[Slightly off topic]

On Sep 5, 6:10 pm, "removeps-gro...[at]yahoo.com" <removeps-
gro...[at]yahoo.com> wrote:
- quote -

I would expect that the interest portion is calculated on a payment-by-
payment basis, by simply computing the amount of interest for the
period on the current outstanding balance. Kind of like the way
credit card interest is computed. That gets you the interest
component of the particular payment, and any excess reduces principal.

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On Sep 4, 11:17 am, Jahan <jahan...[at]gmail.com> wrote:

- quote -

How do they determine the interest part of your payment? Consider the
20k at 8.5%. Over one year the interest on it is about $1700. If you
choose to pay $200 a month, how much that is interest? In a fixed 30
year mortgage, these numbers are fixed in stone by a formula, but how
does one figure it out for the loan where you decide how much to pay
each month, if at all?

I'm putting as many tax details, and few financial planning details as
I can:

Suppose all $1700 is interest.

Your earnings seem to put you in the 15% bracket. The tax savings on
$1700 interest is therefore 0.15*1700=255. The interest you can earn
on $1700 is now about 3%, or $51, on which you pay 15% tax and are
left with $43. So it looks like it is better to pay the interest.

Note that if your income is very high, the tuition interest deduction
is phased out.

If the tuition and fees deduction is available, it's probably a good
idea to take advantage of it.


- quote -

6k seems a bit high! The exemption is about 3.5k, and standard
deduction about 5.5k, so net about 9k. Your taxable income, including
interest, is then under 12k. Tax on this should be around $1200.

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kamlet[at]panix.com (Arthur Kamlet) wrote in
news:g9q617$naq$1[at]reader1.panix.com:

- quote -

I don't know whether this may apply, but through NIH there are programs
that if you work in research, up to $35000 of student loans can be
forgiven per year or per 2-year period (I believe). See
http://www.lrp.nih.gov/

--
Best regards
Han
email address is invalid

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In article <g9q4n2$qps$1[at]snarked.org> ,
D. Stussy <replies[at]newsgroups.kd6lvw.ampr.org> wrote:
- quote -



That makes some sense if the interest you paid was available as a
tax credit.


Since it is just a reduction of income, it is still a good idea to
pay down the loan ASAP if you can afford to do so, since the tax
savings is a small percentage of the interest paid.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

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"Alan" <sfcnm-mtm[at]yahoo.com> wrote in message
news:w1Wvk.21398$uE5.11591[at]flpi144.ffdc.sbc.com...
- quote -

Note however, that your deduction is limited to $2,500.00 of interest.
Therefore, from a tax standpoint, you should pay down the loan to the point
where the interest accrued in a year will not exceed $2,500.00.

- quote -

You need to ask that elsewhere.

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Jahan <jahanzed[at]gmail.com> wrote:

- quote -

This is a financial planning question rather than a tax question;
while there are tax implications of any move you are not in
such a high tax bracket, so there tax implications would be small.

Financially you are better off paying the 8.5% interest loan
from your savings, assuming it has no pre-payment penalty,
because you cannot in the present market make 8.5% risk-free
on any investments.

One reason not to do this is if you need the savings for a financial
cushion. It sounds like this may not apply to you since
you have a stable place to live (your parents'). On the other
hand, you do not yet have a job. The sensible thing to
do might be to wait until you have a job, and have assessed
that the job will be ongoing, before paying off the 8.5% interest loan.

Paying off the Stafford loans is not as attractive.

Hope this helps.

Steve

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Jahan wrote:
- quote -

question that will generate lots of opinions.

From a tax perspective and assuming your income doesn't exceed
~$70,000, your student loan interest is deductible from gross
income even if you do not itemize deductions. See the
instructions for Line 33 of the Form 1040.

From an investment point of view, you have to have to ask
yourself how much of a return are you making on your savings vs
how much of a return you make on paying down debt (after taxes).
In other words, are you making a higher rate of return
after-taxes on your savings then the after-tax rate you are
paying on your debt. If not, then financially it makes sense to
pay off the high cost debt. As an aside, if you are also paying
off credit card debt, then that debt would be the highest cost
debt and should be paid off first.

However... everyone should have some cash readily available for
emergencies and any other contingencies that may arise. You will
need to decide how much of that $38K in savings you need to keep
for that purpose. Any excess should be used to pay-down credit
card debt followed by the 8.5% loan if the return on savings is less.

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I left school this summer. Here is my financial situation.


*Total debt of student loans (including interest) around 40K
Breakdown of these loans:
Graduate plus loans 20K [at] 8.5% interest rate
Unsubsidized Stafford Loans 12694 [at] 6.8%
Subsidized Stafford Loans 8,500 [at]6.8%

*Earnings from work this year 20K
*Taxes paid 6K (approx.)

*Savings 38K

My question is should I use funds from savings to pay off my grad plus
loans (higher interest rate). I am thinking of taking off 30K from
savings to pay off my student loans. If I do so, would I still be
able to get refund for the taxes I have paid at the time of filing my
tax returns. What is the best course of action I should take to get
as much refund as I can. Also I would like to pay off my loans so
that I don’t accrue too much interest rate.
Im 27 and single. Don’t have a job yet and am living with my parents.
And im hoping to get a job in the next 2/3 months. To date i have
accrued interest in the amount of $2000

Thanks.

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >