<p>I feel dumb asking this question, but...</p>
<p>excatly HOW are loans repaid?</p>
<p>Example: for MD, I have $2000 from Perkins and $2625 from Sub Stanfford Loans.</p>
<p>Perkins has a 5% interest after graduation
Stanford has...lets say 5.3% interest after graduation.</p>
<p>Let's assume (just for this case), that at the end of my 4th year, I have accumlated $8000 for Perkins and $10,500 for Stanford (totally made up).</p>
<p>So my question to (mainly parents) is that, what kind of monthly payments should my family be expecting? Seeing we have 10 years to pay up, would paying immediatly help? or would paying in spread payments throughout those 10 years help?</p>
<p>P.S Also, is it possible to pay back some of the 1st year loans after finishing the 1st year of college?</p>
<p>Forgive me, but seeing my family struggles to make ends meet sometimes, I just want to know what the future holds and how I can help.</p>
<p>Well, first of all, the Perkins and Stafford loans are for YOU to pay back, not your family -- the reason that they are subsidized and payment is deferred is that it is anticipated that you will be able to make the payments once you are out of school and employed. </p>
<p>You can prepay them, but since they are subsidized, there is no reason to do so. Interest does not start running until the payments are due, so there is no advantage to paying early. You're better off using any assets you have to pay current expenses.</p>
<p>New Stafford loans (for this year) have a fixed rate of 6.8% - so payment of $10,500 in Stafford loans would be $120.83/month.</p>
<p>Perkins is 5% - so a payment on an $8000 loan would be $84.85</p>
<p>That would mean with $18,500 in debt, your loan payments would be $205.68/month. Once you are out of college and working, that amount should be easily manageable. </p>
<p>You can figure out different scenarios on your own here:
<a href="http://finaid.org/calculators/loanpayments.phtml%5B/url%5D">http://finaid.org/calculators/loanpayments.phtml</a></p>
<p>Annual Stafford Loan limits are 2625 (freshman year), 3500 (soph year), and 5500 (junior and senior years). I would expect your school to offer the loans at these stepped up amounts as you go through college to meet your financial need. I suppose that you can count on 17,125 in Stafford Loans if you graduate in 4 years.</p>
<p>Just an added note: once the loans come due, it DOES help to pay them off as early as possible. My son has $7,250 in Perkins loans which he has just started repaying. Interest on the loan over ten years will add a couple more thousand to the amount. I am encouraging him to make larger payments now, if he can afford it, because it can save money and reduce the time period in which he will be repaying. (They do not have a penalty for paying if off early.) It would be nice to get it out of the way before marriage and children come along. :)</p>
<p>I agree, Susan - I should have been more clear. I just meant that there is no advantage to paying during the deferral period. My daughter's college has offered her subsidized loans with NO origination fee, and as far as I'm concerned that is a deal that is too good to pass up -- at least it is certainly better for her to take on the debt at 0 fees and 0 interest for 4+ years than for me to have to come up with the extra money now. But once interest starts to accrue, then it is always going to save money to pay the loan down more quickly.</p>
<p>Remember one more thing - because the loans are subsidized you can actually pay them off interest free or at least if you pay down some of the principal when the interest does start to accure it will only accure on whatever is left of the princpal balance so you can actually save a bunch of money on these.</p>