Author Topic: Paying off an unsubsidized loan with a subsidized loan?  (Read 1570 times)

Offline cmandrews2

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Paying off an unsubsidized loan with a subsidized loan?
« on: October 09, 2012, 11:52:55 AM »
Would it be wise to pay off an unsubsidized loan with an interest rate of 6.8% completely with a subsidized loan with an interest rate of 3.4%? I still have two years left in college and I'm thinking that it would be wise to eliminate the growing interest on the subsidized loan and also decrease the interest that I'll have to pay after college. Thanks for the advice.

Offline Entity

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Re: Paying off an unsubsidized loan with a subsidized loan?
« Reply #1 on: October 09, 2012, 02:24:30 PM »
Not being near your schema, i can only suggest general advice but :

Sure it makes sense mathematically, to reduce the growth rate of the loan, but check a few things first. Namely go carefully over the terms and conditions and try and find anything that restricts or penalises early repayment.

Anything you can put onto the principle now, will save you big bucks as you are paying it down,   do it.
Is there anything you can do to make school cheaper for yourself?  grants and scholarships come under this heading, so does finding less flash accommodation to share with other *like minded* students. ( nothing breaks this, like having your flatmates be in party mode, while you are trying to go hard on school. avoid the ones that are setting themselves up for failure, and go hard)

Offline ttubravesrock

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Re: Paying off an unsubsidized loan with a subsidized loan?
« Reply #2 on: October 09, 2012, 05:28:42 PM »
While numbers might make it so that it makes sense, I don't see the logic in borrowing money to pay other debts.  I'm not a professional in any way, but I enjoy working numbers to potentially help people get out of debt completely.  I'm about 3/4 of the way through my own debt repayment. 

Offline Entity

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Re: Paying off an unsubsidized loan with a subsidized loan?
« Reply #3 on: October 09, 2012, 06:03:27 PM »
Assuming that the new loan is equal or less in principle to the old one, then nothing is lost. however using it to bankroll additional expenditure is extremely dangerous to the financial future of the borrower.

Offline FrugalFannie

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Re: Paying off an unsubsidized loan with a subsidized loan?
« Reply #4 on: October 09, 2012, 06:41:24 PM »
Does the new loan require payments while you are in school? If payments are deferred is interest still accumulating during that time?

Offline chrisdfw

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Re: Paying off an unsubsidized loan with a subsidized loan?
« Reply #5 on: October 09, 2012, 08:29:43 PM »
I think is a fine idea, you don't lose anything.