The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: starfish on July 13, 2014, 11:12:04 AM
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I'm starting a new thread for this, since its a different topic than my previous thread.
My husband had FAFSA loans for about $13,500 - which he says are now around $5000 left. I asked him years ago why we couldn't pay it off sooner, given the interest rate. He said they didn't let you do that - that you'd still pay the full amount plus all the interest. That doesn't seem possible to me.
Does anyone here know about this? Can students make extra payments toward their principle and thus reduce the interest they pay overall?
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Every government-backed student loan I've ever heard of allowed early payment without penalty. With that said, you might want to review some of the other "early student loan payoff" threads on the forum that discuss the pros and cons of paying off your loans early. Armed with good information and strategies, you can decide which option suits your financial situation and your lifestyle goals the best.
Knowledge is power.
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There is nothing called "FAFSA loans", there are student loans backed by the government that you must fill out the FAFSA to be eligible for. And, yes you can pre-pay a federal student loan, many, many people pre-pay them.
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There are rare loans out there like that, but every student loan I've ever seen is not. Pay it off early.
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I pay early on my student federal loan without penalty. If your husbands student loans are federal, the same should apply. Private banks starting buying up student loan debt in 2004-2006 when the rates changed. If your husband sold his debt to a private bank he may get penalized for paying off early.
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Anyone that says they can't pay something off early is just uninformed.
Feel free to find out who the actual lender is you are paying back and just ask how to make extra payments.
I am able to easily make extra payments and I can even designated which loan gets the extra payment.
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I paid off my federal unsubsidized loans (6.8% at the time) while I was in school since I didn't want the interest to accrue to crazy amounts. So yes, you should be able to pay it off sooner.