Student Loan Interest

I can tell you how I handle loans, loan payments, and interest which would work for your situation, but my style isn't for everyone.

When I make a loan payment I do not use the split to capture the separation of principal and interest. I send the entire payment to the loan account. I then enter another transaction for the interest payment. I started doing this because I wanted to see everything in the account. It made it easier to compare my Quicken loan account to what my lender was sending me. It's a style that you may not prefer, but it'll work for your situation. You send in the payment, and then you add a second transaction for the full interest amount. The principal of the loan account never changes.

Cheers, Scott

I would get rid of the "loan" with a fixed payment schedule of Prinipal and Interest. I would record the original loan not using Quicken's loan functionality. As information comes in about the interest, enter a transaction to increase the balance of the loan and offset to an Interest Expense type of category. As you borrow more money, the same situation. When you make a payments you are not concerned about splitting the transaction because you already recorded the interest - you are just payming off a balance and not concerned how the balance was created. So your payment would be to Checking offset to Student Loan (in Quicken's term a transfer).

Well, this is a bit more complex loan than Quicken normally handles, but I don't know that I concur with the advice given so far. What's been described will be somewhat painful to maintain all the way thru the loan.

You haven't provided the specific terms of the loan (rate, term, compounding period, etc), but as long as it's amortized, you can do it with a minimal amount of 'tweaking" that you can do up-front with a subsequent tweak for your August payment.

Unless you're a total math whiz, you're probably going to need a calculator, or better yet, a spreadsheet.

Let's assume a loan for $20k @ 6% over 10 years, compounding monthly, with 1st $10k disbursement in Sep '09, 2nd $10k disbursement in Jan '10, 1st payment in Apr '10 with interest only thru Jul '10, & from Aug thru the remaining term (9 yrs), just a regular, old loan.

Set the loan up to begin 09/01/2009, for $10k, 10 years, compounding period Monthly. Make the Payment Period Monthly so the majority of the loan (the last 9 years + 1 month) will accrue properly. It really doesn't matter what you set for P&I, we'll change that later, just set the first payment to occur in Apr '10.

Essentially, up until Apr '10, the interest is just adding to your pricincipal. Then, from Apr, '10 thru Jul '10, you're paying interest only.

run your amortization schedule with the spreadsheet or your calculator. Using my hypotheticals, it will look like this:

disb. interest payment bal.

Now open your loan account. If you're anal about your data & like to track things the way they really happen, enter a line for each month's interest, Sep '09 thru Mar '10. If not, just enter a single line for the lump-sum total of all the interest thru March.

Now edit the Loan>>Edit Payment so that the P&I for April is just the Interest (102.79).

Let's fast forward to April. You'll send the bank your payment each month thru July.

After you send July's payment, go back to Edit Payment & put in the full P&I amount (245.10).

If I understood your request correclty, you're now on autopilot....

HTH, Bartt

I disagree that this is easier. First (without additional information) I think the loan would likely be more of an adjustable type. No information on how often the rate would adjust. I would treat this as a credit card and reconcile it off the statement entering the interest as part of the reconcilation process. I do this with my HELOC with is variable interest at Prime minus 1% and it has adjusted several times per month in the past. It takes me less then

However, I don't disagree wth you analysis and I am willing to say its okay that we disagree on the best way.

That's how I do it, and is what I had intended to describe. I don't see this as complicated at all. It's only two transactions each month, one of which you have to do just to make the payment. The only way I can envision it being simpler is to not use Quicken at all.

I agree with your final point. There isn't a correct answer and all we can do is offer suggestions and let the OP decide what's best for their situation.

Scott

touche...

I tend to be one of the "anal" types & like to know what's coming before it gets here.

I use Tax Planner & to get accurate results there, I find it easier to have a scheduled payment driven by the loan & let Q calc the interest.

Bartt

You could always enter an estimated interest payment into the account, and then adjust it when you get the statement. That's the best of both, right?

Scott

"Scott Lindner" wrote in news: snipped-for-privacy@mid.individual.net:

account,

I appreciate all this advice. It certainly is a big pain to track this either way. Just to clarify, this student loan is a fixed rate loan and here are the details...

They made two disbursements to the university along with their current balances as of the July 2009 payment:

So this gives a total of: Loan: $6,900 Rebate: $104 Int Pd: $342.12 Outstanding Interest: $49.82

The interest accrued for both until payments began for me in Apr 2009. Here is the payment history:

Payment Payment Applied Applied Received Amount to Princ. to Int.

Now I assume that the term of the loan started on April 2009 and will be finished on April 2019. Do you think that is correct?

Also, I believe that since my outstanding interest is $49.82, that my August payment will finally be split between principle and interest. The question is...how much? I should know in a couple of days as the loan website hasn't updated yet for my 8/14/09 payment.

So....given all this convoluted information...which of the methods that you all so graciously offered would be best? Or perhaps you have new ideas given all the details now.

Again, I thank you in advance for your kind advice.

Well, I think the general concensus is that there isn't any "one" correct way to get there & I think we'd all agree that no matter how you slice it, it's a complex case.

After some thinking, I recalled that my (now) ex had something similar to this & I resurrected the old info. During the "interest only" period, the interest varied each month (Jan payment Feb payment), which would infer daily compounding.

If that's your case, then I have to change my rec & go w/ "Oilcan" & Scott's suggestion. It'll be easier to track it like Oilcan suggested, maybe even with a credit card account type.

If your interest doesn't compound daily & each month's interest is predictable & you prefer to let Quicken do the math, start with the total balance on your most recent statement, with 7.65% over the term of the loan & see if it's P&I agrees with what your bank tells you. If it agrees, my personal preference is to let Q do the splits for you, so you just have to post the payment.

It's whatever works best for you.

Bartt

Ok...here is what I decided to do. I decided to keep the student loan as a Quicken loan. I went back and adjusted all of the automated payments for 4/09 to 8/09. In other words, for April through July, I set the interest to the full amount of $85.53 and the principle to zero. That accounts for the fact that I only paid interest for those 4 months so the loan balance stayed the same. Then for my August payment, I adjusted the automated split to reflect what the statement said I paid (which was $68.81 for the interest and $16.82 to reduce the loan balance.)

I do believe that this will work now although I will have to always change the true split of the automated loan split in order to really reflect what the balance of the loan is.

Does anyone have any comments about this plan? I think it's workable even though it's a pain in the butt as I do not know the true split until several days after the payment is made so I'll always have to remember to go back and fix it.

Once again, I want to thank you all for your advice. It was extremely helpful and I doubt I could have gotten this advice anywhere else on the net.

Zipp

It should work. Your interest rate is fixed and assuming you set-up the term of the loan correctly, Quicken should calculate the split (amortization). I would monitor the account for a couple of payments to see if this proves out and then every December after you make the December payment, I would reconcile the interest back to the Financial Instutions statement and you can make any minor adjustments at that time. Oilcan