Student Loan Interest

Posted by Zipp on August 14, 2009, 9:52 am

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I have Q2009 premier I am setting up a student loan for my son. I know how
to set up a regular loan but it's the accrued interest I don't know how to
handle. Here are the details...

The loan is disbursed to the college in Sept. Interest begins to accrue.

The next semester is disbursed in Jan. More interest accrues.

They begin billing and deducting the actual payments in April.

So from April to July...I've been paying ONLY the interest.

However, the Aug payment will begin impacting the principle as well.

How can I handle only paying the interest from April to mid-Aug and then
the usual payments afterwards?

I set up the loan as if I was beginning to pay in April so all these months
Quicken thinks I am paying both interest and principle.

Thanks
Zipp

Posted by Scott Lindner on August 14, 2009, 11:49 am

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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

Posted by Oilcan on August 14, 2009, 2:20 pm

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> I have Q2009 premier I am setting up a student loan for my son. =A0I know=

how

> to set up a regular loan but it's the accrued interest I don't know how t=

> handle. =A0Here are the details...

> The loan is disbursed to the college in Sept. =A0Interest begins to accru=

> The next semester is disbursed in Jan. =A0More interest accrues.

> They begin billing and deducting the actual payments in April.

> So from April to July...I've been paying ONLY the interest.

> However, the Aug payment will begin impacting the principle as well.

> How can I handle only paying the interest from April to mid-Aug and then

> the usual payments afterwards?

> I set up the loan as if I was beginning to pay in April so all these mont=

> Quicken thinks I am paying both interest and principle.

> Thanks

> =A0 =A0 =A0 =A0 Zipp

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).

Posted by Bartt on August 14, 2009, 8:53 pm

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> I have Q2009 premier I am setting up a student loan for my son. =A0I know=

how

> to set up a regular loan but it's the accrued interest I don't know how t=

> handle. =A0Here are the details...

> The loan is disbursed to the college in Sept. =A0Interest begins to accru=

> The next semester is disbursed in Jan. =A0More interest accrues.

> They begin billing and deducting the actual payments in April.

> So from April to July...I've been paying ONLY the interest.

> However, the Aug payment will begin impacting the principle as well.

> How can I handle only paying the interest from April to mid-Aug and then

> the usual payments afterwards?

> I set up the loan as if I was beginning to pay in April so all these mont=

> Quicken thinks I am paying both interest and principle.

> Thanks

> =A0 =A0 =A0 =A0 Zipp

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.
09/01/2009        10,000                        10,000
09/30/2009                50                10,050
10/31/2009                50.25                10,100.25
11/30/2009                50.5                10,150.75
12/31/2009                50.75                10,201.5
01/01/2010        10,000        51.01                20,252.51
01/31/2010                101.26                20,353.77
02/28/2010                101.77                20,455.54
03/31/2010                102.28                20,557.82
04/30/2010                102.79        -102.79        20,557.82
05/31/2010                102.79        -102.79        20,557.82
06/30/2010                102.79        -102.79        20,557.82
07/31/2010                102.79        -102.79        20,557.82
08/31/2010                102.79        ($245.10)        20,415.51
09/30/2010                102.08        ($245.10)        20,272.48
10/31/2010                101.36        ($245.10)        20,128.74
11/30/2010                100.64        ($245.10)        19,984.28

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

Posted by Oilcan on August 14, 2009, 10:46 pm

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> > I have Q2009 premier I am setting up a student loan for my son. =A0I kn=

ow how

> > to set up a regular loan but it's the accrued interest I don't know how=

> > handle. =A0Here are the details...

> > The loan is disbursed to the college in Sept. =A0Interest begins to acc=

rue.

> > The next semester is disbursed in Jan. =A0More interest accrues.

> > They begin billing and deducting the actual payments in April.

> > So from April to July...I've been paying ONLY the interest.

> > However, the Aug payment will begin impacting the principle as well.

> > How can I handle only paying the interest from April to mid-Aug and the=

> > the usual payments afterwards?

> > I set up the loan as if I was beginning to pay in April so all these mo=

nths

> > Quicken thinks I am paying both interest and principle.

> > Thanks

> > =A0 =A0 =A0 =A0 Zipp

> 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. =A0What'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. =A0Make the Payment Period Monthly so the majority of

> the loan (the last 9 years + 1 month) will accrue properly. =A0It 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. =A0Then, from Apr, '10 thru Jul '10, you're paying interest

> only.

> run your amortization schedule with the spreadsheet or your

> calculator. =A0Using my hypotheticals, it will look like this:

> =A0 =A0 =A0 =A0 =A0 =A0 =A0 =A0 disb. =A0 interest =A0 =A0 =A0 =A0payment=

bal.

> 09/01/2009 =A0 =A0 =A010,000 =A0 =A0 =A0 =A0 =A0 =A0 =A0 =A0 =A010,000

> 09/30/2009 =A0 =A0 =A0 =A0 =A0 =A0 =A050 =A0 =A0 =A0 =A0 =A0 =A0 =A010,05=

> 10/31/2009 =A0 =A0 =A0 =A0 =A0 =A0 =A050.25 =A0 =A0 =A0 =A0 =A0 10,100.25

> 11/30/2009 =A0 =A0 =A0 =A0 =A0 =A0 =A050.5 =A0 =A0 =A0 =A0 =A0 =A010,150.=

> 12/31/2009 =A0 =A0 =A0 =A0 =A0 =A0 =A050.75 =A0 =A0 =A0 =A0 =A0 10,201.5

> 01/01/2010 =A0 =A0 =A010,000 =A051.01 =A0 =A0 =A0 =A0 =A0 20,252.51

> 01/31/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0101.26 =A0 =A0 =A0 =A0 =A020,353.77

> 02/28/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0101.77 =A0 =A0 =A0 =A0 =A020,455.54

> 03/31/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0102.28 =A0 =A0 =A0 =A0 =A020,557.82

> 04/30/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0102.79 =A0-102.79 20,557.82

> 05/31/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0102.79 =A0-102.79 20,557.82

> 06/30/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0102.79 =A0-102.79 20,557.82

> 07/31/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0102.79 =A0-102.79 20,557.82

> 08/31/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0102.79 =A0($245.10) =A0 =A0 =A0 20,=

415.51

> 09/30/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0102.08 =A0($245.10) =A0 =A0 =A0 20,=

272.48

> 10/31/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0101.36 =A0($245.10) =A0 =A0 =A0 20,=

128.74

> 11/30/2010 =A0 =A0 =A0 =A0 =A0 =A0 =A0100.64 =A0($245.10) =A0 =A0 =A0 19,=

984.28

> Now open your loan account. =A0If 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. =A0If 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- Hide quoted text -

> - Show quoted text -

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
30 seconds per month to reconcile my HELOC. Plus if you like the
recon feature of a Credit Card you can then move the Account out of
Credit Cards and reclassify it as a Liability (Debt).

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