So i've been paying back my student loan for almost two years now. The minimum i can pay each month is $168. I usually do $200 every month.

I check online today and it says my next payment is due 12/21/2010. For some reason it did not deduct this month.

I've rescheduled it to start the draft again next month. My question is why does 2 month "oh you don't have pay" happen each year? It happened last year as well.

11/1/2010 8:36:23 AM

Just guessing here, but it sounds like they aren't letting you pay it off early and instead are rolling the $32 extra you pay each month into the 2x monthly payments you aren't having to make.

$32 extra per month for 5 months = $160. $32 extra per month for 10 months = $320. The two payments you are not having to make would have been $336.

If you paid $168 a month, for 12 months, you would have paid a total of $2016.

Paying $200 a month, for 10 months, means you are paying a total of $2000. (And then the 2 free months to finish up your year).

That's my best guess.

[Edited on November 1, 2010 at 8:42 AM. Reason : math]

11/1/2010 8:40:41 AM

would make sense. I've also noticed the website magically loses my auto draft bank account schedule. Seems to have to setup every 6 months just about.

11/1/2010 8:42:49 AM

That sucks, sounds like they are trying to make sure you pay as much interest as possible by giving you the two "free" months.

[Edited on November 1, 2010 at 8:44 AM. Reason : .]

11/1/2010 8:43:57 AM

well i do get a tax write off at the end year for the interest. It was well over a grand for last year's write off.

I thought about paying my car off this year (i owe 10k on that) or put a good dent in this loan. Rather pay the car off in case I need to liquify something, I can do that.

11/1/2010 8:52:56 AM

Student loans are "good debt." As long as you have no trouble paying off the monthly payment, I wouldn't worry too much about paying it off right away, especially if you have other loans you're dealing with at the same time.

11/1/2010 9:10:13 AM

I graduated back in 2002 and consolidated my loans after graduation. I have a 2% rate on my loans so I am in no hurry to pay them. But I do pay $150/month on a $138 payment and I run into the same thing as the OP once per year.

Who are your loans serviced by? Mine are Sallie Mae.

11/1/2010 9:24:06 AM

Quote :

"Student loans are "good debt." As long as you have no trouble paying off the monthly payment, I wouldn't worry too much about paying it off right away, especially if you have other loans you're dealing with at the same time."

Have you ever compared the total amount paid when you pay the minimum payment vs. paying more? Even with a low interest rate it can be quite substantial at the end of the loan.

Example:
$15k loan, 12 years, 6.8%.
Minimum payment is ~$150/month. After 12 years you'd end up paying almost $7,000 in interest.

Now bump your payments up to $300/month: You pay the loan off in just under 5 years, and pay $2,700 in interest...quite a savings. Yes it hurts to pay more than the minimum but in this example the loan was paid off in 40% of the allotted time and you saved $4,300.


Bankrate has a bunch of nice calculators that show you the loan amortization based off a number of variables.
http://www.bankrate.com/calculators/college-planning/loan-calculator.aspx

This website doesn't have as many variables to play with, but makes nice graphs.
http://www.mlcalc.com/

[Edited on November 1, 2010 at 9:45 AM. Reason : ]

11/1/2010 9:35:47 AM

Yes, you pay more interest the longer you pay something off (duh ) but if you're dealing with multiple loans, it's generally more beneficial to pay off the car loans, home loans, etc, first. Unless you've got some awesome loans with less interest than student loans. In that case let me know where you get your loans financed.

11/1/2010 9:41:39 AM

The other argument is that you take that extra $150 or so that you are sending to the loan and invest it in something. Assuming you get a better rate of return than the interest rate on the loan, then you make out better paying the loan off slower.

Obviously if your loan rate is 6% or something, then finding a safe investment paying 6% right now is difficult. In my case my loans are locked in at 2% so I have very little incentive to pay them down. I'd rather put extra money in my 401K or IRAs.

11/1/2010 10:55:36 AM

Quote :

"Just guessing here, but it sounds like they aren't letting you pay it off early and instead are rolling the $32 extra you pay each month into the 2x monthly payments you aren't having to make."

I know nothing about student loans, but mortgages are handled like this. You have to explicitly state if you want the additional money to go toward the principal. As others pointed out, I wouldn't prepay if the rate is low.

11/1/2010 11:54:45 AM

^^

That is always an option, but my personal preference would be to make sure you have some backup cash built up for emergencies, then get out of debt ASAP, then invest/save as much as you want. But that's just me, and obviously what works for one person might not work for everyone.

