Federal Student Loans

hehe! We have almost 300K in student loans for my hubby! Talk about making you wanna be sick!

The last thing you should worry about, given that you have a tight budget, it trying to pay the student loans off early. The interest rate is so low that it's not a huge deal. My husband's boss made plenty of money where he could have paid off his loans early but financially it made more sense to use the money in other ways.

Put that extra money toward other things that have more meaning on your total money picture like credit card debt, other loans, and putting extra toward your mortgage (if you have one).

With student loans.... it's actually BEST to pay them off for as long as possible.

The reason? The rates are essentially AT inflation. So it's "free" money, the longer you take to pay them off. Also, student loan debt is calculated WAY differently in running your credit. It's very very easy to qualify for a fantastic loan to buy a house with even a couple hundred K in student loans, when even $30k in regular debt can kybosh the loan process. Essentially student loan debt doesn't count. It does, but it's just calculated differently.

DO make sure to consolidate them. My H and I were paying $800 a month in his student loans (ugh), until I called and got them all consolidated. We now pay $72 a month. Ginormous difference there. We also pay $126 a month on mine (and I only have 9% of his debt load)... but we have to pay more because they only let you stretch out the loan term for so long. Mine have to be paid off in a couple years, he has over 30 years.

Good for you & your husband for being conscientious & responsible in trying to pay off these loans! I'm not sure how the student loans work, but I'm trying pay off our mortgage early also. When I can put some extra $ to it, I note on the check & the payment coupon that the extra $ goes to the principal. When I didn't make a note, they just applied the money to next month's interest -- not the same thing. Maybe that would work for your loans? Or maybe there's a way to contact the lender to find out how to accomplish your very admirable goal.

Another way to look at this: since your interest rates are so low, might it be better to put the extra cash toward saving for your next goal (new car, mortgage, IRA, whatever -- even just a savings cushion or emergency fund) rather than paying off the student loans early? I know the idea of owing so much is nerve-wracking, but it might make better sense in the long run to do it differently. By the way, I'm assuming you've checked & that there are no penalties associated with paying these loans early? I know it sounds weird, but there are times where fiscal responsibility comes back to bite you in the butt!

Good luck!

You can request that any overages are applied to principle not interest!! That is the biggie but you MUST do it in writing and in most cases you must include a note to that effect with every check.

You can also restructure them, but whatever you do do not get a private refinance loan! That interest rate is good and the terms are better than most private loans.

when you pay extra, put in the memo line "apply extra to principle" and they're supposed to apply it to the original amount and not the interest.

Google "income based repayment" for some possibly helpful information. There are new federal regualtions that can positively affect your payment amount and the life of your loan. I am planning to call this week (the new programs went into effect July 1) to see how we can adjust ours. Also, if you work in certain sectors (local, state, federal goverment, education, health care, etc) you may be eligible for loan forgiveness (after 10 years of payments)! My hubby and I have several tens of thousands worth of student loans, too, and pay almost $400 a month (that is consolidated)!! I'm hoping that the new IBR regulations will help us either lower the payment or pay down our loans quicker! Good luck!
Oh yeah, and I agree with what a few others said: have you considered paying off other debts first? That's my goal (credit card, car, mortgage, THEN student loans). I figure that the regulations are changing (for the better), the interest rates are so much lower, and it's doesn't affect your credit score as drastically, so it doesn't hurt as much to let it "drag out" a little longer if necessary.

When you pay the "extra" on your loans, you need to specify where you want that amount to go to. Otherwise, the creditor automatically applies it to the interest, then to late fees, etc., and THEN to the principle. Once you start doing that, you'll see your amount go down MUCH quicker :)

As others have said, make sure to ask in writing for the extra amount to go towards principal, not interest. You may want to make sure that your lenders will do this and that there are no prepayment penalties.