The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: donedeal511 on January 15, 2018, 01:10:29 PM
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I'm going back to school and want to lower my monthly student loan payment on a private loan. I have 70k in a private variable loan at 5.2% 10 year loan on year 3 with seven remaining years, i pay about 1k/month now. I'm approved for a 4.75% fixed private loan through SoFi for 20 years which would lower my monthly pmt in half. I don't start until august so if I sign the loan now I would make large extra principle payments until august. Then ill be in full time school and will make the minimum monthly payments for 4 years. When school is done I'll resume extra principle payments or refinance to a 5 year fixed or variable. Just wanted to get an opinion on this plan. Do I have any other option?
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This might be an unmustachian thing to say, but have you considered taking out the largest amount of loans you can for this upcoming school year? Federal loans have a number of benefits when compared to private loans. The BIGGEST benefit being that subsidized loans are interest free while in school and there is a 6 months grace period. Not only that but federal loans typically have lower interest rates and the interest can be deducted come tax season. It might be worth it to take out a large federal loan and use the money they deposit into your account (after tuition is paid) to put directly towards your private loans and then refi whats left. That's what I would do anyway.
P.S. many on here would say don't take out more loans and try to cash flow the rest of school. $70k is quite a bit of debt.
Good luck!
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Assuming you are going back for a graduate degree, I would not take out extra $$ to pay towards your current loan. Current fed loan interest rate are at 6% and no subsidized loans for graduate or professional degrees. So you’d be borrowing at 6% to pay off 5.2% loan.
Whether or not you plan on going back to school I would refi. If you plan on continue working, just keep your current payment and pay it off early, saving yourself some interest. But sounds like you’ve got a decent plan on tackling the debt. Will going back to school help advance your career so you can pay this off faster?