Comments on: Student Loans Consolidated, Finally

By: Jimbo

Jimbo — Tue, 28 Nov 2006 17:23:43 +0000

You should be able to drop that rate even further. Electronic payment of your student loan, could probably shave a point off your interest rate, if your bank or whevet is competitive.

I really need to do this…ugh

By: Flexo

Flexo — Mon, 23 Oct 2006 01:04:21 +0000

Dave,

I should be getting back to writing the University of Phoenix Online stuff in the next week or so. Glad someone’s interested!

By: Dave S

Dave S — Sun, 22 Oct 2006 15:00:19 +0000

Hey flexo,
Congrats on completing your Master’s…on that note, can we look forward to a continuation of the UofP online experience…

I would pay those loans off as soon as possible…debt is debt…regardless of the interest rate.

By: Angry Dinosaur

Angry Dinosaur — Sun, 22 Oct 2006 14:40:14 +0000

Flexo,

While there may be a tax incentive to pay your loan off faster, there is no inflation incentive. Jim at Blueprint for Financial Prosperity learned this last month:

http://www.bargaineering.com/articles/inflations-role-in-debt-vs-save.html

Specifically, check out comment VII.

By: Flexo

Flexo — Sat, 21 Oct 2006 13:55:56 +0000

I went through the same company that services all of my loans, College Loan Corporation.

By: Bob on the Fob

Bob on the Fob — Sat, 21 Oct 2006 09:00:35 +0000

http://www.graduateleverage.com groups student borrowers, and uses their bargaining power to get the best deal from lenders. The best deal is provided to the student borrowers. I ended up with $27K at 2.875% and a future 1% discount for auto payment/perfect payment history.

By: DoubleJ

DoubleJ — Fri, 20 Oct 2006 22:00:23 +0000

Which company did you consolidate through? I graduate in March and am looking to consolidate soon. I had one offer for 5.5%, which I should be able to beat. Thanks in advance.

By: Cathy

Cathy — Fri, 20 Oct 2006 21:03:51 +0000

Even if you could earn more by investing, there’s a lot to be said for being debt-free. Hopefully you’ll be able to lower the interest rate even more with on-time payments – for example, one of my lenders lowered my interest rate by 1% after the first 12 payments were timely.

By: Sam

Sam — Fri, 20 Oct 2006 15:47:51 +0000

I hadn’t thought of the tax issue. Frankly that’s something that’s been on my mind to learn about. Can you recommend a good source of reading to understand the basics of the income tax structure for regular earnings, asset appreciation, stock sales, etc?

By: Flexo

Flexo — Fri, 20 Oct 2006 14:13:30 +0000

Risk free investments providing about 5.0% APY before tax is not much higher than 4.25% after tax, if at all. Following your plan, inflation will quickly eat up the <1% advantage of investing the money in the highest paying money market accounts. There are also tax incentives for paying off student loan interest... don't remember if it's a credit or deduction, so that lowers the effective APR of the loan -- but only if the interest is paid, not if the money is invested elsewhere. Your theory would work well for other, lower APR loans or 0% credit card balance transfer offers, but there's no advantage to investing in a 5% MMA rather than paying off a 4.25% tax-incentivized loan. Investing in the stock market sounds good, but nice returns are only guaranteed over a long period of time. In the short term, we may be heading for a "soft landing" if you believe El-Erian.

By: Sam

Sam — Fri, 20 Oct 2006 13:58:45 +0000

I don’t understand why you would do that. If you have the money to pay that loan off, even in part, you should invest it and make the minimum payments on the loan. You can beat 4.25% with risk-free investments, even.