The first week of December
signals two important events:
1.)
The holiday season is just around the corner.
2.)
Repayment of my student loans from B-school begins.
What bugs me about
my Federal Direct student loans is the fact that they are accruing interest at
a fixed rate of 6.80%. (My total
rate is actually higher because a significant portion of my loans are Federal Direct PLUS
loans, which accrue at 7.65%.) The prime rate, which is the lending rate
for the most credit worthy customers, is only 3.25%. (And yes I have great credit!) Somehow I get the feeling that
I am getting a raw deal on my Federal student loans. Isn’t the government
supposed to be helping me finance my education and not trying to massively
profit off of it? Even the 30-year fixed
mortgage rate (national average) is slightly less than 5.00%! WTH? Even Tony Soprano
would be impressed by such loan sharking.
And
to make matters worse, I missed the deadline to apply for a loan deferment (I don’t have a job yet), which was on November 15th. All you 2010 grads who are still unemployed
a year from now, make sure you remember to apply for deferment more than
1-month ahead of your first payment! On the bright side, you can apply for
deferment at anytime during your repayment so I will just have to make my first
payment before getting my loans deferred. Loan deferment is helpful because it allows
you to delay repayment and you do not accrue any interest on the subsidized portion of your Federal
loans.
If I was smart, I would have taken out a
mortgage in the same amount of my student loans, sold the house immediately for
the same price that I bought it (somewhat risky assumption), and used the proceeds to pay off my
Federal student loans. Essentially I would be swapping my 6.80+% student loan
rate for the 5.00% mortgage rate. Even after broker and origination fees, I feel confident
that I would still have come out on top.
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