<rant>

I'm a big fan of the idea that any and all debt is "bad debt", regardless of what the credit bureaus tell us. I hate the idea of owing someone else money, even if it is considered "good debt". All these companies want to do is keep you perpetually indebted to them.

You will note that there is no consideration in credit scores for having actually paid off a loan. No bonus points for paying it off early, nothing like that. Besides a few other factors, the only way to get and keep a good credit score is to perpetually be in debt and regularly make payments on said debt.

</rant>

11/1/2010 12:12:58 PM

^ Yeah that annoys the shit out of me too with the way they create credit scores. If it were up to me we'd do it the way loans were decided 50+ years ago

11/1/2010 1:15:20 PM

^^ Sounds like a Dave Ramsey fan. I believe in everything you said, but most people cannot save money unless it is locked into something they cannot easily touch like a 401K or IRA. My goal is to be debt free, house and all, in about 10 years.

The only debt my wife and I have now is school loans, a car loan because her car started dying (fuck you Toyota) and we needed safe, reliable transportation, and of course the house.





[Edited on November 1, 2010 at 1:39 PM. Reason : sd]

11/1/2010 1:38:55 PM

I have my loans consolidated through loanconsolidation.ed.gov and called them just to make sure that when I make additional payments it takes it out of the principal. She said once the interest is satisfied, then the extra money comes out of the principal so she told me to make my additional payments after the draft takes out the minimum deduction. So it may help you to have the $168 automatically deducted and then do a one-time payment of $32 each month.

11/1/2010 1:48:35 PM

My loans are with two different loan vendors and both of them have checkboxes on the payment page (all my payments are direct out of my bank account). I have to manually check the box to apply any extra over the minimum straight to the principal so it doesn't push forward my next due date like the OP's did.

11/1/2010 7:49:15 PM

i just came here to say fuck cfnc

if obama didn't do anything else worth a damn, he put those mfers out of business



that's all

11/1/2010 8:22:58 PM

What is the problem with CFNC? Can't say I've ever had an issue with them.

11/1/2010 9:22:20 PM

any time i've changed my status from repayment to deferment or vice versa, they've managed to fuck it up in some way.

example:

when i came out of deferment last year, they sent me statements for 3 months saying that my balance due was 0. so, i called them because i knew my deferment was over--they told me it was under forbearance. well, i don't need a forbearance, so i start paying it, but i paid less than would typically be due, say 100 instead of 200. after the third month, they call and say that i shouldn't have gotten the forbearance and that i'm now two months past due:

me: "so, basically, you told me i didn't have to pay anything, but i did any way, and now you're saying i'm two months late because i paid less than i should have?"

her: "yes, sir, but i understand that you're upset so i'm going to go ahead and give you a forbearance on those three months so you're no longer past due"

me: "I DIDN'T WANT THE GODDAMN FORBEARANCE IN THE FIRST PLACE"

[Edited on November 1, 2010 at 9:52 PM. Reason : of course this popped up on my credit report. i contested it. they won't remove it]

11/1/2010 9:51:05 PM

11/1/2010 10:06:17 PM

it's really not that big once you get used to it...

11/1/2010 10:21:26 PM

Quote :

"Student loans are "good debt." As long as you have no trouble paying off the monthly payment, I wouldn't worry too much about paying it off right away, especially if you have other loans you're dealing with at the same time."

The only reason it's really considered "good debt" is because generally the return on investment is high, if you complete your degree and secure a higher paying job than you would have had without the degree. It's not good to pay it off gradually because you'll obviously paying more in interest. The only way I could justify paying it off slowly would be if you had an investment that gave a higher rate of return than you are paying back in interest.


Also, I'd say if the interest rate on the student loan is higher than other loans, it may be more beneficial to pay off the student loan first, despite the fact that the interest is tax deductible. Student loan debt can not be discharged in bankruptcy, so if you were injured or had some other catastrophic event, you'd still be stuck with this debt. Since your payments are less than $200 a month I'd say this isn't likely to be a factor, but for anyone that has high payments this may be a consideration.

Another thing, FAFSA is the application for loans and other aid, and has nothing to do with this thread.

11/2/2010 8:19:17 PM

For low rate public loans it almost always make sense to pay them off gradually. To say this is bad because you pay more in interest is a pretty flawed argument and so is paying the student loans down early since they can't be discharged in bankruptcy. In the rare chance you ever declare bankruptcy, retirement assets should be safe, which is exactly where you should be putting any additional money.

[Edited on November 3, 2010 at 7:46 AM. Reason : ]

11/3/2010 7:44:00 AM

Quote :

"In the rare chance you ever declare bankruptcy, retirement assets should be safe, which is exactly where you should be putting any additional money. "

Exactly.

