<p>This should have probably been posted in the Financial Aid section of the forum but I thought I would get your opinions/ advice on my situation. I am the first person in my family to go to a 4 year university so my parents are sort of at a loss when it comes to this sort of stuff.</p>
<p>Anyway, I will be graduating this year with about 15,000 in loans. Luckily they are all Perkins and subsidized Stafford loans and I fully intend to make good on them as I was the one that 'had to go to my dream school'...lol... Luckily meaning that they have no interest at this time and my parents and I have no private loans out in addition to these. Over the past few years while in school I have worked pretty much full time and have been splitting my paychecks in half into my checking and savings account (usually more in the savings each time). I want to use this money to pay back my student loans but do not know where to begin. </p>
<p>My parent's say I should leave my money in my savings for now to keep collecting interest and then upon graduation deplete my savings to pay the loans immediately. They also suggest keeping some money in my savings for emergencies but how much should that be?........Or should I start to pay them now if I have the money available (like 200 a month directly to the loan collector and not the savings)? I thought about using the money to get established after graduation but I am looking at Professional School so I think it would be best to pay of my undergrad debt while I can before I accrue more in prof. school.</p>
<p>Basically, when should a student begin to pay back loans?</p>
<p>I'm not a loan or financial aid expert, but:</p>
<p>The federal government pays the interest on subsisdized Stafford and Perkins loans while the student is still attending school (full-time I believe). Loans payments are scheduled to begin 6 or 9 months after student leaves school, due to graduation or otherwise.</p>
<p>If you have available capital, it might make sense to begin to pay these loans down while you're still in school. My estimate of a total monthly payment would be in the $175-200 range for $15m loan amount based on what interest rate you have.</p>
<p>You can pay this amount monthly, or as your parents suggest, accumulate interest and make a lump sum payment after graduating.</p>
<p>You mention grad school. How will you fund this? If you apply for federal grad loans under FAFSA, and you have banked monies, these should be reflected on the appropriate lines and will be a factor in your EFC calculation. For FAFSA, as a degreed undergrad, you would be considered an independent student for grad school. </p>
<p>The choices are really a balancing act between the interest you're paying on the loans, the interest your savings is returning, the amount of savings you need/want as a buffer and its effect on your grad school funding.</p>
<p>You might want to speak with a financial aid counselor when you return to school.</p>
<p>There is no good answer here. Much depends on your personal circumstances, life plans and tolerance for debt. Keep in mind, though, that interest alone will cost you a grand a year or so on 15K of loans. </p>
<p>From a financial point of view, it is a no brainer to use your savings to pay off your loans, as the loans cost you more in interest than you get in interest for your savings. BUT, cash reserves are useful, as your parents say. </p>
<p>To answer your last question, I'd try to get out of debt as soon as I could, while keeping a modest savings cushion. I presume you could still rely on parents for emergency (true emergency, not that bahamas trip you couldn't pass up...) help? If so, you only need minimal cash reserves in savings. </p>
<p>Being debt free can be a very liberating thing.</p>
<p>I guess it makes sense to start paying them now while I have a little cushion. Although violadad it is definitely not enough to affect my FAFSA because it is basically saved work-study funds, summer jobs, paid internships, ect. Especially since the interest in return is not going to balance out the interest paid to the lender. </p>
<p>So, is it best to work on one loan at a time or split it 50/50. I am thinking to start paying off the Perkins loan as it is lower and I might be able to completely pay it off before graduation rolls around.</p>
<p>If you go directly to grad/professional school, your subsidized loans continue to be subsidized as long as you are in school full-time. It doesn't matter that you've graduated from undergrad; grad school counts for deferral. </p>
<p>My suggestion is to wait until you graduate from grad school and then begin paying off all your loans. You should always keep a cushion of cash in case of emergencies (and many of your loans could be deferred again in case of emergency), which is generally suggested to be 6 months worth of living expenses.</p>
<p>Don't be in a big hurry to pay off these loans, with low interest rates. It appears that you are going on to grad school and may need all the cash you can get your hands on.</p>
<p>edad, the interest rates are not all that low these days, especially for older Staffords.</p>
<p>Chevda makes a good point, though about the subsidy continuing in grad school. That subsidy is "free" money (actually, not free, I'm paying for it, along with other tax payers...). But this approach only makes sense if the interest is truly subsidized. If payments are just suspended, but interest accrual continues, you could be in for a big surprise after only a few years, finding your 15K balance is now 20K or higher!</p>
<p>The rule of thumb for living expenses is enough to cover six months of unemployment however most adult children could reasonably fall back on living with their parents so your numbers may vary. I wouldn't pay anything back until the interest kicks in.</p>