Your Questions About Save Loan Interest

Steven asks…

How much would I save on this loan?

8500.00 over a year, me current interest rate is 17.5% and another bank is offering me a 13.9% interest rate. The loan is over a 1 year period, is it worth switching over? How much will I be saving?

John answers:

Go to prosper.com and find a better interest rate there. It works like ebay for loans. Really cool. If there is no cost to get the 13.9 loan – you should go for it.

Here’s the math:
You’ll save approx. $300 in interest.
1484 approx in interest with the 17.5
1178 approx in interest with the 13.9

Betty asks…

school loan interest on taxes?

I was told I can claim the interest I payed in on my school loans. I was looking at my statements and I only paid in $506.43 in interest. How does that help me out on my taxes. Do I get that money back when I file it? Is it even worth filing it or do I have to file it? thanks

John answers:

It’s a deduction. You get to deduct that amount from your income before you calculate how much tax you owe.

If you’re in the 15 percent tax bracket, then you’ll save 15 percent of $506. Whether that’s “worth filing” or not is up to you.

EDIT: Contrary to what someone else says here, you do NOT need to itemize deductions in order to deduct your loan interest. Student loan interest on qualified loans is deductible even if you do not itemize your other deductions:

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

Mary asks…

how do I continue working on a saved PLUS loan application??? HELP!!!?

whenever I go to the PLUS loan website all I see is “apply online”, but I have already started applying and just saved my application, and whenever I try to just reapply it just says I have already started applying. So how do I retrieve my saved application???

John answers:

There are many student loan lenders.Before you go for one check the rate of interest and also see that the lender is a legitimate one.
Don’t pay any money to get the laon. You can also try for some scholarship online.
To know more you can visit
http://www.easystudentloan.blogspot.com
and
http://www.scholarshipgrants.blogspot.com

Paul asks…

Student loan interest, how does it work?

Does the interest apply to what you owe or, no matter what you paid off you pay interest on the current plan you agreed on?

Basically if I paid more than what my minimum payment is, do I pay less in interest in the long run?

John answers:

Yes you do…

Your student loan payment, when converted is .. Say $270/month for 10 years…

If you double up your payments, you dont reduce the AMOUNT of your future monthly payments. You can only do that by consolidation. You DO reduce the amount of interest you pay, and of course the time the loan takes to get paid off….

REMEMBER— Student loans arent the same type of loan as–say—- Rent-A-Center, where you pay that 270$ payment 120 times no matter how fast you pay it off. Student loans are more like a car payment or mortgage. Doubling up or paying extra principal SAVES YOU MONEY…

Sharon asks…

I need some advice on what to do with student loan debt.?

I have $15,000 in government student loans at 5.5%. They go back into repayment in 6 months. I’m just entering the work force and I’m thinking about doing a graduated repayment plan, it will rise as I make more and inflation rises. I have $20,000 saved in my bank account from work and saving. One friend of mine told me to use half of the $20,000 towards my loans before I consolidate making my loans at $5000, but that is money that didn’t come very easy for me and not very easy to make back since my income is currently low. Another friend told me to put my loans into repayment and invest my $20,000 I have saved and use my student loan interest tax write off to put towards taxes I have to pay from my investing. Use the money earned to pay my student loan monthly payments. I have no credit card debt, mortgage payments or any other debt besides a small car loan.

Any advice towards this situation would be great. If I should invest I’m open to investment advice, I’m not familiar with investing and I know the stock market is a mess at the moment. Thanks for your time.

John answers:

The only issue should be the size of your emergency fund.

If you paid nothing on the student loan, you would pay $825 in interest. This $825 could be used to reduce your income…at 15% tax, you save, what a whopping $125. You still pay $700 in interest.

Meanwhile, your $20,000 of investments make, what, .4% in savings account and get you $80. After tax, you make $68. Or, say you invested $20K at the beginning of 2008 in a mutual fund, lose $10,000 after the meltdown….

Yeah, spend $700, save $68. Works for me.

(I was told the same thing. My loans were 7% and I had zero other debt. After ensuring I could pay my bills, I bumped up my payments and got rid of the loan in 4 years.)

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