The one thing that is missing is the length of the loan, but I think I would go with the 7% that drops to 6% after 3 years.

At that income, he should be able to pay it off relatively quickly, so it doesn’t really matter much. The two rates are very similar when everything is included.

Live like a college student and it will be gone in no time.

Well, for one, if you are single, you will not get a tax deduction for student loan interest at that income level. You’re phased out entirely once your income passes $65k.

I would generally go for the lower rate myself but pay it off quickly.

Stein said it best - live like a college student until it is paid off.

Clarification - in 2007 the income limit is $70k. Regardless, doesn’t help your situation.

Beware, student loan co’s are pretty sneaky with those rebates. One trick is to send your first bill out only a few days before it’s due, so your a few days late on the first payment, then you loose it…it’s pretty common

Hmm I would pay it off quickly if thats his only debt. He could use some of that savings.

You have been tagged:

http://familysavings.blogspot.com/2007/07/8-interesting-things-about-myself.html

You will probably be wiser taking up student loan consolidation now versus waiting for the rebate. Also, you may want to look for a better than normal 1% discount after 36 months that Citibank, Sallie Mae, Wells Fargo, Chase and other promote. Educational Loan Company offers a 0.50% discount for auto-debit and 1.25% discount after 24 on-time payments which would bring you down to a fixed interest rate of 5.5% after only 2 years thus saving you more. Either way, it would be wise to go with interest rate discount versus the rebate in most cases.

You are also doing very well with your 11K in your savings account and you are getting a good safe return on it. Remember, there are no prepayment penalties on federal consolidation. Thus, you could keep making minimum payments (remember you will add interest costs this way) and continue to build up your savings account at the same time always have the luxury of cashing out and paying down your fed consolidation debt. This would allow you to build up a very nice safety net for those life emergencys and/or opportunities.

Teri is right about the tax deductions. But keep in mind, if marriage is in your future, and your new wife earns less than $47,000 (total $130,000), your interest will be tax deductible.

Your interest rate will most likely only get higher in the coming years. But maybe in five to ten years they will go way down. I consolidated in 2004 at 3.5%. Consolidating now may be a good option but most student loan companies require over 15k or 20k for you to get that interest rate reduction. Double check that you actually have enough of a balance owed to get that reduction. Also, you can check with other companies to see if there are better offers but realistically the amount of people who actually make all those payments on time is somewhere below 5%. Once you miss one payment, that option is gone. You don’t start all over again.

If you have -50k in student loan debt most of it must be private student loans which means you must have higher interest rates on those. In that case, you might want to reduce your payments on your federal student loans to interest only (they call them graduated plans, interest only for two years and then they up the amount due to include principle after the initial years). Use the extra cash you save there to help pay off the private debt first. You’ll save more money that way.

Whatever you do, I wouldn’t pay them off all at once. Federal loans are very good for your credit rating. Pay everything else off first, ride those out as long as you can.

One more thing, are you currently employed? If you can get a unemployment deferment on your student loans the interest rate goes down .6% and you can consolidate then. That will lock your interest rate at 6.625% . For people graduating college right now, you should consolidate while you’re in grace period and you’ll get the same thing. Your consolidation company can also wait to complete the consolidation until your grace period/ deferment is up so you don’t have to make payments right away.

Either that or go teach ESL in Korea for a couple of years. If you have a degree, you can save a lot of money there. That’s what my son did. He owed $80,000 in student loans!

J - you make some good points. However, most consolidation companies require a much lower than 15K or 20K minimum to be eligible. The norm is probably more like 10K. Some companies like Wells Fargo,U.S Bank, and Citibank have no minimums whatsoever to get the 1% after 36 on-time payments. However, you do need to make sure you have enough debt that debt actually exists after making 36 payments. Anything federal loan amount above 2K will see benefits. As to your 5% projection in terms of people who realize your benefits, that may have been true in the 90s but now with auto-debit and bank pay software, a much higher percentage of people are making their payments on-time. Not to mention, a lot will give you a 15 day grace period and as long as you remember that if you get into trouble, you can always request a forbearance or deferment to protect you from ever making a payment rate. Your expectation percentage can jump skyward easily. The norm is probably in the 20 - 25% range conservatively speaking. However, watch out for companies that terminate your on-time payment benefits when requestion a forbearance or deferment. In my previous post, Sallie Mae was the only company that I know for sure pulls benefits during a voluntary forbearance. You should be safe with Wells Fargo, Chase, Citibank, and Educational Loan Company. But always double check on their websites.

Your interest rate will most likely only get gamier in the coming years. But maybe in five to ten years they will go way down. I consolidated in 2004 at 3.5%. Consolidating now may be a good option but most student loan companions want over 15k or 20k for you to get that interest rate reduction.This is good for student to complete them studies.