I have been out of grad school for about 7 years now. Due to high interest rates and a large debt load, a vast majority of the payment that is currently paid under IBR goes to interest. As a strategy to pay down the debt and to expand my education, I will be re-enrolling in school for 6 hours. I understand that this will defer my loans and prevent interest from accruing on the Stafford Subsidized loans. During this time, I'll be diverting the payments to my private loans instead.
Is this a good strategy? Does going into student deferment reset the clock on loan forgiveness? I don't want to have to restart the 25 year forgiveness cycle on those loans.
Is this a good strategy long term? It's hard to say.
Here's some thoughts:
- Your IBR clock doesn't reset as long as you keep your loans in good standing
- Deferment is still good standing
- To get deferment for being in-school, you need to be enrolled at-least as a half-time student (I don't know if 6 hours is enough).
The hard part I see with this strategy is balancing being a half-time student with working. For the same time devotion, could you earn more and make a serious dent in your loans, versus spending more (for the classes you're taking) and struggle with time management?
For the short term, it might work, but I can't see this being a sustainable long term strategy. Furthermore, I think there are alternatives to spending your time earning versus being in school that might benefit your entire financial picture in a better way.
I got BREAKING NEWS! IBR now damages your credit. This is a brand new change. I cant get anyone to give me a straight answer why. Before about one month ago, the interest was not reported as part of the principal balance on an IBR loan. Well, ladies and gentlemen, it now is! For me, this means that my credit report shows that my student loan debt jumped from 80 to 133k in one month, tanking my credit score from 800 to 625! And for each month from here on my credit score will get lower. Even though I am making all my IBR payments on time. I am totally screwed for life. Had I known this was going to happen, I never would have entered into the IBR program in the first place, or would have at least paid the interest. But those bastards waited 8 years while my interest grew and grew and grew before they included interest on my credit report. This is a dirty, sneaky intentionally planned trick, obviously designed to force me to make higher payments than I would have had I never entered into the IBR program in the first place.