Won and don -- the $1000 / month estimate was figured from a 15-year repayment period, which some mentioned is max in Canada. At 4%, the figure would be 750 / month. I figured 1000 for round figures -- 250 less wouldn't change the figures much.
I'm actually sad to hear stories of 80, 90, and 100K debt at graduation -- equally so for accounts of stretching out college debt to 30 years -- especially in light of the relatively low pay in the field.
I suppose it's better than 250K from NYU with a liberal arts degree; still, very bad math.
1 Never ever defer loans, you only have a set time to pay it back and deferring doesn't stop the clock, and doesn't stop the interest. Also once you get back to paying the monthly payment jumps.
2 round up, don't pay the minimum pay a little extra even if you round up to the nearest dollar anything you can do to chip away at the principle amount early will save hundreds in interest later. fifty five cents over three years is a huge savings in interest
3 divide your expenses into thirds when setting up your budget 1/3 rent 1/3 other expenses and 1/3 debt repayment is ideal but really just take out your debt payments out and half rent and half other expenses.
4 pay off small and high interest debts first. If you have 540 sitting on a best by credit card or credit card debt even if the debt is only a few percentage points more than the student loan pay off the high interest debt and small debts so you have more financial wiggle room when you need it. Minimum payments can trap you into a spiral of debt.
You Americans with your 30 year repayment plans at 2% interest, and being able to choose what type of repayment plan you get - that's crazy to me (Canadian). Up here, we have 10 or 15 years, at 2.5% over prime. We have no choice in the matter, so those first 5 years after school, you're really screwed if you have a large loan to pay off. The loan repayment situation in the US vs Canada is apples and oranges to an extent.
^Bowling_Ball, I think that applies only to federal loans (OSAP in ontario). Most bank will convert education loans into personal loans 1 year post graduation at whatever rate the market is at.
On second thought, bowling ball is totally wrong on this one. 100K debt is not a problem, so when you graduate, just go ahead and pay it off. Use your new salary and be smart -- make extra payments. Use the 25% rule. Use the 50% rule -- heck, use the 100% rule. While you're at it, buy a house. Buy a car, buy American and save money. Save time. Save yourself for marriage and lengthen your repayment. Amortize. Don't forget to view yourself positively. Use your IBR ASAP while in the IDP and contribute wisely toward your retirement. Consolidate like a boss with both hands. You'll be fine.
Hi TRT, my suggestion is to pay off your loans as soon as possible. I had about 70k and paid it off in 5 years. It wasn't easy, but it was doable and I feel like I learned a lot of great lessons about money in the process. The idea of paying hundreds of dollars a month for decades seemed unbearable.
I don't think you need to go to extremes (working 2 jobs, extreme frugality, etc) to do it either. I managed on pretty crappy ntern/recession salaries and living in expensive cities the whole time. It is really just about setting clear and attainable financial goals and keeping to a budget. I was very focused and driven to pay off the debt and I think that's a big part of the mental aspect of doing it.
Also, I wouldn't necessarily consolidate all your loans into one giant one. I kept mine separate and signed up for the lowest monthly payment for each, then put all my extra cash into either a high interest one or a small one I could pay off quickly. I did consolidate some loans, but I was strategical in using it to obtain longer repayment times (for lower monthly payments) or incentives for reduced interest rates. Hope this helps!
Stephanie, I don't know all the ins and outs of deferral, but in the 6-month grace period after graduation, they want you to think that your loan is deferred, but that's not the whole truth. Interest continues to accumulate during that time, which I confess I didn't know about until just now.
For those of you paying off $50k or $70k loans in 5 years or less, hats off to you. Repaying loans sucks, but being sober in this industry is worse ;)
It's not completely out of the realm of possibility. My sister's current interest is about 800$ per month...that being said, this person must owe upwards of 200,000$.
Which brings me to next point -- I really admire anyone who has the diligence to pay off their student loans in less than the ascribed loan period. I only owe about 28,000$ right now and my finances are tight. I could not imagine owing upwards of 100,0000$.
sorry, there is some pretty sloppy remembering there...
I graduated with around $50,000 in debt at 6.8% which is $3400 a year. Since I used the income based repayment the balance continued to grow for around 2 years and had reached roughly $62,000 before I started paying a substantial amount and reducing the principal
Loan Repayment plans and tactics after graduation?
@curtkram, I agree, if I did not have such a low interest rate, I would use the income based repayment (IBR) plan.
are your loans canadian? could very well be completely different than U.S. student loans
Won and don -- the $1000 / month estimate was figured from a 15-year repayment period, which some mentioned is max in Canada. At 4%, the figure would be 750 / month. I figured 1000 for round figures -- 250 less wouldn't change the figures much.
