When Should I Pay Off My Stafford Loan?

<p>I will be graduating in May 2012. I took out one subsidized Stafford loan in the amount of $5,000.00 during my sophomore year. I have managed to work/save since my freshman year, and now have that amount put aside to pay off the loan.</p>

<p>Should I pay it off in full now (before I graduate), in May (at graduation), or wait until it officially becomes due six months post-graduation (November 2012)? Are any of the options better for credit-building? I will be leasing my first apartment in Manhattan on June 1st and want to be sure my credit record is squeaky-clean for the credit and background check.</p>

<p>Thanks!</p>

<p>Good for you!Do you have an "emergency fund" set aside? Is your work stable? If not, I say make payments,but don't pay it off.</p>

<p>Having debt isn't going to hurt your credit report. I have considerably more debt than you, and my credit report is very good, and I have a score well over 700 (and I'm probably not much older than you, either). I've been able to get an apartment in the past with no problem, and I just got a new car a few months ago without a co-signer, and with a ridiculously low interest rate since it was based on credit.</p>

<p>I'd say to make payments for a bit so you are not emptying your bank account (unless you already have a lot more saved up).</p>

<p>I am going to tell you to pay if off now. No need to have that kind of debt hanging around. Pay it off while you have the money. Too many people have a comfort level with debt that is not healthy. The less money you are paying in interest is more money in your pocket. Unless your loan is interest free, you should pay it off.</p>

<p>It's not so much a comfort level...having at least some debt is necessary to build credit. I don't know if it would matter if the OP paid it all at once or did payments, but having that debt helps the credit score. </p>

<p>I have a few credit cards that I do not use, but I will not close them, either. Having longer account histories helps your credit, even if it is not being used. Also, they keep increasing my credit limits, which is also good. The more credit you have available that you are not using, the better your score. Having little credit available that you're not using, or if you're using a little bit of it, is not good. </p>

<p>I can assure you I am not comfortable with my debt, but I have learned a lot about my credit report and how different things affect it. I would not know so much if I had little or no experience with loans and credit cards. Everyone has to learn how to manage it sometime.</p>

<p>Look it is not how much debt you have but how much faith they have in you to lend you money. That is achieved by taking credit and using it then paying it off quickly. I have over an 800 score and carry a business credit card because they think I am good with my money. I don't own a business. I never carry debt on my credit cards. I paid off my student loan as fast as I could. Not as fast of the op but with in four or five years of graduation. I borrowed more than the op with the help of a government backed loan at 9% interest rate back in the early 80's. I can not ever think of a loan I did not pay off early in my entire life. People who start at well with money do well with their money. Never pay someone to use their money unless you have no choice, or you can make more money off their money than what you are paying in interest. </p>

<p>I am also not trying to tell you that you are not doing well with your money. I have no idea how you personally handle it. I just know I have had an easier time in financial transactions and gotten much better interest rates than most people because I respected my money. I am much older than you so I do have that benefit but I have always had good credit. Bought my first house at 24 and never had a problem getting approved for any purchase.</p>

<p>If the loan is a subsidized loan then I would wait until the end of the grace period is approaching. You will not be paying any interest on it until then and the money you have saved can be drawing interest. Also you have the money there as a cushion for if you do not immediately find a job and for when you start job hunting and possibly moving. </p>

<p>Making regular payments is supposedly good for the credit score. One interesting thing my son discovered (too late) was that he should have kept his old bank account open when he moved. He had had that account for about 10 years since he was 14 or 15 but closed it when he visited home last summer. When he was looking into getting a car loan a few weeks back he discovered that the fact that he had closed the account and has no bank account more than a year old his credit rating (which he has nursed carefully) had dropped. He has a good income and a spot free credit rating (still in the 700s), but because he has only had his existing accounts for less than a year, his job for less than a year (11 months) and has only lived at his current address less than a year, the bank wanted a cosigner for an auto loan and offered a rate of 10% ! He was incensed. Is trying to wait to get a car but his very old one has let him down twice in the last coupe of weeks and he needs a car to get to work where he lives (there is no public option).</p>

<p>^^ This is what I mentioned above. That is why it is also good not to close old credit cards, and to use them at least once a year and pay them off immediately to keep them active. Store cards don't mean as much, but major credit cards do. If you have one for 2 years and it closes due to inactivity, that lowers your average account length. If you keep it open for years and years, it doesn't matter if you're not using it more than once a year for a cheap purchase, it is still credit available to you that you do not need to use. </p>

<p>momof3 - You can have debt and have just as good a credit score/report as someone without debt. But my point was that you've got to get /in/ to debt at some point to build credit. Why would someone lend to someone who has such a short credit history that they cannot determine whether it is a risky lend or not? Considering I have been on the credit bureau for a very short time, my credit score is excellent. My car loan's interest rate is significantly lower than the average person's interest rate on a car loan, and I did not need a co-signer. Taking out that additional loan did not 'ding' my credit score, either, since I have only had about 1 hard inquiry a year on my report due to student loans. After 2 years, the hard inquiries no longer count against you.</p>

<p>Of course it is best to pay things off quickly and not carry debt, but it is important to carry open lines of credit, even if you do not use them. I became very interested in my credit report and everything that affected it when I first started car shopping. My own parents don't know as much as I do about it - it isn't just about not using credit, or paying it back as quickly as possible, that can actually hurt you. Well, perhaps not /you/ personally, but young people fresh out of high school or college who are wondering why they can't get a car or apartment even though they have a great income.</p>

<p>We knew that about credit cards. We have some we rarely use, but put the occasionally charge on them when they say they may close them due to inactivity. We have credit scores in the 800s (oddly mine is 10 points higher then my husbands - just a few points short of the highest score possible - which we discovered when we got a car loan last year - I thought it was hilarious that mine was higher - just shows how stupid the system is). Our son had closed his bank account before we were aware he was planning to - but I don't know if we would have thought to suggest he should not (I knew about the not closing the credit card accounts, had never thought about the bank accounts). He does not have any credit cards. Is very averse to the idea - we keep telling him he should get one and just charge his cable or something to it each month then pay it off - just to help build his credit. I think maybe he does not trust himself with a credit card. He has been religious about paying his student loans and 0% as long as you pay it off within 12 months furniture loan.</p>

<p>Most first-time credit cards don't have high credit limits anyway, so he wouldn't get into massive debt even if he didn't trust himself in the beginning. I think the best thing is to wait until he has some kind of expense (few hundred dollars) and try to find a card with 1 year interest-free payments. I got my first credit card when I realized my books would cost more than expected one semester. I just made minimum payments on it since it was not collecting interest, and I was a full-time student not making a whole lot of money. Then when I got my income tax return I paid off the rest long before the interest-free benefit ended. </p>

<p>A lot of people I know also just put gas on their credit cards, since that's something we budget for anyway. Maybe look for a card with a good points system for gas and groceries. He could always leave his card at home when he doesn't need it, too, if he's worried about spending it. I do this with mine since I don't want to be walking around with all of that on me anyway.</p>

<p>Wow im hoping 2 find a chick 2 mary whos got like an 800 credit score lol</p>