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Message
Should I save money or pay off student loans quicker?
Posted on 10/8/13 at 11:12 am
Posted on 10/8/13 at 11:12 am
I have $20k in grad student loans.
I can afford to take about $1000/month ($500/pay period) and either put all of it towards my loan payments, or put half in savings and half towards the loan.
I don't know which would be smarter... any advice?
I can afford to take about $1000/month ($500/pay period) and either put all of it towards my loan payments, or put half in savings and half towards the loan.
I don't know which would be smarter... any advice?
7
Posted on 10/8/13 at 11:16 am to PrettyBird
What are the rates? I would assume that would be the determining factors.
Posted on 10/8/13 at 11:16 am to PrettyBird
What are the savings for?
Do you already have an emergency fund saved up?
Do you already have an emergency fund saved up?
Posted on 10/8/13 at 11:16 am to PrettyBird
I think paying off your loans is the best option. Placing money in savings will not do you much good besides building an emergency fund. The loan + interest will cost you more in the long run than by paying the minimum and putting the rest away in savings. If you could get a higher return through an investment, you might could justify paying the minimum and investing the rest.
Posted on 10/8/13 at 11:18 am to Colonel Flagg
Rates are pretty meh, 6.7%. I believe that was the set rate for all student loans.
I've got almost $4k in savings currently, which I consider my emergency fund. I have great credit though, with almost $20k in credit if I needed it (no current balances).
I've got almost $4k in savings currently, which I consider my emergency fund. I have great credit though, with almost $20k in credit if I needed it (no current balances).
Posted on 10/8/13 at 11:19 am to southernelite
quote:
What are the savings for?
I don't know... I've always saved my money but I am beginning to wonder what the point is, and if I should just pay off my loan quickly.
Posted on 10/8/13 at 11:25 am to PrettyBird
You need more in savings. Work your way up to 10 grand in savings and then start hammering the student loans.
Posted on 10/8/13 at 11:27 am to Broke
Just curious, why $10k?
If I save $500/month I would be at $10k in one year from now. Easy for me to do but these loans are sitting on my shoulders.
If I save $500/month I would be at $10k in one year from now. Easy for me to do but these loans are sitting on my shoulders.
Posted on 10/8/13 at 11:30 am to PrettyBird
I just paid mine off really fast as I felt that was a very high interest rate. I believe my loans had a similar rate.
It feels great when it is all gone.
It feels great when it is all gone.
This post was edited on 10/8/13 at 11:30 am
Posted on 10/8/13 at 11:34 am to PrettyBird
quote:
Just curious, why $10k?
That's my comfort number. What you should do is figure out exactly how much money it takes you to live each month. Then save 9 months worth of bill paying ability in a savings account or some other liquid account. Then start working on the student loans.
Look I do this for a living. I plan peoples financial lives. Do what I say grasshopper.
Posted on 10/8/13 at 11:42 am to PrettyBird
quote:
Easy for me to do but these loans are sitting on my shoulders.
You're going to get a lot of different opinions here, and most of them have some validity.
Each individual has different debt tolerances. You have to figure out your own tolerance. Just from reading some of your comments in this thread, it seems like you aren't comfortable with debt. I can relate.
So if that's the case, then you should just figure out the best way to get it paid off. You don't have to put all of your extra income towards the debt. For instance, if you have $1000 per month extra to put in both debt and savings, then maybe you could distribute it 90%-10% debt to savings, or even 75%-25%. Just figure out what works best for you, but base it on your individual values and how comfortable you feel with debt.
This post was edited on 10/8/13 at 11:43 am
Posted on 10/8/13 at 11:47 am to WikiTiger
quote:
it seems like you aren't comfortable with debt. I can relate
I've never had debt until grad school, so it's new for me.
I will probably do a combination of saving and paying off the loan.
I appreciate all the input!
Posted on 10/8/13 at 11:59 am to PrettyBird
Get a credit card with no interest for 18 months and transfer that loan, then pay it off before the interest kicks in
Posted on 10/8/13 at 12:08 pm to yellowfin
Debt = 20k
Monthly savings = 1k
18-month no int. card = 18k
He couldn't pay it off in time.
Monthly savings = 1k
18-month no int. card = 18k
He couldn't pay it off in time.
Posted on 10/8/13 at 12:23 pm to ell_13
quote:
He couldn't pay it off in time.
Not to mention changing student loan debt into credit card debt takes some hurdles and know how.
I do it all the time though for credit card points. Actually did it the last two days
This post was edited on 10/8/13 at 12:24 pm
Posted on 10/8/13 at 12:32 pm to Teddy Ruxpin
quote:
changing student loan debt into credit card debt takes some hurdles and know how.
I didn't even know this was an option. Is this something worth looking into?
Sounds above my head.
Posted on 10/8/13 at 12:38 pm to PrettyBird
quote:
I didn't even know this was an option. Is this something worth looking into?
Sounds above my head.
Easiest way is to just use it to "live off" of the cc and put 90% of your cash towards your loans. It essentially does the same thing just takes some time. You'll need a high CC limit though
Posted on 10/8/13 at 12:54 pm to BACONisMEATcandy
...Well I currently "live off" my credit card. Purchase everything with it, and just pay it off to zero each month.
I just meant how would I transfer my loan to a credit card? Also - I'm not sure if I want to open another credit card in the amount of $20k. Or if I can. I have three CC now, with a total of almost $20k, one is $10k the other two $5k.
If this is even what you were referring too... see, over my head!
I just meant how would I transfer my loan to a credit card? Also - I'm not sure if I want to open another credit card in the amount of $20k. Or if I can. I have three CC now, with a total of almost $20k, one is $10k the other two $5k.
If this is even what you were referring too... see, over my head!
Posted on 10/8/13 at 1:00 pm to PrettyBird
quote:
I just meant how would I transfer my loan to a credit card? Also - I'm not sure if I want to open another credit card in the amount of $20k. Or if I can. I have three CC now, with a total of almost $20k, one is $10k the other two $5k.
You can request your CC company send you a check that you then write out and mail to your student loan company.
You have to be very careful with using a CC for this kind of stuff. While savvy people can get great deals using 0% interest promotions, a person could also get severely fricked with high interest if they fail to pay off the balance before their 0% promotion expires.
Posted on 10/8/13 at 1:06 pm to WikiTiger
quote:
You can request your CC company send you a check that you then write out and mail to your student loan company.
You have to be very careful with using a CC for this kind of stuff. While savvy people can get great deals using 0% interest promotions, a person could also get severely fricked with high interest if they fail to pay off the balance before their 0% promotion expires.
Ya, not to mention the transfer fee and such.
However, I was talking about purchasing cash equivalents.
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