Advice requested on how to tackle an upcoming student loan.
Just to give some background. I am a student in grad school, close to finishing up and luckily, I do not have any student debt. I do have some CC debt, that YNAB is helping me pay off and I should be able to do so completely this year, if everything goes well. I also have some outstanding money that I borrowed for my wedding, that will be paid off as soon as I get a job. As you can see, doing all that with just 2K USD per month is hard (the max I can earn since I am constrained by visa regulations on how much I can work).
Now coming to the important part. My wife is slated to start grad school in August and since both of us do not have that kind of money to pay for it, we are looking at a large student loan, in the ballpark of around 70K USD.
Since I am not working yet (outside of being a graduate research assistant with a limited stipend) and she does not have any income, at least for a year, till she finishes and finds a job, what would you folks advise in terms of handling this student loan? Any tips, advice, personal experiences would really help.
It is my hope that I will be in a job soon and I can start working on paying it off and when she gets a job, we can buckle down and use one salary completely to pay it off as soon as we can, but outside of that, would love some inputs and perspective.
(If you will have private loans, they are handled differently by each servicer)
If it's a federal loan, check if payments during the first five months of disbursement still count as a cancellation payment, which will reduce the amount of the loan that will generate interest (and cancel any that accrued on that portion during those months).
Get into the habit of paying something towards the loans each month while she's in school, if at all possible. Even 25/mth as a cancellation payment or to cover interest helps a lot.
Borrow as little as possible. If you can earn enough to pay your living expenses without taking out a larger loan or putting your life on a credit card, that will help keep the total down. YNAB will become your favorite app very quickly (if it isn't already 😃)
With loans that high, esp for grad school, some of the loans may be PLUS loans which do not have a 6 months grace period.
Pay off as much of the interest during the 6 months grace period after she finishes school as possible. After that point the interest will capitalize & you will be accruing interest on the unpaid interest.
Set up direct debit payments once you enter repayment as that typically saves 0.25%. There are many repayment plans available for student loans, so calling your servicer to talk about options is a good idea. Different servicers for federal loans will have different options & policies about early repayment & paying more to principal.Reply
Hi LoaferDude !
Do you and your wife have a time frame for her getting her degree? A number of my friends have stretched out their education in order to prevent taking on student loans - so they'll pay for a semester, then save up for the next semester. If they could only afford one class for the following semester, then they'd take the one class and continue to save. It's taken them a bit longer to get their degrees, but they're graduating debt free which was a huge priority for them.Reply