Advice for 1 year loan 3 year Army scholarship

Discussion in 'ROTC' started by uwknight, Sep 23, 2016.

  1. uwknight

    uwknight Member

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    DS is now a contracted, and he is overjoyed. Selected for Color Guard and the Northern Warfare Challenge, and is more than proud to wear the uniform every Thursday. Question: He had to take out a student loan his first year, and he wants to start paying that down so that he doesn't get socked with the interest. Are there any options he might have such as taking out a individual loan with lower interest (like a 10 year), and then having the option of paying it off even sooner, if $'s are there.

    I believe after one graduates there are some options for active duty but what about a federal program while still in school? Thanks for guidance on how to best to proceed.
     
  2. KeyzCat

    KeyzCat Member

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    I'm not sure I am understanding as most Federal student loans interest does not begin to accrue until graduation. A personal loan would begin accruing interest at time of loan. So the best option is to just start making payments on the principal I don't know how much the loan is for but if your DS is able to use the stipend to make a monthly payment figure 7 months a school year Soph- $2450 Jr- $3150 Sr- $3500 not counting Summer trainings that will be $9150 if the loan is higher and possible for your family financially could add Summer stipends/pay. Don't stop applying for scholarships many are cash to student and not need based with biggest money earned with papers/projects/community service all things that can also get OML points. A great resource for scholarships is at many colleges or worth asking your college's library to subscribe for the students to access through the library site, on school resource computers and/or as a ref book set The College Blue Book.
     
  3. LongAgoPlebe

    LongAgoPlebe Member

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    KeyzCat is right on. As long as the loan is a federal Stafford loan, the interest is deferred - that means, paid by Uncle Sam, not accruing - while DS is enrolled in an accredited undergraduate 0r graduate program and for six months after graduation or leaving the program. Interest rates on these loans are also very, very low - lower than many/most bank or even credit union rates. If the loan for last year was a private loan or a PLUS loan, the interest might be accruing now. He should investigate carefully what the payback and interest-rate terms are before changing anything. If the interest is deferred, it is to his greater financial benefit to save steadily while in college so that he has funds for uniforms, up-front $ for getting to/from BOLC, funds to live on in case his BOLC date is 8 months after graduation, etc. etc.

    You will find lots and lots of good information on public (federal) loans at this site: https://myfedloan.org/ Be sure to check out the Public Service Loan Forgiveness (PSLF) program, as well. This is for individuals who are employed in public service (EMTs, cops, fire, health care), government (any level - fed, state, local), teaching K-16, or working for a nonprofit to make income-based payments for a fixed 120 months (don't have to be consecutive), then apply to have any remaining balance forgiven. Several of my students who are in civilian government service, Reserves or NG are enrolled in this.
     
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  4. tjb1975

    tjb1975 Member

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  5. LongAgoPlebe

    LongAgoPlebe Member

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    Thank you - I should have been more careful using terms.
     
  6. uwknight

    uwknight Member

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    Thank you. It was a private loan, and we started this past August by applying a $2oo toward interest, and the principle. It seems the best path forward so DS has a manageble debt load of perhaps $10000 or maybe less after graduation, its try to be as aggressive as possible to the loan. Just wasn't sure if there were some other government program I wasn't aware of. According to FAFSA we have a money tree growing, but I gotta tell you it must be one sick tree:confused: Feel bad for all HS students trying to get into college. Cost just becomes higher and higher. Thanks again.
     
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  7. beyond

    beyond KπΣ15'

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    Just a thought.... he'll be eligible for the USAA/Navy Fed "Career Starter" loan shortly. It's basically an uncollateralized 36k at .75% interest. It might make sense to refinance the student loans that way at a lower interest rate.
     
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  8. Pima

    Pima Parent

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    UM...beyond,

    I would be careful with that number. SA cadets/mids get a different amount and rate than ROTC cadets/mids. Unless things have changed ROTC is allowed 25K and I believe it is around 2.75. Most go through USAA for the starter loan.
    ~ There are caveats too.
    ~~ 1. The CoC will have to sign off on the paper work
    ~~ 2. If they fail to commission or complete those 4 yrs AD than the rate jumps up to something like APR +9.99 %

    In this case the cadet in question has yet to become a POC.