11/3/2010 9:27:51 AM

Quote :

"despite the fact that the interest is tax deductible."

Is this true because I haven't been able to deduct the interest on my tax.

11/3/2010 1:33:40 PM

http://www.irs.gov/publications/p970/ch05.html

11/3/2010 1:44:17 PM

^^You probably make too much money, are married filing separately, or can be/are claimed as a dependent.

Quote :

"You can claim the deduction if all of the following apply: 1. You paid interest on a qualified student loan in tax year 2009 2. Your filing status is not married filing separately 3. Your modified adjusted gross income is less than $70,000 ($145,000 if filing jointly) 4. You and your spouse, if filing jointly, cannot be claimed as dependents on someone else's return"

http://www.irs.gov/taxtopics/tc456.html

[Edited on November 3, 2010 at 1:50 PM. Reason : Also you do not have to itemize.]

11/3/2010 1:49:40 PM

Quote :

"3. Your modified adjusted gross income is less than $70,000 ($145,000 if filing jointly)"

So why the hate for people who make good money?

Also, apparently you can only deduct up to $2,500. Sucks for those who have big student loans.

From one of the above links:

Quote :

"Figuring the Deduction Your student loan interest deduction for 2009 is generally the smaller of: * $2,500, or * The interest you paid in 2009."

edit: If you're married does that jump to $5,000? Or does it just apply to 'one of you' since the loan is only technically in one person's name even though you're both paying on it?

[Edited on November 5, 2010 at 5:19 PM. Reason : ]

11/5/2010 5:11:46 PM

I paid $200 and now it says my next due date isn't till October and took out ~$10 in interest. >_> Guess I will call them and see if I can get that changed.

6/4/2011 10:43:17 PM

1) Keep paying anyways
2) Owe less in the long run

isn't this common sense?

Its like when you are 13 and you borrow $5 from your buddy to get a big mac and he says "every day after tomorrow adds a dollar" So you pay that shit right away.

also i really want to post a "Lets do something large" in here

I'm AstralAdvent and i approved this message.

6/5/2011 12:00:44 AM

im like way way ahead on my student loans, i graduated in 05, and made a payment every 4 weeks since then

my next payment is due in like April 2012

6/5/2011 12:01:28 AM

CFNC is pretty terrible; I'm glad to be done with them in ~2 years or so. Luckily I've never actually missed a payment because of their stupidity and I've never had them pull the "you paid extra so we won't deduct this month" trick, but they have been a poorly managed annoyance from the moment I finished college and started paying my loans.

[Edited on June 5, 2011 at 9:27 AM. Reason : ]

6/5/2011 9:22:39 AM

cfnc screw me hard in '06. I had updated all my information for auto-draft when I moved and changed banks and it was all good. The next 3 months it drafts fine and then December it did not, no statement mailed, and i didn't noticed they charge not hitting my account because i was traveling to see family for the holidays. Checking how much i spent online I notice the missing cfnc payment, i check cfnc online and see that they have my old bank info. So i call up and complain and they told me "it was a system error but i should have received a paper notice it was overdue and made payments that way". We go back and forth for a while and come to find out that at the time their websites address update wouldn't update your actually mailing address with them unless you called in to change it. So my mailed a late notice to a place i hadn't lived in nearly a year, tried to draft out of an account that was no longer on valid, and then reported 16 late loan payments on my credit (2 separate loans per semester). So i had hell with my previously perfect credit history because i missed 16 payments in one month due to cfnc being ran by chimps.

6/5/2011 10:34:51 AM

^ Auto-draft works great but I've heard plenty of horror stories like that one (and not just with CFNC), so I generally avoid it.

I prefer to make the payments for all our bills each month rather than use auto-draft. Doing it this way has a few side-benefits:
--It forces me to look over our finances so there are no surprises.
--Generally speaking I can avoid issues like the one above, since I am the one making the payment and not some computer.
--I am the one paying the company, rather than the company taking money from me. I know someone who had their mortgage payment taken out twice in the same month due to some auto-draft screwup, then got the run-around about how it was going to take 7-10 days to have the 2nd payment put back into their account...blah blah blah...issues like that are just avoided.

Downside: you have to make the payments each month so if something is late, you can't blame anyone but yourself.


As for CFNC, I've never had an issue with them.

6/5/2011 11:18:26 AM

^ in that situation i'd have been hosed either way, seeing as how they sent the paper statement/bill to an old address.

6/5/2011 9:02:00 PM

yeah, I got a 30-day knock on my credit report because they were sending the bill to who knows where.

6/5/2011 9:03:57 PM