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Student Loan Debt
Old 07-27-2005, 09:47 PM   #1
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Student Loan Debt

Hi,
I have been a long time lurker. I am heading back to school to work on an MBA on a part time basis while working full time. I am eligible to get an Unsubsadized Federal Loan in the amount of $18,500 for this school year. Actual school costs will be around $8,000 of which my company will pay $5,000. Does it make sense to take out the full amount of the federal loan and pay off other debt. I do not have any credit card debt. I have a car loan in the amount of $8,500 at 6.25%. I also have a second mortgage which is variable rate and is currently at 7.5%. Thank you for any advice.
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Re: Student Loan Debt
Old 07-28-2005, 07:19 AM   #2
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Re: Student Loan Debt

They can be used for living and supporting yourself and family while you are in school. If you need a new car to get you through school, you're allowed to buy it. I've never read anything in my loan paperwork limiting how I spent the money.
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Re: Student Loan Debt
Old 07-28-2005, 09:12 AM   #3
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Re: Student Loan Debt

You bet. Student loan interest is tax deductible, so the effective rate is quite low. Given current rates, it wouldn't be such a horrible to take out the loan, and put the excess money into a CD at a higher rate than that of the loan. Added to this are the VERY flexible repayment plans, and the ability to defer payments if you become unemployed, etc. The best deals are reserved for doctors, nurses, and teachers who may be eligible to have their debt forgiven under certain circumstances
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Re: Student Loan Debt
Old 07-28-2005, 10:41 AM   #4
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Re: Student Loan Debt

Stafford loans have a variable interest rate that is capped at 8 1/4% and changes every year on July 1.* The interest rate is determined by the auction of T-bills on the last day of May.* So when Alan Greenspan raises interest rates, that really impacts the Stafford loan.* Last year, the interest rate was just under 3%.* This past July 1st, the rate rose almost 2 points.* Ouch!

You can only lock in the interest rate on the Stafford loan by consolidating, which most people do once they leave school (although the law was just reinterpreted to allow for in-school consolidation).

From what you posted, it doesn't sound like much of a savings for you to pay off your car loan.* It might be worth it to pay off the second mortgage with Stafford $$ and do an in school consolidation to lock into the interest rate.

Just my 2 cents...
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Re: Student Loan Debt
Old 07-28-2005, 11:25 AM   #5
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Re: Student Loan Debt

One thing to note, although it probably doesn't change the decision much. I believe these kinds of loans have an upfront fee built in such that you borrow, say, $8,000 and they only give you loan proceeds of $7,950. I read somewhere that this initial fee can be up to 3% of the initial loan balance. But all the loan programs are different, so I'd suggest talking with the financial aid office at your school to find out the details of your particular loan.

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Re: Student Loan Debt
Old 07-28-2005, 11:06 PM   #6
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Re: Student Loan Debt

What are conditions in which loans for say Med Students are forgiven?

Thanks!

TD
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Re: Student Loan Debt
Old 07-29-2005, 02:14 AM   #7
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Re: Student Loan Debt

Tommy--I believe those are Perkins loans. I thought I read somewhere the Gov't wasn't going to do those any longer.
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Re: Student Loan Debt
Old 07-29-2005, 05:44 AM   #8
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Re: Student Loan Debt

Quote:
Originally Posted by Tommy_Dolitte
What are conditions in which loans for say Med Students are forgiven?

Thanks!

TD
An aside. Most any loan can be wholly or partially forgiven.
The debtor just needs to know (or figure out) how to do it.

JG
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Re: Student Loan Debt
Old 07-29-2005, 07:37 AM   #9
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Re: Student Loan Debt

Quote:
Originally Posted by MRGALT2U
An aside. Most any loan can be wholly or partially forgiven.
The debtor just needs to know (or figure out) how to do it.

JG
JG, a now-deceased friend often passed on your sage advice. No matter what the subject (getting rich, repairing a car, cold fusion), his comment was "Anyone can do it once they figure out how".

