<p>One of my kids is graduating in May. She has both Perkins and subsidized Stafford loans, so she's not responsible for interest until after a grace period (6-9 months after graduation). In any case, her plan is to live at home, work and save like crazy to pay off some of these loans. The grace period would give her 6-9 months to save some $, added to what she's been earning this year through internships and work-study. Of course, none of this matters if she can't find a job, but she's trying to be optimistic.</p>
<p>I haven't been involved in this aspect of FA so I'm ignorant how the system works and I haven't met anyone who paid a loan off as it came due (but instead over many, many years). The Stafford has a higher interest rate so it seems better to get rid of that (those) first.
- Since new loans were issued each year, do these loans get treated separately or are they combined into one loan?
- Since they are subsized loans, would the total amount due equal the initial amount borrowe (minus an origination fee if there was one)?</p>
<p>The total due, if paid before the grace period ends, would be the total borrowed (including the origination fee - so if she borrowed $1000 and only received $970 because of a $30 origination fee then she would owe the $1000).</p>
<p>I believe they are seperate loans though some people choose to consolidate them into one loan at some point in time.</p>
<p>When she is paying the Stafford loan make sure she pays the ones with the higher interest rates first. The interest rates went down from 6.8% for loans taken out 2008-2008 to 6% for loans taken out 2009-2010.</p>
<p>Other things to consider - if she is likely to be taking loans for any big purchases in the nearish future then weigh up whether she would be better off keeping the student loans which the interest is tax deductable rather than say a car loan which is not (balancing out interest rates in the mix). Credit rating - is paying a regular monthly payment better for credit rating purposes, maybe on part of the loans? I am not sure exactly how that works.</p>
<p>Good for her that she is thinking this way though.</p>
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- Since new loans were issued each year, do these loans get treated separately or are they combined into one loan?
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<p>If they are from the same lender and the same terms (interest rate), they are usually rolled into one loan.</p>
<p>Admittedly it was long long ago in a galaxy far far away: I paid of my student loans in a few years, and when I got married, did the same with hers.</p>
<p>Thanks guys. To complicate matters, she's considering living and working abroad once she gets loans paid off. She really enjoyed her study abroad experience and both my college age kids have international friends. So now it's time for her to start researching IRS tax implications of living/working abroad, VISA requirements and all such stuff. Wow. I thought applying to college was complicated. It just never stops.</p>