undergraduate debt

[spctle342]

I'm obscenely new to the process of applying to grad school and starting to really buckle down in my search for MSW/Ph.D programs for Fall 2012. I'm going to graduate in December, so I'm scheduled to begin paying off my loans in June. By that time, I imagine I should be accepted somewhere. If you're accepted to a graduate program, do you simply defer? Do you pay until you start taking classes? Who initiates this process?

Do people really attempt to pay off undergraduate debt while scraping by in grad school? Is this advisable or insane? I think I'd prefer to postpone payment until I have the degree I want, but perhaps that's not financially prudent. I don't really have any other debt, aside from my car, which should be paid off around the time I begin grad school. I have stellar credit, and I'm generally very frugal. Throughout school, I've been working ~30 hours/week, and after I graduate, I'll receive an automatic raise and plan to take on more hours in the seven or so months before I take off for grad school. I currently have a cushion of ~7k that should be more than enough to finance the application process, GRE, campus visits, initial moving expenses.

Say I receive a stipend that covers most of my expenses--in that case, I should work to pay down my debt, correct? More realistically, say I receive a measly stipend that covers 50% of my tuition/expenses--defer? Is it that cut and dry? I realize most people say not to bank on IBR and public service loan forgiveness, but I can't say that's not a factor for me, as I'll be working in the nonprofit sector and probably starting out at 35k/year with an MSW (haven't done enough research on the Ph.D to ballpark that).

Are there other things I should factoring into the equation? I will have accumulated approximately 25-30k in undergraduate debt by the time this is all said and done.

[mechengr2000]

I would NOT try to pay off loans while in grad school. That would mean skipping meals, unless you have some realllllly handsome stipend!

Where are your loans from? Federal government? Bank?

[javi7830]

I too have debt from my undergrad (was about $18,000). I took a year off between my bachelor's and master's and ended up paying a few thousand off, BUT as soon as I enrolled in school again, I made sure to contact National Student Loans (I'm in Canada) to inform them of me going back to school. That way, I could defer payments until I was done school again. Personally, I would rather have a little bit in my savings account in case of an emergency than use it to pay down my debt (since interest doesn't accumulate while I'm in school).

[Damis]

That's interesting. I was always under the impression (in America at least) that once you start paying a student loan off you're stuck until it's done. Regardless of if you decide to attend grad school again. Is this true?

[spctle342]

I would NOT try to pay off loans while in grad school. That would mean skipping meals, unless you have some realllllly handsome stipend!

Where are your loans from? Federal government? Bank?

All federal loans. I think I happened across a few articles where students were advised to begin making payments while attending graduate school to manage the amount of debt, but I agree that it seems financially impossible.

So, if I graduate in December, what happens come June? Assuming I've accepted an offer somewhere, does my admission automatically result in deferment, or is there some sort of process I need to initiate to postpone payment?

[ZeChocMoose]

That's interesting. I was always under the impression (in America at least) that once you start paying a student loan off you're stuck until it's done. Regardless of if you decide to attend grad school again. Is this true?

Not true for federal loans. As long as you are attending half-time, you can receive in-school deferment even if you have been previously paying off your loans. The only time when you wouldn't be able to get in-school deferment for your federal loans if you are in default on those loans.

Private loans, however, are very different. It would depend on the terms and the conditions of the loans whether your lender allows in-school deferment.

[ZeChocMoose]

All federal loans. I think I happened across a few articles where students were advised to begin making payments while attending graduate school to manage the amount of debt, but I agree that it seems financially impossible.

So, if I graduate in December, what happens come June? Assuming I've accepted an offer somewhere, does my admission automatically result in deferment, or is there some sort of process I need to initiate to postpone payment?

Since you are graduating in December, you will probably end up paying a couple months on your student loans before they go into in-school deferment. This assumes you have Stafford Loans. If you have Perkins loans, you will get a 9 month grace period so you might not have to pay anything between this gap period.

If your school participates in the National Student Clearinghouse, they will report your enrollment to your lender. Assuming that you are attending at least half-time, you will be eligible for in-school deferment. In the majority of cases, your in-school deferment is automatic and you do not have to do anything. (It may take a couple months for the school that you are enrolled in to report your enrollment. It depends how frequently they update their enrollment records to NSC. I would check at least by October to make sure the loans are in deferment.) However, there are some schools that do not participate in the NSC and some lenders who will require you to fill out their deferment paper work.

Your best bet is to call the financial aid office or registrar's office at your graduate school and ask them how previous students have handled this in the past. You can also call your lender or read their website.

Edit: You also need to keep on paying on your loans until they go into deferment. Usually if you default on your loans, you will not be eligible for in-school deferment.

Edited May 4, 2011 by ZeChocMoose