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Debt Finances & Money

Having to pay back school loan interest

Last November, I found out that my graduate school automatically notified my student loan servicer that I was taking classes “half-time”, which, for graduate school, allowed me to automatically defer my student loans. In fact, because I had a subsidized loan, the government paid my interest for me so that it didn’t accrue. Even though I didn’t have to pay, I continued to pay the $200 minimum per month.

But this summer and fall semester, I only took one class, which means I’m not half-time anymore. I got a letter from my student loan service company that basically I owe interest on all those payments since May (the end of my last half-time semester). So, instead of paying down my loan by $200 each month, I’m back to paying down about $150 per month, plus $50 in interest.

Luckily I don’t owe all that money right now. Instead, they took it out of my payments and recalculated my balance owed. Instead of owing $9998, I’m back up to owing $10,280. Dang, back up over $10k. It was nice owing only 4 figures for a while, but I should have known better.

But since I plan on taking 6 credits again next semester, I’ll go back into automatic deferment for 5 months, which means about $250 savings in interest!

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Clever Dude


  • Is that the right loan to pay back, though? I would think that given the easy terms and low interest, you’d want to avoid paying your student loans off until the last possible minute, and stashing the money in something that earns a slightly higher return.

  • @taxrascal, the loan is actually my highest interest rate loan, and I can’t deduct the interest due to our income level. Our second mortgage is higher, but not after the interest deduction.

    But yes, I’m paying the minimums (even when I didn’t have to pay anything) and paying down other debts instead (my truck) even though the student loan is higher interest.

  • I feel your pain, we owe about 40k on my BS and 35k on the wife’s MS. In the end the way I look at it is as an investment that more than doubled the salary I made before I went to school, so eventually it will pay for itself. You can never go wrong with enrichment such as education.

    In the meantime it just feels like a 2nd mortgage payment that never goes away. The good news is at least the interest is tax deductable 🙂

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