The Never-Ending Student Loans
I am back in school this semester and I just got a notice from the Department of Education:
Our records indicate that your account is currently in a deferment. . . . You are responsible for the interest that accrues during your deferment on the unsubsidized portion of your loan(s) and can either pay the interest prior to your deferment end date or let it capitalize (be added to principal balance).
Hmmm. . . I have a lot of options right now. I could (1) keep paying them down, (2) ignore them completely until I finish my graduate education in 2006 or 2007, or (3) pay the accrued interest until they are no longer deferred. I have a number of factors to consider before a decision. Right now, I owe $21,285.62, at a very sweet and low 3.625% interest rate. Also, I know that because my Adjusted Gross Income is less than $50,000 any student loan interest will be completely tax deductible. My student loan interest is about $700 a year. I expect that by the end of the year, my AGI will still be under $50k, so I am going to opt to pay just the accrued interest, so I can do other things with my money until I no longer qualify for this tax deduction. This seems to be in direct conflict with my goal to pay my student loans off by the time I am 30 (in 2010), but as soon as my AGI is more than $50k in a 2006 or 2007, I will speed up the payments. Even if my AGI stays under $50k until 2007, assuming I begin paying $517.36 every month beginning January 2007, I can pay it off in 44 months, thus achieving my goal, according to a calculator from dinkytown. I think I can do it.
Our records indicate that your account is currently in a deferment. . . . You are responsible for the interest that accrues during your deferment on the unsubsidized portion of your loan(s) and can either pay the interest prior to your deferment end date or let it capitalize (be added to principal balance).
Hmmm. . . I have a lot of options right now. I could (1) keep paying them down, (2) ignore them completely until I finish my graduate education in 2006 or 2007, or (3) pay the accrued interest until they are no longer deferred. I have a number of factors to consider before a decision. Right now, I owe $21,285.62, at a very sweet and low 3.625% interest rate. Also, I know that because my Adjusted Gross Income is less than $50,000 any student loan interest will be completely tax deductible. My student loan interest is about $700 a year. I expect that by the end of the year, my AGI will still be under $50k, so I am going to opt to pay just the accrued interest, so I can do other things with my money until I no longer qualify for this tax deduction. This seems to be in direct conflict with my goal to pay my student loans off by the time I am 30 (in 2010), but as soon as my AGI is more than $50k in a 2006 or 2007, I will speed up the payments. Even if my AGI stays under $50k until 2007, assuming I begin paying $517.36 every month beginning January 2007, I can pay it off in 44 months, thus achieving my goal, according to a calculator from dinkytown. I think I can do it.
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