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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 10:55 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 11:46 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?
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