more loan questions

[CityGal]

Ok. So I've filled out the promissery notes and I'm pretty much ready to submit my application -- minus the fact that I have to look for which vendor I want. From reading posts and other various things, I know that I will not be getting private loans. Instead, I'm going to try to get the max government loans. After work today, I'm heading over to Barnes & Noble to do as much free research as possible.

I have come to terms that I will be paying these loans off until my 50s. My only major concern now is the actual repayment per month. I've done several calculations and it seems that I'll be paying somewhere around 500 dollars. That's A LOT! How the hell do I pay 500 dollars a month. So, I was thinking that while in school I could take a part time job and pretty much save money so that I can pay for at least some of it once I graduate.

Questions:
I'm thinking about taking out 60G in loans, are my 500 calculations correct? If so, is there any way to reduce that? I've read about making the payment period longer, but somehow that seems to be more money in the long run.

Also, is it wise to pay a few thousand off at one time? Meaning, will I get penalized for it? I'm assuming that every lender is diff., but if you've done this have you been penalized or charged extra?

Any words of advice, definite no nos, and regrets about loans?

[awhitmer83]

I have just started repaying $46,000 in student loans, $10,000 of which is private. I'm paying $420 a month. That's a little more than my minimum, because I'm paying more toward the private loan with its ridiculous interest. The private loan will be paid off in about 4-5 years, then I'll roll what I've been paying onto my consolidated loan. If all goes well, I should have them paid off completely in less than ten years. Student loans are like credit cards in that you can pay extra, but you'll still owe your normal payment the next month.

One thing to keep in mind - the interest on government loans is amazingly low. I have stretched mine out to 20 years to make my monthly payments low, but I can always pay more (which I am). That way if I'm ever having a tough month I can pay the minimum and save a little money. The amount of interest over the life of the loan is negligible because my interest is 3.4%. I didn't like the graduated payment plan because it assumes that your income increases - I kept thinking, what if mine doesn't? Likewise, I didn't do the income-sensitive repayment plan because of all the red tape. I didn't want to have to send the lenders my financial crap all the time.

If I could go back, one thing I would do is borrow only what I truly needed. I always maxed the loans and used the refund for stuff like car repair, clothes, etc. It was great at the time, but now I'm sickened by the amount of money I have to pay back. I should have just covered my tuition and books. I went to a private college for undergrad, so it was very expensive, but I did one year at a state school for my master's degree and accumulated $15,000 extra when I could have gotten away with much less. The money I spent was so worth it, but I hate knowing that I should be doing well on my income but can't because of my student loan payments. HTH.

Edited to add: There's a great loan calculator at http://www.finaid.com/calculators/ - you can alter your monthly payment or your payment term and it will tell you how soon you'll pay it off, how much interest you'll pay, and how much annual income you'll need to make the payment.

[redav]

One thing to keep in mind - the interest on government loans is amazingly low. I have stretched mine out to 20 years to make my monthly payments low, but I can always pay more (which I am). That way if I'm ever having a tough month I can pay the minimum and save a little money.
This is a very good plan. As long as the longer term doesn't raise the interest rate too much, this is a very good strategy.

I didn't like the graduated payment plan because it assumes that your income increases - I kept thinking, what if mine doesn't? Likewise, I didn't do the income-sensitive repayment plan because of all the red tape. I didn't want to have to send the lenders my financial crap all the time.
More excellent comments. If your income does increase, you can pay more like a graduated program, but you have the flexibility not to if you can't or don't want to. It also negates the benefit of inflation. To even consider that type of repayment plan, the interest rate would have to be much lower.

If I could go back, one thing I would do is borrow only what I truly needed. I always maxed the loans and used the refund for stuff like car repair, clothes, etc. It was great at the time, but now I'm sickened by the amount of money I have to pay back. I should have just covered my tuition and books. I went to a private college for undergrad, so it was very expensive, but I did one year at a state school for my master's degree and accumulated $15,000 extra when I could have gotten away with much less. The money I spent was so worth it, but I hate knowing that I should be doing well on my income but can't because of my student loan payments.
More great comments!

[NewMrs.]

Student loans are like credit cards in that you can pay extra, but you'll still owe your normal payment the next month.




I had a different experience with this. I completed an Americorps program in 2000 and received an education award of approximately $4,700 towards my student loans. When my lender received this money, they treated this as almost two years' worth of payments. I was on the 10-year plan and my payments were something like $250 a month, so this counted as almost 20 months worth of payments. I received statements for years telling me that I didn't owe anything. I was psyched about having at least thing much paid off, so I sent in whatever money I could afford each month to pay it down further. This counted for additional monthly installments, and prolonged the time period in which I received statements telling me that I didn't owe anything.

However, I live in Pennsylvania, so all of my student loans came from the Pennsylvania Higher Education Assistance Agency's lending arm, AES. I took out only Stafford loans, never consolidated, and stayed on the 10 year plan.