So I've got one $6000 student loan that is not consolidated, and is running an outrageous 10.4% interest rate.

If I go at it pretty hard, I should be able to pay it off by the end of the year, but the loan company is telling me that additional or early payments will not go strictly to principle.

If I'm going to have to pay the full interest amount anyway, it actually costs more to pay it back now than to continue making normal payments. At least, if I stretch it to the life of the loan, I'll be paying back some of the amount with dollars that are worth less.

Is there any hope for getting around the system and making it apply to principle now?

I haven't even checked yet if I can consolidate it with the others, and I graduate in May. What can I do? I screwed up by not trying to consolidate it earlier, but now that I'm in the pickle, is there a way out?

3/21/2008 12:12:15 PM

what kind of crazy loan did you agree to

3/21/2008 12:13:23 PM

You need to find out the terms for sure before you do anything else.

3/21/2008 12:16:45 PM

Quote :

"additional or early payments will not go strictly to principle. "

So where exactly will they go?


Check your contract. This sounds like someone is pulling your chain

3/21/2008 12:16:49 PM

Did you ask if you can have extra payments specially applied toward principal?

It might be that you misunderstood them. They may by default apply them toward prepaying the loan, but if you request so they will apply your extra payment toward principal.

I have a personal loan at a finance company like that, you have to tell them if you want to apply extra toward principal otherwise they just prepay your loan for however far in the future you have paid.

3/21/2008 12:24:47 PM

10.4% hahahahahaha

3/21/2008 12:40:54 PM

jesus my credit card has a lower interest rate than that.

3/21/2008 12:56:00 PM

so what's the standard interest rate on federal education loan now? I remember it used to be 2.5% or something like that.

3/21/2008 1:00:22 PM

Quote :

"jesus my credit card has a lower interest rate than that."

So does mine

This was a private education loan, taken when that was necessary because of extenuating circumstances.

[Edited on March 21, 2008 at 1:06 PM. Reason : a]

3/21/2008 1:05:51 PM

Check your terms.

It's not uncommon for private lenders to penalize for early payment, but it is interesting that they're saying you can't put it towards principle. Private education lenders are notoriously scummy, so assume the worst about them (well, any lender in general), and never take what they say at face value.

3/21/2008 1:51:01 PM

usually if you pay any additional amount, you have to specifically write "apply any additional amount directly to principle" on your ticket, or they'll put it toward the interest, which is pointless.

3/21/2008 1:53:52 PM

i've never heard of a lender being able to refuse a payoff

3/21/2008 4:05:15 PM