Paging White Coat Investor. CARES Act and Capitalized Interest?

[sylvanthus]

Any idea if this CARES Act is going to do more harm than good? If interest gets capitalized after this “suspension” period, Im actually going to lose more money in the end because of this suspension period. Anyone know? Id call FEDLoan servicing, but clearly they will not be helpful, may as well bash my head on the wall.

If the interest capitalizes, I want to forgo this suspension, no idea how to do that.

Thoughts?

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[thegenius]

Are you obligated to take the suspension? Why can't you still pay?

 

[TooMuchResearch]

Any idea if this CARES Act is going to do more harm than good? If interest gets capitalized after this “suspension” period, Im actually going to lose more money in the end because of this suspension period. Anyone know? Id call FEDLoan servicing, but clearly they will not be helpful, may as well bash my head on the wall.

If the interest capitalizes, I want to forgo this suspension, no idea how to do that.

Thoughts?

His post today was on the CARES act. Haven't read it yet though

 

[sylvanthus]

Its automatic, so Im sure id have to call fedloan, spend hours on hold/transfered to 14 different people to continue payments. Then likely have to call back 5 times. The pain of calling those fools is immense.

 

[thegenius]

Its automatic, so Im sure id have to call fedloan, spend hours on hold/transfered to 14 different people to continue payments. Then likely have to call back 5 times. The pain of calling those fools is immense.

That's terrible.

You have money and you want to pay your loan off. They will not let you and force your interest to capitate.

That seems like fraud and ripe for a class action lawsuit where the lawyers will make millions, leaving very little to the actual class.

 

[HoosierdaddyO]

Also is it a bad time to refinance your loans.... I was just offered a 3.5% refinanced rated fixed for 5 years. But now wondering if it makes more sense to get the 6 months of 0 interest and then refinance after those 6 free months are up. The only worry is that the interest rate is likely to go up and I’d be stuck with a higher refinanced rate. Any thoughts would be helpful lol !!

 

[thegenius]

Also is it a bad time to refinance your loans.... I was just offered a 3.5% refinanced rated fixed for 5 years. But now wondering if it makes more sense to get the 6 months of 0 interest and then refinance after those 6 free months are up. The only worry is that the interest rate is likely to go up and I’d be stuck with a higher refinanced rate. Any thoughts would be helpful lol !!

Explain the details of your loan?
3.5% is pretty low. You might not get substantially lower than that. Maybe 3.0%, maybe 2.8% depending on how hard you look.
Remember there is basically no collateral on this loan, they are risking this on your decision to continue to be a doctor (unlike a car or mortgage).

 

[HoosierdaddyO]

So I have about 250k in fedloans that are consolidated at around 6.6 percent. I have pretty strong credit and was able to put an application in with a private lender to refinance. This was about 3 weeks ago right after the first Fed rate cuts but also right before the second fed rate that dropped it to zero. Surprisingly as the Fed rate went to zero all the refin rates went about like 2 points from 3.5 to now currently 5.5. I guess my issues is I don’t think there will ever be another chance to be locked into a 3.5 fixed rate for 5 years in the near or intermediate future. So it might pay to just bite the bullet and lock into that low fixed... as opposed to take the free 6 months and then refinance at what would be a higher rate greater than the 3.5 in offered now!!!

 

[thegenius]

What is this taking 6 free months? I don't understand that.

Interestingly, as the second fed rate went to zero, the mortgage market also went up a little. Our mortgage broker guy at BofA explained it to me, and I don't really understand it besides what I read online.

3.5% is very good. I would take it.

I had 300K debt coming out of residency between 5.0% and 6.8% and I couldn't even refinance them because we purposely foreclosed on an investment property a few years earlier....so I paid 2-3x my monthly payment and when I got it down to 80K, I was then able to refinance with Earnest at 3.25%. Saved even more money and was able to pay off 300K in about 4.7 years.

Just take 3.5%.

I put your numbers, 3.5%, 5 year term, 250K loan into my handy-dandy spreadsheet and your monthly payment is $4,548 and after 5 years you will have paid only a total of $22,876 in interest. So someone is willing to pay 250K to make just $22,876 over 5 years. I would take it!

 

[HoosierdaddyO]

Haha thank goodness for your handy-dandy spreadsheet... really do appreciate the math and yea I would agree that if someone is willing to shell out 250k only for a 22k profit sounds like a win to me. As for the 6 months free I actually misspoke, President trump currently out a freeze on any fedloans at 0 percent but that is only for 2 months and not 6 months. So I think just refinancing now makes more sense in the long run at 3.5.

And of note if someone can confirm this but student refinancing rates don’t actually coincide with the US federal reserve rate... it in-fact matches and trends with that of the LIBOR rate which is the London Interbank offered rate, who would thunk lol!!! Anyways yea going to pull the trigger and accept the 3.5!!