Jul 30, 2008

To defer or not to defer?

As most of you know, I will be starting grad school next month (actually in less than three weeks!!). This gives me the option of deferring my student loan payments until I graduate, which will be either in two or five years, depending. But deferment seems to have some major flaws. These are my options:

a) I can defer and postpone all interest payments, which they will later tack on to the principal of the loan! Needless to say, deferring without paying interest is not an option for me at all- I could end up owing over $23,000 as principal by the time I graduated!!

b) I can defer and still make interest payments, which would run roughly $300 every quarter. I would have to save $100 each month to be able to afford paying off the interest payments, and my principal would stay at roughly $16,000.

c) I can keep right on making payments to the loan, and keep chipping away at my principal. Right now, my payment is only $150 every month.

So looking at it this way, the winner is: C!! I just have to move some things around within my budget to find an extra $50 every month. Hopefully, by the time I graduate, I will have paid off a fairly good chunk of my loan. :)


The Executioner said...

Good choice. I think that sounds reasonable. If you run into trouble, can you elect to defer at a later date?

Dolly Iris said...

I agree that option C sounds best!

Canadian Saver said...

Good plan! Most would just have it deferred but you crunched the numbers and know that's not always the best answer.

You can always change your strategy if it's not working...

United Writers of Imaginary Samoa said...

Very smart move. A tough decision indeed.

Situations like this make me really wish I was heading towards a public service career so that I can just have my loans forgiven someday.

Good luck!

SavingDiva said...

I think you're making the right decision. It's an easy way to make sure you won't have a bigger loan payment when you get out of school!