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Message
Pay off my student loans early?
Posted on 7/21/14 at 10:31 am
Posted on 7/21/14 at 10:31 am
So I have $11,700 remaining on student loans that are on a 10 year repayment plan that I've been making payments on since January 2011. The interest rate is 6.25%, monthly payments of $188. Wife and I have $23k in savings, with our first baby on the way.
I know over the course of the entire 10 year repayment I'll end up paying something like $5k in interest on the original $15k loan, but is it worth paying it off early with half of what we've saved up (basically since beginning of 2012)? We know that with a growing family in the future, we'll need a good bit saved up to afford the down payment on a larger home in the next 3-5 years.
Thoughts?
I know over the course of the entire 10 year repayment I'll end up paying something like $5k in interest on the original $15k loan, but is it worth paying it off early with half of what we've saved up (basically since beginning of 2012)? We know that with a growing family in the future, we'll need a good bit saved up to afford the down payment on a larger home in the next 3-5 years.
Thoughts?
5
Posted on 7/21/14 at 10:36 am to EveryonesACoach
Wait until the baby is home and healthy and then clear them up completely. Keep on stashing cash in the meantime.
Posted on 7/21/14 at 10:47 am to EveryonesACoach
You won't find any investments with a guaranteed 6.25% after tax return. I agree with above advice, make sure baby is healthy then pay it off very quickly. How much you should have in saving is a long conversation for another thread, you will obviously have to settle on that number before you decide just how much money to start paying off debt with.
This post was edited on 7/21/14 at 10:51 am
Posted on 7/21/14 at 10:48 am to Costanza
I see no reason to blow your savings. Maybe kick up your payments to $250 a month. Student loan debt is safe debt. If you ever get in a bind, you can always set it to deferral or change your repayment plan. Once your savings are gone, they are gone.
Posted on 7/21/14 at 10:55 am to EveryonesACoach
There are some tax benefits with student loan repayment to consider as well.
I assume you have contributed heavily to retirement if you have $20K in savings. If not, I'd be shifting money to an 401/Roth first.
I agree with the others, kick the payment up a bit and repay faster. You possibly have some big expenses coming up with childcare and housing.
I assume you have contributed heavily to retirement if you have $20K in savings. If not, I'd be shifting money to an 401/Roth first.
I agree with the others, kick the payment up a bit and repay faster. You possibly have some big expenses coming up with childcare and housing.
This post was edited on 7/21/14 at 10:57 am
Posted on 7/21/14 at 11:03 am to Joshjrn
My problem with student loans is that they charge interest every day. 10 years for $11k turns out to be quite a bunch more when you factor in interest. The best is to pay it off as quickly as possible, IMO.
Posted on 7/21/14 at 11:12 am to Joshjrn
Student loan debt is very forgiving and flexible. It's also tax deductible.
I see no reason to dump the savings into them. You can always make a larger payment to pay them off quicker, but I wouldn't dump a savings fund into them. Double your payment and turn 10 years into 4.
I see no reason to dump the savings into them. You can always make a larger payment to pay them off quicker, but I wouldn't dump a savings fund into them. Double your payment and turn 10 years into 4.
Posted on 7/21/14 at 11:13 am to wiltznucs
Yes, my wife and I both put 10% in to retirement with varying employee matches. Unless we were to go on a vacation or something unforeseen comes up, we comfortably put $1000-$1500 a month into savings. I know that'll change once the baby arrives.
I kind of was thinking what josh said, don't want to blow through a bunch of savings when I'm going to need a large amount of cash possibly in the not so distant future. But the cash lost to interest does bother me.
I kind of was thinking what josh said, don't want to blow through a bunch of savings when I'm going to need a large amount of cash possibly in the not so distant future. But the cash lost to interest does bother me.
Posted on 7/21/14 at 11:46 am to EveryonesACoach
Congrats on the coming baby, lack of sleep and sex, etc etc =) Hope the pregancy rolls on without any major issues.
6.25% interest on $11,700 is $731/yr, and that amount is getting lower and lower with each passing payment. $700/yr is nothing to sneeze at, but, I think I'd rather the security of a nice cash balance than worry about that amount of interest a year.
Get the baby through the 6 month old point, and then reconsider. IF it's really keeping you up at night, add an extra $200/month in payments.
6.25% interest on $11,700 is $731/yr, and that amount is getting lower and lower with each passing payment. $700/yr is nothing to sneeze at, but, I think I'd rather the security of a nice cash balance than worry about that amount of interest a year.
Get the baby through the 6 month old point, and then reconsider. IF it's really keeping you up at night, add an extra $200/month in payments.
Posted on 7/21/14 at 11:59 am to EveryonesACoach
Interest paid on Student Loan Debt is an above the line tax deduction too, right?
Posted on 7/21/14 at 12:14 pm to schexyoung
quote:
Interest paid on Student Loan Debt is an above the line tax deduction too, right?
depends on how much you make..
Posted on 7/21/14 at 12:15 pm to schexyoung
Up to $2,500 per year, if my memory serves me.
Posted on 7/21/14 at 12:26 pm to Joshjrn
For 2014, the phase-out ranges are:
Filing Status........Phaseout Begins....Phaseout Ends
Married Filing Jointly...130,000.....160,000
Qualifying Widow(er)...65,000.......80,000
Head of Household.....65,000.......80,000
Single........................65,000.......80,000
Filing Status........Phaseout Begins....Phaseout Ends
Married Filing Jointly...130,000.....160,000
Qualifying Widow(er)...65,000.......80,000
Head of Household.....65,000.......80,000
Single........................65,000.......80,000
Posted on 7/21/14 at 3:00 pm to Costanza
quote:
Wait until the baby is home and healthy and then clear them up completely. Keep on stashing cash in the meantime.
Bingo we have a winner. After baby is born pay off the student loan and start stacking cash for that home. Good Luck..
Posted on 7/22/14 at 1:16 am to Double Oh
Tax deductible part is a joke. I paid 5 figures in interest last year, got to deduct 1200$ I think. Probably deduct less this year or none because we will make more $.
Student loan system is so broken. Hoping for some republican reform if they win the senate or new repub president
Student loan system is so broken. Hoping for some republican reform if they win the senate or new repub president
This post was edited on 7/22/14 at 1:17 am
Posted on 7/22/14 at 8:45 am to LSUtigerME
quote:
It's also tax deductible
The thought that anyone would think this is a viable reason to keep a debt and continue to pay more interest on that debt blows my mind.
Posted on 7/22/14 at 9:02 am to PurpleAndGold86
Before you pay the debt, find out if you're eligible for any of the various loan forgiveness programs. Classroom teachers, public employees, and certain other employment may qualify you for a 10 year payment plan, with the remaining balance forgiven after 120 payments. Here's a link to the public service loan forgiveness program: LINK
Posted on 7/22/14 at 9:17 am to DaBeerz
quote:
Tax deductible part is a joke. I paid 5 figures in interest last year, got to deduct 1200$ I think. Probably deduct less this year or none because we will make more $.
Student loan system is so broken. Hoping for some republican reform if they win the senate or new repub president
You owed five figures in interest? What the frick?
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