DISQUS

Swamp Fox · 9 months ago

Why pay anything towards this loans? Given how low the rates are and the tex-deductiblity of the interest, I would invest the the monthly payments instead (stocks if you think the market has reached bottom, municipal bonds from your state if you are leery of the market). This way, you'll likely be no worse off, and probably better, than paying the loans. Once your deferment is over, either make a lump sum on the loans, or if your financial situation allows, ride the investment out. In addition, you'll have the flexibility to cash out the investments if you have unexpected expenses or it takes longer to find a job out of school. Once you put money towards that loan, you'll never have access to it again.

Re: taking out a small loan, no. First, it would be heard to find an unsecured loan offering a better after-tax rate than your student loans. Second, why bring another lender into the picture. Third, a bank loan won't have the same protections (e.g., deferement for unemployment, economic hardship) and won't be tax deductible.

Finally, if you're going to keep paying off the loans, why put any towards the lower interest loan now. Put everything towards the higher rate loan.

Rassah · 9 months ago

I agree that it's almost impossible to get a lower interest loan than a student loan, and the only other option that popped into my head was a 0% intro APR credit card. Problem is, they charge at least $90 for a cash transfer, and that's already 3% to 4% of the $2,000 to $3,000 that the reader wants to borrow.

(Running the numbers and amortization schedules in Excel...)

After running the numbers, I realized that this will not be worth it, because the student loan continues to compound interest on top of interest. Even if you borrow $3,000 at 0%, and concentrate on paying that off during the first year, you will save $2,700 on the larger loan, but due to that $3,000 simply being shifted, will actually be $2,700 - $3,000 = -$300 worse off. Unless the reader is able to continue paying the $300 a month on the large loan, AND pay off the new $3,000 loan in one year AT THE SAME TIME, it's not worth it. And if they can do that, it's better to put that money towards the original loan, anyway.

Gerry · 9 months ago

Thanks for posting my questions Flexo! Just a quick clarification:

I am currently in GRADUATE school, while working full time. So, being in graduate school caused my undergad loans to go back into deferment. And the large loan ($30,000) is private and not subsized....so still accruing interest. I'm just not required to make payments.

But good idea to at least put all money towards the big loan and not worry about the smaller one. The smaller one is a government one and subsized.

Thanks everyone!

mapgirl · 9 months ago

At the heart of his question is 'I was wondering if any bank might ever offer a 6 month or 12 month loan at a lower interest rate.'

I don't believe that he could get a 6-12 month unsecured loan anywhere at a lower rate than his current student loans. If he does, please give him my email address because I'd totally jump on that.

The closest thing is the balance transfer suggestion by Rassah, but I have a hard time making those numbers work out if there's a transaction fee involved for any of the APR specials being offered. (0% for 6 mos, 2.99% for 18 mos, etc.)

Ken · 9 months ago

The question is are these subsidized or not.

If they are not then he should be paying all the money to the higher interest one.

If they are subsidized, put the money in the bank and earn some interest.

Gerri · 9 months ago

First: I do not have any student loans. I have never had a student loan.

I heard a former colleague tell the following story in [about] 2000:

His son had racked up almost $100,000 in student loans after getting through a BA and MBA programs. He was working for a financial services company and hated the work so much that it was affecting his health. He decided he wanted to abandon a career in finance and pursue something entirely different, but the burden of the student loans was oppressive and that student loans could not be discharged through bankrupcy.

Since his credit was excellent, he got a regular loan: 10 years at a somewhat higher rate than his student loans and used the proceeds of that loan to pay off the student loans. He then defaulted on the new loan and declared bankrupcy.

The bankrupcy hung on for whatever statutory period while he learned plumbing but disappeared before he was 35. He is out from under the student loan with a fresh start.

OK, is the story true? Don't know. I have long since lost contact with my former colleague and have no way to verify it.

John Rivers · 4 months ago

I have about $30,000 in student loans. I have desperately been trying to pay it back. I have created an Alaska movie here:

http://www.filmbaby.com/films/4148

Any help would be greatly appreciated

THANKS!