We weren’t going to have our daughter take out the 5500 fafsa unsubsidized loans but now we might. I know she won’t have to repay until she graduates. I understand the interest starts day one of the loan. Can we pay just the interest on these loans every year to keep the interest from adding on and compounding every year?
Yes
Don’t forget the loan fee that is also charged - currently 1.068% of the amount borrowed.
We paid the interest while our D was in school. It’s a good idea.
You also don’t have to take out the whole amount if not needed.
What was the Lastest rate? wondering what average yearly interest payment would be.
Currently, and until July 1, 2016, 4.29% fixed.
Thanks everyone. One more question is this interest paid something I can claim as a tax deduction
Potentially, yes. See chapter 4 of IRS pub 970:
Thank you. I’m thinking no. If she is taking the Stanford loan then it’s in her name not ours…correct ? So we probably can’t claim it. And also I found the following :
Can’t claim interest on student loan if;
Interest you paid on a loan if, under the terms of the loan, you aren’t legally obligated to make interest pay- ments.
Did you look at the IRS pub that I provided a link to? If not, read chapter 4. If you did, go back and look at the information under “Qualified Student Loan” at the bottom of the second column on page 30.
The 5500 is the total of the subsidized and unsubsidized. The former doesn’t accrue interest for a period. https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized#subsidized-vs-unsubsidized
Some students don’t qualify for any of the loan to be subsidized.
Thanks all. Just feeling the pinch. Feel like the middle class is getting squeezed.
From the 1098 E , you will be able to claim as a deduction whether as a parent or as a dependent. But remember you have to pay it so READ Box 1 It say’s Student loan interest RECEIVED by lender. Meaning you PAID THEM during the year. Unlike interest from a mortgage where they were paid by your mortgage payment of P & I, in this situation if you don’t pay them you will have nothing in the box consequently you have nothing to declare. If you take a good look at your Stafford loan you will also notice that some is subsidized and some is unsubsidized with different rates and part of the loan.