Savings versus student loan debt for young professional

That's a lot of student loans. I feel for you.

I'd personally probably put the extra 500 toward the student loans, but that's just me. While 4.9% isn't awful, rates could easily increase. If you aren't saving for anything in particular, I'd try and pay down that debt pretty aggressively.

Loan forgiveness man! Don't waste your time. Bernie and Hillary are about to take care of you!

Really though, I would get the minimum match in company 401k, have around 4 months salary saved, (or more if you are in oil and gas) and then throw everything else at the loans.

Use the next six months to build savings and pay off other debt or CCs, if any. Congrats on graduating and the new job.

I am almost 5 years into my career but began in a similar position. My advice is to build up your savings now, while living is cheap. In a few years you could have a wife, kids, and need a new car - saving becomes more difficult even if salary increases. You already did the smart thing to refinance; at 4.9% your loans aren't cripplingly expensive, to the point where you need to throw everything you've got at them. I hate debt (especially when it isn't a Mastercraft or a Porsche) but anyone can get laid off and having a cushion is a wonderful feeling.

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I've got about $130,000 in student loans, just refinanced to a 4.90% variable rate

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Student loans are an above the line tax deductions. What that means is that you get the tax deduction regardless of how you choose to file taxes.

TL;DR: With your salary, your adjusted interest rate is ~75% of listed once you get a tax refund. 4.9%=3.675%


ETA: You need to also keep an eye out on interest rates. You could have a very wild swing in rates when they go up. If you have an emergency fund though, you could always use that if rising interest becomes a "problem"

I'm in almost the exact situation you're in with a few other variables shifted around, and I got some good advice in this thread. It seems to boil down to what interest rate threshold you believe you have, that being the rate of return you can attain through retirement or other investments. Keep in mind though that you need to be at full company match for 401K, because that's free money and typically makes the actual rate of return out compete almost all but the worst forms of debt (CC balance, particularity bad car loan, etc). My 401K seems to hover around 5% and the company matches half of my contributions up to 6%, so it's gonna have to be something pretty substantial interest-wise for me to feel like I need to dip into that. Additional retirement or investment is a little more straight forward, you want to earn more interest than what you're paying on your debt.

In short, the general strategy is to max 401K contributions, then look at the interest rates you're working on, and prioritize the highest ones. From there you can decide to get into additional retirement investment through a Roth or something similar, or if that money does you more good paying off something else. Your particular situation is confounded by the adjustable rate, so that's between you and the terms of your loan.

I'm in no way a financial expert, this is just the gist I got.

ETA: the important thing to keep in mind is that you're not deciding what to do about the whole loan, you're deciding what to do with that extra money you have at the end of the month. You want that money to work it's hardest for you. A huge loan can be intimidating, but you have to recognize it's the interest rate that's important, not the necessarily the balance.

I would increase your savings to at least $12,000 so that you can pay on your student loans in that 3 month window if you should ever find yourself in that situation. Otherwise they will just continue to grow.

Like others have said. Put money in your 401k up to your company's limit match. Nowhere else can you instantly get 100% return on your money.

After that, put all money towards the loans. Variable can be scary. Rates have been near zero for close to a decade, and were raised this year already. That's a entirely different discussion, but it's also out of your control completely.

Good luck, that is a lot! My fiancee had about $120k just 3 years ago and she's cut it in half, so it can be done. Just takes determination.

gotcha, its perfectly within the law to use these loan forgiveness programs to your advantage

but people on this board will believe youre some criminal for doing so; makes absolutely zero sense

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thats a lot

i thought if you made payments for 20 straight years, your remaining balance is forgiven?

if so, id make the minimum payment for 20 years and then move on

student loans are a scam, do not let them control your life

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To clarify, the forgiven amount is taxable under those programs.


Under Public Service (10 years) the forgiven amount is not taxable.

And yes, I agree. A person should choose the most economical route. If the math doesn't add up for full repayment, go to lesser payment/ forgiveness and pay the tax.

I've seen the downvotes, because of the "you took out the loan" crowd. What that crowd fails to realize is it isn't the student's fault the contracts have been rewritten to allow forgiveness, and in a capitalist free market contracts rule baby. You should always exercise your contractual rights if you believe you should.