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Pay off student loan?
Posted on 12/28/24 at 8:59 pm
Posted on 12/28/24 at 8:59 pm
I have 110k saved to pay off my student loans and be done with it. I pay 2000$ a month. Interest rate is 3.5%. No other loans except mortgage. Should I do it?
17
Posted on 12/28/24 at 9:00 pm to TigerDent
What are your mortgage numbers?
Posted on 12/28/24 at 9:10 pm to jmarto1
1900$/month. Rate 4.5%. Owe about 210k.
Posted on 12/28/24 at 9:23 pm to TigerDent
Assuming you already have an emergency fund, you should invest the money instead if looking at it from a maximizing money situation. If you want piece of mind, then pay it off and start investing the money saved.
ETA: I paid off my student loans in 2020 instead of purchasing some property (which was a great deal at the time) for piece of mind, which was a mistake. I should've bought the property then could've sold some of it to pay the other part a couple years later.
ETA: I paid off my student loans in 2020 instead of purchasing some property (which was a great deal at the time) for piece of mind, which was a mistake. I should've bought the property then could've sold some of it to pay the other part a couple years later.
This post was edited on 12/28/24 at 9:27 pm
Posted on 12/28/24 at 10:01 pm to TigerDent
Why on earth would you pay off a 3.5% loan early?
Posted on 12/28/24 at 10:08 pm to JohnnyKilroy
Peace of mind I suppose, and the 400$ of interest I’m paying on it each month.
Posted on 12/28/24 at 10:15 pm to TigerDent
quote:
Peace of mind I suppose, and the 400$ of interest I’m paying on it each month.
Who cares about paying 400 in interest, when the money you are using to pay it off generates more than 400 per month in interest?
HYSA pay more than 3.5%.
Posted on 12/28/24 at 11:06 pm to TigerDent
Don’t listen to these guys. It’s always good to pay off debt. I would at least double your current payments if you don’t pay it off completely.
Posted on 12/28/24 at 11:12 pm to TigerDent
I had a lot more at 6-7%. Took me 10 years due to the interest at 1800$ a month. You can still make more than 3.5% in a savings account. I would not lump sum it, just pay a little more every month. 1-2 extra principle payments per year will cut down your time a lot
Posted on 12/28/24 at 11:46 pm to Drizzt
quote:
It’s always good to pay off debt
What does “good” mean in this context?
Peace of mind? Most efficient? Maximizing return?
Nothing happens in a vacuum. If you pay it off, that’s probably not the most efficient use of your money. Now, that peace of mind could be worth the trade off for you.
If you prefer what’s financially efficient, you trade that peace of mind for better returns on your money.
I have a 10,000 outstanding auto loan balance that I never needed to take out could have paid off at any time but I’m paying like 15 bucks a month in interest. That 45k in cash that I DIDN’T spend 4 years ago was invested and is now worth about 100k.
My net worth would be LOWER today if I paid cash.
Posted on 12/28/24 at 11:55 pm to TigerDent
Let's say you hold off paying the debt one year and put it into the market. Sure enough the market goes -5% that year. In that case, you really went -8.5%.
Posted on 12/29/24 at 3:40 am to lsu xman
And the following yr you get 24%. So now up 15.5%. In the long run you gain.
I put 20k in a brokerage account a few yrs ago. I’m at 104k right now. I manage my own investments.
I put 20k in a brokerage account a few yrs ago. I’m at 104k right now. I manage my own investments.
Posted on 12/29/24 at 6:55 am to Methedup77
I’d be cautious taking financial advice from a person whose handle is “methed up.”
Posted on 12/29/24 at 7:10 am to TigerDent
quote:
I have 110k saved to pay off my student loans and be done with it. I pay 2000$ a month. Interest rate is 3.5%. No other loans except mortgage. Should I do it?
From a strictly numbers standpoint isn't doesn't make financial sense.
The question is what are you doing with the 110k now? Is it an emergency fund? Is it sitting in an hysa? Are you going to put it in a brokerage account? Did you max out all of your retirement accounts(401k, backdoor Roth if applicable, HSA)?
There are probably a ton of better things to do with the 110k. With that said, certainly can be a peace of mind do not have the loan payment drag and be done with it. Not everything has to be the best "number" decision.
Posted on 12/29/24 at 7:31 am to Drizzt
I bet it’s you who downvoted me. You’re just jealous
Posted on 12/29/24 at 7:53 am to TigerDent
Pay it off.
Everyone will tell you the math, but the reality is you should pay it off.
Make sure you have a fully funded emergency fund first.
Everyone will tell you the math, but the reality is you should pay it off.
Make sure you have a fully funded emergency fund first.
Posted on 12/29/24 at 8:06 am to TigerDent
As you can see from your answers most people have different circumstances.
Congratulations on your savings.
Check out how much you net on your investments after taxes.
Learn how compound interest applies specifically to your loan.
Congratulations on your savings.
Check out how much you net on your investments after taxes.
Learn how compound interest applies specifically to your loan.
Posted on 12/29/24 at 8:31 am to TigerDent
At 3.5%, in theory you'd be better off investing
However, there is something to be said about getting out of debt for peace of mind and IMO more importantly cash flow. Lots of things you can do with that 2k per month.
I'm going to be in a similar situation later this year and will just pay off the loan to be done with it.
However, there is something to be said about getting out of debt for peace of mind and IMO more importantly cash flow. Lots of things you can do with that 2k per month.
I'm going to be in a similar situation later this year and will just pay off the loan to be done with it.
Posted on 12/29/24 at 8:40 am to TigerDent
From a money making perspective, it makes sense to keep them and invest the cash elsewhere.
The rest is personal.
Do you want the peace of mind or satisfaction of paying them off? That’s why I paid mine off early. I had a chip on my shoulder. My rate was also closer to 6% so a tad bit different.
There is no wrong answer, one just is more risk averse.
The rest is personal.
Do you want the peace of mind or satisfaction of paying them off? That’s why I paid mine off early. I had a chip on my shoulder. My rate was also closer to 6% so a tad bit different.
There is no wrong answer, one just is more risk averse.
Posted on 12/29/24 at 8:45 am to TigerDent
Pay it off tomorrow and then take the $2k payment and start investing it in S&P index fund / maybe think about allocating some of the $2k into a Russell 2k fund as well.
Do that and odds are you will have over a million dollars in that account in the next two decades…possibly a good bit more …also assuming you don’t increase allocation which almost assuredly you will
Great position you have put yourself in…well done!
Do that and odds are you will have over a million dollars in that account in the next two decades…possibly a good bit more …also assuming you don’t increase allocation which almost assuredly you will
Great position you have put yourself in…well done!
This post was edited on 12/29/24 at 8:47 am
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