    My DS took the career starter loan via USAA. Signed the loan paperwork the day he commissioned. Had a 5K student loan for his entire college career. It was not a subsidized Stafford loan akait was personal like the OP. He did not take the 25K offered. He did take 10K. The 5K for the loan was 50 bucks a month and not worth taking the loan.
    ~ He is now an O3 (pinned on in July). Owns a home and so now with his mtg deduction he gets to deduct that student loan int. too. He bought his home as an O2 after UPT at the ripe old age of almost 24 (23 and 11 mos)
    ~~ The 10K he took, he immediately invested 5K in an IRA to max out...the other 5 was placed into a mutual money market fund that he could access at any given time.
    ~~~ He bought a brand new car (Toyota) for 18K at 0%.

    JMPO, taking that starter loan to pay off college or buy a car is not always financially sound. Look at my DS. Yes, he took a total of 28K instead of the 25K he could get as a ROTC cadet. However.
    1. By banking 10K in Roth IRA and Mutual funds, mtg lenders saw assets, not debt.
    2. Due to pt #1. He was able to buy a home and now his college loan is a tax write off...career starter loan is not.
    3. By buying a car using Toyota financing his interest rate was 0% not the 2.75% ( I think that is the USAA starter.....I know for ROTC cadets it is not 0.75% unless something has changed.,,huge change). He saved more money monthly because of the interest difference.

    The starter loan is great. There are a ton of threads regarding this issue. Just saying, when it comes to the starter loan, look at the fine print. IMPO, my DS as an AF brat was thankful we said put 5k in easy access money. He was a silly wabbit and did not realize how much it costs to pay for cable hook up, that 1st commissary shopping trip where you buy those strange things like garbage bags, toilet paper, aluminum foil, milk, eggs, etc, and let's not forget things like pots. pans, utensils and plates (not the paper type)
    ~ Oh an did I forget to add in the fact that as a ROTC cadet you do not get paid until you report unlike an SA grad that collects pay the minute they commission?
    ~~ DS traveled from VA to TX, lived in the Qs for 7 days until they moved him into the student housing. He arrived 10/03. Moved into his furnished student housing (no towels, no sheets, no pot/pans, dishes, no tv, no cable,...bed, sofa and kitchen table) on the 10th. Want to know when he got his 1st ADAF paycheck? 11/1! He had to buy everything out of pocket to start his life...including traveling from VA to Tx. That is why the starter career loan exists impo.

    Now what I will say is he should look into USAA. I am assuming that since he is contracted he is eligible to become a member. ASSUMING bc my kids were military brats since birth and that means my ROTC DS was a member from the get go. USAA is a great organization. Hornetguy (poster here) works for USAA. Their insurance rates are very low. They have an ATM refund aspect for debit cards. They offer AMEX credit cards where they waive the annual fee for AD members, including platinum.
    ~ Long term posters that have served will tell you we love Dec. as a USAA member. I don't if Flieger, Christcorp, CaotMJ, Scoutpilot, but if they are than they know what I am talking about. USAA will send a check in Dec. It is called the subscribers account. Depending on how the stock market goes, we usually get 300-400. Granted it took yrs, okay decades, but I am fine with that when Xmas rolls around.
    ~ My DS is going to have our 1st grandbaby in Nov. Want to guess where they got the car seat. You got it...USAA.

    Just saying be smart financially.
     
  9. Capt MJ

    Capt MJ Member

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    As a former USAA employee who dealt with the Career Starter Loan, I can say that in the past, and I suspect still currently, the max allowed loan and interest rate deal differs between the 5 Fed Academies and ROTC. There are various business reasons for this. The interest rate can also vary with the cost of money in any given year. It will be something to research once contracted/MS3 time frame. These loans are totally the choice of USAA and NFCU, and while they have been in existence in some form or another for many years, there is no guarantee they will continue. Each year, the program is assessed. Given the interest rate charged, it's usually a loss to the company. The value lies in building a strong relationship with the cadet/mid, that will last a lifetime, as they may obtain auto, rental, homeowner's, life insurance; investment products; auto and home loans; checking and savings accounts, and so on. Then their spouse and children become USAA members. That's how USAA grew from a handful of Army officers pooling their money in 1922 to self-insure their cars, to over 10 million members, with membership drawn from all 7 uniformed services, active duty, Guard, Reserve, veterans.
     
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  10. beyond

    beyond KπΣ15'

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    So I can't speak for other times/places/commissioning sources, but at KP when I took the loan in 2013 (beginning of my 2/c year) it was 36k at .75%. I'm not one to give investment advice, but unless you're a bone head about it, you should be able to have that money work for you.

    I just checked my USAA account to confirm those numbers, again I'm a KP grad, so you milage elsewhere may vary. I used a little bit of the loan for part of a car, but saved nearly all of it. How you want to do it is up to you, but, for me it hasn't been hard for that money to earn more interest than I am paying.
     

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