I think his point was...pointless.

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Re: Student Loan Debt
Old 07-29-2005, 07:47 AM   #10
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Re: Student Loan Debt

Yep, death is about the only Stafford loan cancellation program anymore... Oh, and in certain circumstances, teaching.
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Re: Student Loan Debt
Old 07-29-2005, 08:14 AM   #11
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Re: Student Loan Debt

For what it is worth, there is no statute of limitations on the government collecting student loan debt.

If you default, the government doesn't have to sue to take tax refunds and can even garnish a portion of your pay without suing you.

Also, it is next to impossible to eliminate student loan debt by filing bankruptcy.

Trying to settle up on student loan debt for less than the whole amount due is about impossible these days.



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Re: Student Loan Debt
Old 07-29-2005, 08:27 AM   #12
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Re: Student Loan Debt

Wayyyyy back when (late 80's) got an ear full from an engineer I had to work with briefly(summer month's) who had to go teach (college level) as a condition of his Phd - he wanted to duck the obligation any way he could to make 'the big bucks' in industry. I think 'a loan' AND a green card were involved in the mix. Disappeared by winter - so I guess 'he discovered the joy of teaching.'
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Re: Student Loan Debt
Old 07-29-2005, 09:12 AM   #13
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Re: Student Loan Debt

Quote:
Originally Posted by lets-retire
Tommy--I believe those are Perkins loans.* I thought I read somewhere the Gov't wasn't going to do those any longer.
My girlfriend just received her financial aid package for this next year- perkins were part of the mix, so at least for the 05-06 school year, they're still on the government cheese menu.
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Re: Student Loan Debt
Old 07-29-2005, 11:41 AM   #14
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Re: Student Loan Debt

We are in the process of getting my wife's [teacher] loan forgiven. Her loan's pretty small, about 1800, but I believe the outstanding loan amount is not a factor. The requirements to apply for the loan to be forgiven where something like this:

-- Be a "highly qualified" teacher (course requirements above being a "standard" teacher)
-- Teach for over 5 years in a low-income disadvantaged school district
-- The loan must be have been originated during a certain time
-- The loan must be a Stafford loan

Unfortunately, we've already paid down some of the loan before we became aware of this. Her school district and the loan servicing agency either didn't know or didn't publicize this. We found about it through an university where she was considering enrolling for her Masters.

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Re: Student Loan Debt
Old 07-29-2005, 01:52 PM   #15
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Re: Student Loan Debt

Quote:
Originally Posted by WanderALot
-- Be a "highly qualified" teacher (course requirements above being a "standard" teacher)
-- Teach for over 5 years in a low-income disadvantaged school district
Oh, you'll pay for the loan. It just won't be in dollars!
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Re: Student Loan Debt
Old 08-01-2005, 12:57 PM   #16
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Re: Student Loan Debt

Quote:
Originally Posted by Nords
Oh, you'll pay for the loan. It just won't be in dollars!
She loves teaching 1st grade in a low-income district despite all the problems that it seems to bring. She feels the kids appreciate her more and that her skills are needed more in a low-income district. She's taught there 6 years so far.

The "highly qualified" teacher designation is a complete joke. Some of her co-workers had to jump through all kinds of ridiculuous hoops just to get the title. This might be a function of her horribly inept district though.

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Re: Student Loan Debt
Old 08-01-2005, 01:49 PM   #17
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Re: Student Loan Debt

Quote:
Originally Posted by Tommy_Dolitte
What are conditions in which loans for say Med Students are forgiven?

Thanks!

TD
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Re: Student Loan Debt
Old 08-01-2005, 02:06 PM   #18
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Re: Student Loan Debt

Quote:
She loves teaching 1st grade in a low-income district despite all the problems that it seems to bring. She feels the kids appreciate her more and that her skills are needed more in a low-income district. She's taught there 6 years so far.
As long as she recognizes its a form of charity. I think that's what Nords is saying. But if she'd teach there anyway, might as well take this deal.
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