Cool trick for med studs

[The White Coat Investor]

Got this one by email today:

 

        One thing I found while looking into my student loans is using autopay through federal loan servicers provides a 0.25% reduced interest rate. Reading all the information I could find on my servicer’s (Great Lakes) website about this, it appears that students currently in school can make the minimum monthly payment ($5 per account) and qualify. Making this minimum payment does not remove them from deferment and actually lowers the amount borrowed because the monthly payment is subtracted from the loan principle when made within 120 days of loan disbursement. I have not seen any such suggestion from what I have read on your blog and others and was wondering if this is really possible for current students?

 

Although it is a small benefit, I calculated that by making the $10 payment (two accounts) each month would save me about $1500 in interest over the course of my next three years of medical school via the reduced interest rate (will obviously vary by person but significant enough for me unfortunately going to a high cost medical school). It is not a lot of money in the grand scheme of things but better $1500 in my pocket than the federal government’s.

 

I would appreciate your input on this as to whether current students are truly eligible for the reduced interest rate. If so, I thought it might be worthwhile information to include somewhere on your site for current students looking to reduce their future debt. Again, thank you for your blog and the time you give to everyone using it.

[RogueDadMD]

I'm not a stud (ha ha) but I did have this benefit of a reduced rate w/autopay when graduating medical school and I took advantage of it.  It may have been there during school but I never looked into starting payment while still in school.

As long as it doesn't hurt his deferment it seems like a great idea.

[jhwkr542]

I don't think you can do this while still in school.

[moneyjoel]

This only works with loans that have payments due. I also use Great Lakes - this is directly from their website:

"You'll receive a 0.25% interest rate reduction on your U.S. Department of Education loans with payments due, while you're enrolled in Auto Pay."

Otherwise I'd be all over this - I'll sign up when I'm done with school to be sure.

[Dmarigs]

moneyjoel wrote:

This only works with loans that have payments due. I also use Great Lakes – this is directly from their website:

“You’ll receive a 0.25% interest rate reduction on your U.S. Department of Education loans with payments due, while you’re enrolled in Auto Pay.”

Otherwise I’d be all over this – I’ll sign up when I’m done with school to be sure.

Click to expand...

Dr. Money Always on top of it Even one year ago.

[wideopenspaces]

I am pretty sure I did this while in school. I started paying back my loans as soon as I took the first one out because I didn't want interest to accrue and my husband was working. I was not trying for PSLF so didn't have to worry if it would mess that up though. Worked out great for me, was done paying for school right around the time I finished residency!