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Question By
Rerecros

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24 People Helped
Loan w/no payment required for 4 years; To pay off the balance, or pay it down to $1 and leave it?
My highest real interest rate loan is a student loan that I have been paying down over the last year (largely with left over funds from the lower interest loans). Three months ago, Fedloan sent me a letter with a change of the payment terms since the loan balance is down to about $1800 and I still have 9 years on repayment. In essence, they have set my payments at $0 for the next 4 years or so (the end of 2017) after which they want me to pay $60/month. Interest on the balance will accrue in the meantime.

I have the funds to pay off the balance, but I was thinking that perhaps I should leave a single dollar on the loan thereby keeping it open and reporting as paid on time for the next four years at the expense of about $.29 in interest. The first loan payment in Oct. of 2017 for $1.29 will close the loan.

Would there be any reason not to do this? As long as it is reporting as paid on time monthly with an almost zero balance from an original balance of $7500, wouldn't this be beneficial to my credit rather than simply closing it outright by paying it off?

For what its worth, I have two other student loans, a car loan and a mortgage, all of which are less in real interest rate terms and no credit card debt whatsoever.

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