless. Then you'd need at least a Master's Degree to deliver pizzas.

So why do the Democrats continue to push programs that sound nice to the politically ignorant public, yet will cause more problems than they will solve?

Lucille Said:

Should I take out a student loan to pay off debt?

We Answered:

If you can manage the debt without going into bankruptcy, go nuts. Sounds like a good idea.

Susan Said:

Advice on paying back my student loan (UK only)?

We Answered:

Your student loan won't generally affect your credit rating or whether you will be approved to get a mortgage. It just sort of 'there'.

The reality is that a sizeable number of people will never pay off their student loan because of the way its structured and others will only ever pay the interest. It might sound bad, but that's the reality. As someone who hates having debt, I find this quite a difficult concept. I don't like the idea of having debt hanging over me, and I suspect that you feel the same. I also get annoyed at the attitude some others have to debt and the fact they don't have the responsible attitude to trying to pay it off, so I admire you trying to do so.

Presently, putting money into an ISA won't gain you much interest. The advice that is commonly being recommended at the moment is that with interest rates so low, is generally that it is better to pay off debts. However given that student debt in most cases isn't going to affect your credit, then it makes the general advice a little more complicated though, especially given your age and the fact that you are unlikely to own property.

This is the big crunch here you have to consider what you plan to spend money on in the next few years. If you intend to save a deposit for a house, then I personally would put the money into saving with a view to doing that and building a secure future with that - otherwise you could find yourself waiting a lot longer to get a property. Paying off the loan earlier, could in theory loose you more money if you have to rent for longer. (Hope you are following this logic!).

If I was in your shoes and didn't have a property I certainly would treat this as a preference rather than making additional student loan payments at the moment, as the interest rate is still fairly low. If it increases, then yes I would reconsider that position.

I think it really depends on the bigger picture of your financial position and your plans for the next few years. Don't think that the thing that on paper looks the best option at first glance is necessarily the best one though!

Edit: If you are trying to buy your first home think about how interest rates are likely to change in the next 12 months and what the housing market is likely to do, when you are considering what to do with your money.

At the moment interest rates can't go any lower - so mortgage rates are as attractive as they are likely to get. Its highly likely that this will change and interest rates will start to go up again - in which case the longer you wait to get a mortgage, the higher the rate you might be paying is. (Fixed rate mortgages in this situation are probably the safest bet if you are happy to lock yourself into one for a few years). Which makes the scenario that the longer you take to save that deposit again look unattractive in terms of making your money work best for you. Think about what 1% means in compound interest terms for say a £100,000 mortgage over a 5 year fixed term in comparison to the interest on your student loan. Being able to take advantage of getting a lower rate could save you a lot of money in the long run.

Obviously this is a gamble and speculation about what the economy is likely to do. It is difficult to guess but you can take calculated risks and judgments.

You need to look at the big picture here - by the sound of it, you are in a good position right now, especially in comparison to many other graduates.

Audrey Said:

Should I pay minimum payments on Student Loan or extra 200-300 each month?

We Answered:

If I were you at this point, with all conditions as you've reported them, I would consider that 3 1/2 % debt to be a bargain. Rather than making additional payments on the principal, I would add to savings, and do some research into ways of investing that savings to provide growth that will exceed 3 1/2 %. The mutual funds are one way, but mutual funds extract quite a cut each year for their own profits. Exchange Traded Funds (ETFs) charge far lower fees and perform comparably.

With a 20-year horizon, you can probably afford to allot a portion of your investment fund to more speculative issues, such as stock options or foreign exchange trading, in case such shorter-term trading might appeal to you. There are risks, of course, and the more you know, the better you can do, but the returns can be phenomenal! If you'd rather give your attention to other matters, just diversify your holdings to position yourself defensively, and let the money managers have their way with your portfolio.

In 20 years, your savings should have doubled at least a couple of times (even at an average of about 7 % per year), though inflation will erode the value of those dollars over time. Your high-risk speculation account (maybe 10% of your total savings, at most) could exceed the value of the rest of your equity.

Whenever the variable rate on the debt increases to an amount that exceeds what you can conservatively expect to earn by investing, it'll be better to use your savings to reduce the principal amount of the loan. That'll be a guaranteed rate of return, so it justifies a bit of a premium. In other words, if your principal has been paid down to $100K and the interest on it has gone up to 9% and your current earnings on your investments is averaging 10%, it would probably be to your long-term advantage to switch to paying down your debt, since the 9% at that point is "real" money, while the 10% is always tentative.

Norma Said:

Student Loan advice needed :(?

We Answered:

I would go through either U.S. Bank or your local bank. Pretty much every bank out there has student loans available. I have heard some horror stories about Sallie Mae but I have no experience with them.

Also did you look into a work study job? If you are willing to do that then you get more financial aid. You can either work and get a paycheck or work and have it applied to your tuition. Might be worth checking out.

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