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Megan C
Megan C , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16539
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Im looking for guidance regarding how best to pay off my student

Resolved Question:

I'm looking for guidance regarding how best to pay off my student loans. I have been granted a scholarship with which I can pay back loans in the amount of $5,500. I have also been gifted a separate amount of $7,500. I'm wondering how best to distribute the money.

Should I pay off the loans that have the highest interest amounts (although the dollar amounts of those loans may be smaller)? Should I pay off larger loans with lower interest rates? All loans have the same term of 10 yrs. I'm open to any and all advice you can offer. Thank you.

The loans and interest rates are listed below:

Federal Loans:
Direct Sub Stafford Loan: $5,500.00 (fixed rate of 3.4%)
Direct Unsub Stafford Loan: $2,138.66 (fixed rate of 6.8%)
Direct Sub Stafford Loan: $4,500.00 (fixed rate of 4.5%)
Direct Unsub Stafford Loan: $2,274.84 (fixed rate of 6.8%)
Federal Stafford Loan: $3,500.00 (fixed rate of 5.6%)
Federal Unsub Stafford Loan: $2,403.75 (fixed rate of 6.8%)
Federal Unsub Stafford Loan: $2,488.06 (fixed rate of 6.8%)
Federal Stafford Loan: $3,500.00 (fixed rate of 6%)

Private Loan:
$7, 329.97 (0% interest)
Submitted: 2 years ago.
Category: Finance
Expert:  Megan C replied 2 years ago.

Megan C :

Thank you for your question, and thanks for using JustAnswer.com

Megan C :

How are you today?

Megan C :

What you would need to do is start with the loans that have the higher interest rate

Megan C :

I would pay off all the ones at 6.8% first

Megan C :

This will save you the most money overall.

Megan C :

You should be able to pay off quite a few

Customer:

Fine thank you. OK. Thank you. I would then pay off the next highest interest rate loan(s) etc? Correct?

Megan C :

That is correct

Customer:

OK is there any other issues or advice going forward after paying off and or paying down the loans that you can think of right now? I considered the consolidation approach but what I found was that most loan companies just wind up taking an average of all the interest rates and charging some fee as well. So I did not see an advantage at this point. Your additional thoughts please.

Megan C :

I would stay away from consolidation, if possible. I would just focus on paying down the higher interest rate loans first. You should be able to knock down several loans, and then only be left with a couple

Customer:

Ok thank you for your time.

Megan C :

You're welcome. Is there anything else that I can assist you with today?

Customer:

Well if you do not mind, a follow up question. In paying these loans down I would assume I am gaining a credit history. In addition I would like to apply for a credit card to add additional credit history. Is that a good idea and do you have any added advice on building a credit history?

Megan C :

Yes, you are gaining a credit history. If you get a credit card, you want to make sure that you do not maintain a balance of more than 1/2 of the credit limit.

Customer:

Yes, that is what I have learned from reading some articles about what credit rating agencies look at. OK thank you. I guess that is it for today.

Megan C :

Okay great. If you have no further questions, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

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