I'm actually sad to hear stories of 80, 90, and 100K debt at graduation -- equally so for accounts of stretching out college debt to 30 years -- especially in light of the relatively low pay in the field.
I suppose it's better than 250K from NYU with a liberal arts degree; still, very bad math.
Strategies to paying it down.
1 Never ever defer loans, you only have a set time to pay it back and deferring doesn't stop the clock, and doesn't stop the interest. Also once you get back to paying the monthly payment jumps.
2 round up, don't pay the minimum pay a little extra even if you round up to the nearest dollar anything you can do to chip away at the principle amount early will save hundreds in interest later. fifty five cents over three years is a huge savings in interest
3 divide your expenses into thirds when setting up your budget 1/3 rent 1/3 other expenses and 1/3 debt repayment is ideal but really just take out your debt payments out and half rent and half other expenses.
4 pay off small and high interest debts first. If you have 540 sitting on a best by credit card or credit card debt even if the debt is only a few percentage points more than the student loan pay off the high interest debt and small debts so you have more financial wiggle room when you need it. Minimum payments can trap you into a spiral of debt.
In the 6 months after graduation during which my loans were deferred the balance went up $10,000
You Americans with your 30 year repayment plans at 2% interest, and being able to choose what type of repayment plan you get - that's crazy to me (Canadian). Up here, we have 10 or 15 years, at 2.5% over prime. We have no choice in the matter, so those first 5 years after school, you're really screwed if you have a large loan to pay off. The loan repayment situation in the US vs Canada is apples and oranges to an extent.
Except in Canada, when you defer repayment, Stephen Harper pays the interest!
*happydance*
^Bowling_Ball, I think that applies only to federal loans (OSAP in ontario). Most bank will convert education loans into personal loans 1 year post graduation at whatever rate the market is at.
On second thought, bowling ball is totally wrong on this one. 100K debt is not a problem, so when you graduate, just go ahead and pay it off. Use your new salary and be smart -- make extra payments. Use the 25% rule. Use the 50% rule -- heck, use the 100% rule. While you're at it, buy a house. Buy a car, buy American and save money. Save time. Save yourself for marriage and lengthen your repayment. Amortize. Don't forget to view yourself positively. Use your IBR ASAP while in the IDP and contribute wisely toward your retirement. Consolidate like a boss with both hands. You'll be fine.
Hi TRT, my suggestion is to pay off your loans as soon as possible. I had about 70k and paid it off in 5 years. It wasn't easy, but it was doable and I feel like I learned a lot of great lessons about money in the process. The idea of paying hundreds of dollars a month for decades seemed unbearable.
I don't think you need to go to extremes (working 2 jobs, extreme frugality, etc) to do it either. I managed on pretty crappy ntern/recession salaries and living in expensive cities the whole time. It is really just about setting clear and attainable financial goals and keeping to a budget. I was very focused and driven to pay off the debt and I think that's a big part of the mental aspect of doing it.
Also, I wouldn't necessarily consolidate all your loans into one giant one. I kept mine separate and signed up for the lowest monthly payment for each, then put all my extra cash into either a high interest one or a small one I could pay off quickly. I did consolidate some loans, but I was strategical in using it to obtain longer repayment times (for lower monthly payments) or incentives for reduced interest rates. Hope this helps!
Stephanie, I don't know all the ins and outs of deferral, but in the 6-month grace period after graduation, they want you to think that your loan is deferred, but that's not the whole truth. Interest continues to accumulate during that time, which I confess I didn't know about until just now.
For those of you paying off $50k or $70k loans in 5 years or less, hats off to you. Repaying loans sucks, but being sober in this industry is worse ;)
In the 6 months after graduation during which my loans were deferred the balance went up $10,000
10,000 / 6 = 1667, which is interest per month during the 6 months.
So, your monthly payment is 1,667 interest + the monthly principle payment?
@Saint
It's not completely out of the realm of possibility. My sister's current interest is about 800$ per month...that being said, this person must owe upwards of 200,000$.
Which brings me to next point -- I really admire anyone who has the diligence to pay off their student loans in less than the ascribed loan period. I only owe about 28,000$ right now and my finances are tight. I could not imagine owing upwards of 100,0000$.
sorry, there is some pretty sloppy remembering there...
I graduated with around $50,000 in debt at 6.8% which is $3400 a year. Since I used the income based repayment the balance continued to grow for around 2 years and had reached roughly $62,000 before I started paying a substantial amount and reducing the principal
^ Ya had me worried... thought you had claimed the record there for a moment.
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