PSA: Direct Debit for Federal Student Loans & Lifetime learning credit!

[Diggidy]

Didn't see anything posted about this, and given that I'm an intern and just exited my grace period in the last month, I'm relatively naive to this and don't know if this is a new or well known program or not.

With that said, I wanted to post and let people know that if they are paying their federal loans through a federal servicer (I have FedLoan), then you may qualify for a .25% interest rate reduction if you apply for direct debit, which automatically withdraws money from your account. On a 200,000$ loan, that's 500$/year of savings!

This, combined with Re-PAYE, has lowered my 6% cumulative interest rate considerably (at least this year, while I'm single and with a relatively low intern salary) -- with the current growth of the stock market I've decided to only pay minimum payments and instead attempt to max out a Roth IRA.

Also: For you interns, make sure you get your 1098T from your medical school and apply for the Lifetime Learning Credit, which you can claim on your second semester of M4 year from 2016. Given the cost of medical school tuition, almost everyone should qualify for a 2000$ CREDIT on this year's taxes.

[DMFA]

Diggidy wrote:

Didn’t see anything posted about this, and given that I’m an intern and just exited my grace period in the last month, I’m relatively naive to this and don’t know if this is a new or well known program or not.

With that said, I wanted to post and let people know that if they are paying their federal loans through a federal servicer (I have FedLoan), then you may qualify for a .25% interest rate reduction if you apply for direct debit, which automatically withdraws money from your account. On a 200,000$ loan, that’s 500$/year of savings!

This, combined with Re-PAYE, has lowered my 6% cumulative interest rate considerably (at least this year, while I’m single and with a relatively low intern salary) — with the current growth of the stock market I’ve decided to only pay minimum payments and instead attempt to max out a Roth IRA.

Also: For you interns, make sure you get your 1098T from your medical school and apply for the Lifetime Learning Credit, which you can claim on your second semester of M4 year from 2016. Given the cost of medical school tuition, almost everyone should qualify for a 2000$ CREDIT on this year’s taxes.

Click to expand...

It can be great, but keep in mind that it is a non-refundable credit, meaning that it is only good if you would otherwise OWE tax when you file.  So if your tax bill comes out to $20, then all it will do is bring your bill to $0.  Even if you maximally under-withhold, your tax bill on half of an intern's salary (estimating $60,000) is probably going to be very low as it is ($30,000, minus $4,050 exemption, minus $6,300 std deduction = $19,650 taxable, due for 10% on $9,275 and 15% on $10,375 = a total tax bill of $2,483.75 (effective rate 8.3%).  So if you've taken every exemption on your W-4, then you might be able to get the maximum credit.

If you have a refund, like most interns will because many won't under-withhold to that extent, then this credit will do nothing.

Maybe we should make sure every single intern that paid any MS4 tuition takes maximum exemptions to ensure they can maximize this benefit, though...?

[Travis @ Student Loan Planner]

Most private refinancing companies will give you the 0.25% deduction for auto debit if you're not going the PSLF route when you become an attending