<p>DS1 graduated with about $3,500 in subsidized student loans. Lucky, I know. The loans start coming due Dec. 9. He was looking today at setting up autodraft to start making payments, but we have a couple of questions ...</p>
<p>He is working an AmeriCorps job that includes an education grant of more than $5K that can be used toward student loans/grad school. He is thinking he'd like to start paying his loan off in December with a $50 monthly autodraft, then in July, when he gets the education credit, pay off the balance. The thinking is that the eight months of paying monthly will help him build a credit history so he can get a credit card in his own name. Does that sound like a sound plan? Should he be doing something differently? Not sure whether grad school is in the future ...</p>
<p>TIA</p>
<p>What education credit are you referring to?</p>
<p>Most loan servicers do report to the credit scoring agencies. If the one that has your son’s loan does, then yes, paying on time or early will earn ‘good’ points. If $50 isn’t the amount he needs to pay, his loan may remain in deferral and then the payments might not be reflected on the credit report. You can ask, but I really doubt the customer service department will know one way or the other. They might tell you yes, the payments will be reported when in fact the system is set to deferral.</p>
<p>However, I don’t see the downside.If you don’t set up the payments, the credit reporting will not happen. If you do and they aren’t reported, you are in the same place.</p>
<p>Your son should be able to get a secured credit card or you could co-sign for one if he’s just trying to build up a credit score.</p>
<p>The $50 amount originally was suggested by the loan company’s calculator. It would mean the loan is paid off in seven years or so but, of course, he plans to pay it off next year. I’ll make sure he asks the company whether it reports to credit agencies. Thanks.</p>
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I think they all report to the credit agencies.</p>
<p>I would suggest having your son pull his credit report now. My kids have very small loans and they already show on their credit report, of course they are showing as deferred. I always suggest building credit early so that they have a four yr history by the time they graduate. Actually I added my kids to a cc while they were in high school so it was easy to get approved for a cc freshman year. Of course I have not given one of my kids the card yet… I use it for small purchases and pay it off. He can go to annualcreditreport.com to pull his info from each of the credit bureaus. I also recommend credit karma. It’s free and it gives you your credit score. </p>
<p>You can also have him look into doing IBR (income based repayment), since the Americorp job will pay very little if any money. If he comes out with a 0 payment, it will still be considered a credit to his account for a year and when he gets his stipend, he can pay off his whole loan . Check with his loan servicer for income based repayment plans.</p>