<p>Well, swimcatsmom… I personally think it’s somewhere in between a pipe dream and a possibility. Our retirement savings are from pre-Roth days as well, and as you know if you’re in your 50’s it makes no sense to do a conversion, especially with interest rates on savings being what they are presently.</p>
<p>But, if you listen to GOP hopefuls Ron Paul & Herman Cain (or what’s left of his campaign), and Steve Forbes before him–if that income tax rate is dropped to, say, 15%–it’s possible that retirement disbursements would be taxed as ‘ordinary income’, thus 15%. Something has GOT to give, because in the next 12-24 months at present rates you’re going to see some hellacious student & Parent PLUS loan defaults, and whoever is in charge will have to remedy that somehow.</p>
<p>As of right now, however, no way am I pulling retirement money out–even if I get that 10% penalty waived–and have over a third of it chopped off before I pay off any PLUS loans in full. I’ll make my payments & wait for Rome to burn first.</p>
<p>We have plenty of credit card debt and instantly qualified for Plus each time. Even in my name- and I make considerably less than DH. Occasionally, we might be a day late on a credit card payment (and incur a charge,) but never longer (over x days gets reported to credit bureaus, I believe- not sure what changed after the eco downturn.)</p>
<p>Our first payments on a given Plus loan come due roughly Feb of that school year. Some parents set their Plus for 2nd semester, in which case, 1st payment would be due later. The loan originators have sent us plenty of info/disclosure docs- eg, showing how delaying payments or entering a reduced payment plan can affect the grand total you pay, over time.</p>
<p>My friend who can’t get approved- seriously in default, over time, on many substantial loans (including her first kid’s college loans,) single parent, limited income.</p>
<p>Question: is it possible to pre-pay down the Plus loan, like a mortgage? Ie, pay monthly costs, but also extra to pay down the principal? Guy on phone said no- it’s only applied to the next scheduled payment. Any ideas? We’re overpaying cred debt to get rid of it and I’d like the same effect with the Plus.</p>
<p>First, I would pay all the extra to the CC bills first before applying any extra to PLUS loan. The interest on a PLUS loan is lower than credit card interest and it is tax deductible.</p>
<p>I am pretty sure you should be able to pay extra and pay down the principal of the loan. I know my son has been doing so on his Staffords. I would ask to speak to a higher up person, and if they still say no I would tell them you want to see in writing why they are saying this. Finaid has some info that may help you further investigate. Also the online counseling you did should address the question.</p>
<p>Wow, thanks so much. The concern is not having to pay the Plus for 10+ years. I do have a box of all the paperwork and will look for the fine print, as well. I’ll dig into this. So very helpful, thanks.</p>
<p>ps. laughing at myself, a bit. As much as I push finaid.org, I missed that.</p>
<p>My parents’ tax prep guy told them that if you write “apply to principal” in the memo on the check, they cannot cash it unless it is applied to the principal (it would be a separate check from the actual minimum payment). Not sure whether this is entirely accurate, but that’s what my mom does with her own bills and that’s what I’m starting to do with my loans, and we’ve had no problems with this method. But it could depend on the lender and their terms.</p>
<p>One month I sent in a little extra on one of my loan payments (not a separate check, just one payment to cover minimum+), and they simply deducted that extra off of the next payment due. But if I mail in a separate check, they apply it to principal.</p>
<p>Novalynxx, in your ‘apply to principal’ example above, are you talking about your Parent PLUS loan or a mortgage payment? We pay our PLUS loans online, and can change the terms/length fairly easily on an annual basis. </p>
<p>If what you say is true for your PLUS loan, couldn’t you make the minimum monthly payment on the loan, then follow up monthly, bi-monthly, semi-annually, whatever–with a bigger check, designate it to be applied to principal, and over the long haul be some serious money ahead?</p>
<p>For my mom, she does it for loans that she has for the mortgage, property (they own two other lots), and whatever else she has going on that it can apply to. I’ve known someone who did it with their Parent PLUS loan as well.</p>
<p>I do it for my student loans and car loan.</p>
<p>And yes, what you said is exactly what I do. Two separate checks. One minimum, one purely “apply to principal.” Only once did I do one total payment (above minimum) to see how they would divide it up. And since then I learned to do two separate checks.</p>
<p>Since my last post, I’ve looked up the status of my PLUS loans (yes, plural because of 2 daughters, and there was an earlier consolidation). Our lender is cool in that they will automatically apply a payment over & above to principal as long as the minimum payment is made, e.g. a $200 minimum payment that normally goes $50 to principal and $150 to interest. If we make a $250 payment, it will automatically be credited $100 to principal, $150 interest.</p>
<p>However…we have one loan in deferment right now, so no payment schedule is set up. At one point we had an extra $500 to throw towards that loan, and it was credited ENTIRELY to interest. This tells me that the loan has to be active & a payment schedule established, with minimum payments being made, before they will take a check designated for principal and apply it that way. Makes sense I guess.</p>
<p>^^ Did you write “apply to principal” on the check or no? None of my loans will automatically throw extra payment $$ to principal, they all put it toward interest unless I write a separate check and specify how I want it applied. One of my loans I know would let me apply payments toward principal when it was in deferment rather than applying it to the accruing interest…but that was just that one loan, and I didn’t look into whether it was the same with my others.</p>
<p>No, Nova, the $500 was an online payment, with no designation whatsoever. I will check into whether that can be done, having ‘extra’ payments while a loan is in deferment applied to principal only.</p>
<p>This sounds like a pretty good short-term strategy, as LONG as you keep the extra money in the kitty to make those extra payments to principal. Because…making minimum monthly payments is usually almost all interest, at least for awhile.</p>
<p>If you make interest-only payments during deferment then more of your payment will go toward principal. My Sallie Mae loan is like that and a good chunk of my minimum payment does cover principal. But my other loans with higher interest cover mostly just interest, which is why I use the 2nd check method with them.</p>
I personally think it’s somewhere in between a pipe dream and a possibility. Our retirement savings are from pre-Roth days as well, and as you know if you’re in your 50’s it makes no sense to do a conversion, especially with interest rates on savings being what they are presently.</p>