Loan estimation: is mine a good strategy?

Hi, I'm graduating this spring and have about $51,500 in loans to pay off.

I plan on using the snowball method, maybe with some variation, to pay off my loans. I have a bunch of loans, so to save time in estimating how long it will take me to pay them off, I calculated the weighted average interest rate and it was 8.88% (was 7.5 a while ago). Assuming the fed doesn't do anything drastic (like 17 consecutive rate hikes), is this a somewhat reliable heuristic just to get an idea of how much I will have to sacrifice to reduce this debt?

Basically all I do to calculate this is treat it like one big $51,500 loan with an interest rate of 8.88%.

I know that my real ability to pay, the flux of my variable rates, and the minimum payments accepted for each loan will all effect this, but in general, does this even make mathematical sense?

According to the following calculator, at about 925 a month, i can pay off the loans in about 6 years (i know this is probably unrealistic, just an example.).

http://www.mapping-your-future.org/features/loancalc.htm

thanks in advance.

I think it's as good an idea as any.

But don't overlook your right to consolidate. Consolidation can occur at a much lower rate, and can spread out payments over a greater period of time (this is important, especially if you don't get into the line of work, at the salary, you had originally hoped -- or if it takes longer for your to get into your career than your grace period allows, etc). With most consolidation brokers, you can pay greater amounts toward the principal, and pay it off early without penalty. Just make sure before you sign on the dotted line.

I did a quick calculation in excel and you are right about the payments. I would be curious how many loans? Are the bigger loans at the higher rates? That might impact it, but you did a weighted average, so could be okay.

Good Luck,

Tim
www.college-investor.com

That's a pretty logical way to look at your loans. I think the biggest advantage you have is your ability to consolidate your loans at a lower rate. You might find that you can secure a reasonable 7-8% interest rate for yourself.

Hi, I'm graduating this spring and have about $51,500 in loans to pay off.

I plan on using the snowball method, maybe with some variation, to pay off my loans. I have a bunch of loans, so to save time in estimating how long it will take me to pay them off, I calculated the weighted average interest rate and it was 8.88% (was 7.5 a while ago). Assuming the fed doesn't do anything drastic (like 17 consecutive rate hikes), is this a somewhat reliable heuristic just to get an idea of how much I will have to sacrifice to reduce this debt?

Basically all I do to calculate this is treat it like one big $51,500 loan with an interest rate of 8.88%.

I know that my real ability to pay, the flux of my variable rates, and the minimum payments accepted for each loan will all effect this, but in general, does this even make mathematical sense?

According to the following calculator, at about 925 a month, i can pay off the loans in about 6 years (i know this is probably unrealistic, just an example.).

http://www.mapping-your-future.org/features/loancalc.htm

thanks in advance.

If the weighted rate is going up while the fed is lowering rates... I'd be thinking that you have some other factor going on (accruing interest) on at least one loan.

I would look at terms of all loans. Subsidized and unsubsidized. Is interest accruing on any? I think that is definition of unsubsidized loans.

I would not consolidate to a longer repayment period if you are working and have the ability to pay. Pay extra when you can, even $10/month to one loan makes a huge difference.

jIM_Ohio is correct. I would look a little closer at that spreadsheet and tackle the higher-interest loans at an accelerated rate. If your average is nearly 9.0%. those top ones must be ugly! The more you pay towards those; you will compound your savings at a higher rate, paying off the total even faster than your method.

Yeah I agree.... for simplicity reasons. I would consolidate your payments into one, but only if the rate is comparably better than your existing ones.