What are the pros and cons of giving back unused student loan money at the end of the semester?
Nthing the “keep it” recommendation, and not just because of the potential of you not finding paying work in the summer. The spring semester is functionally longer than the fall, even if there are the same number of class days in each. Fall generally runs from September to December, four months, while spring is January through May, five months. But loans are disbursed in two even payments, so if you don’t have money left now You’re Doing It Wrong. Don’t even start thinking about paying back loans until you have a job. This is far and away the cheapest money you’re ever going to borrow, and the liquidity it provides will more than pay for itself when compared to the few bucks you might save in interest. Trust me: running out of money and getting hit with overdraft fees on your checking account–or worse, running up credit card debt–will cost you far more in the long run than your student loans. Basically, with student loans the rule is to borrow as much as you can and keep it for as lo
Depends (sorry, lawyer answer). If it’s at a reasonable interest rate ( If it’s a higher interest rate, see if you would be able to take a short term emergency loan to get you to your next loan payout that might change things (check with your fin aid dept). That way you could apply for a larger loan in the next semester and pay off a short term (3 month) loan at that time with very little interest in the mean time. The 3% fee is a sign of a loan you might want to reconsider taking next year (or 3L year) – look for a better lender. Graduate Leverage might be an okay place to start. Again, check with Fin Aid. You’ll save more getting the best deal on the original loans than you will in paying back this particular loan amount. In the end it comes down to simple math and a set of your own assumptions about budgeting for the next year. You financial aid department should be available to help you in both areas. Best luck!
My SO borrowed every penny she could, and it’s just about the best debt she could possibly have. The interest rate was higher when she was in school, but when she got out around 4 years ago, the rates on consolidation loans were stupidly low. (She’s paying something like 3.2% IIRC) The only lower interest rate debt she has is a balance transfer on a Citibank card she had around that time that’s at 1.9% for the life of the balance. Unless inflation runs rampant in the next few years, which seems unlikely at this point, despite all the money printing going on, interest rates will remain low and so student loan debt will end up being very cheap over the long term.
Normally, I’d say delay pay on student loans — they’re cheap, so put your money to work elsewhere. But I’ve gotten credit card offers recently that are cheaper than your GradPLUS loan. I used to know a guy who took out student loans and invested a corresponding amount in bonds and pocketed the difference, but this sounded wrong then and is flat out money losing advice today. As a reference, my lowest student loans from undergrad are at 3.960 percent currently. This is pretty damn low, and as long as there’s investments paying out more than this there’s little reason to go beyond the minimum monthly payments. Maybe more importantly, what’s the story on in-school interest? Subsidized loans have interest paid by the government while you’re in school. Unsubsidized loans “capitalize” it, meaning they add it to the principal while you’re in school. The easiest way to think of it is like an extra loan every compounding interval. The Payoff Amount likely includes a pro-rated interest payment.
