paying off student loan debt

[harleyquinn]

Hi everyone.
I've been reading a bunch of threads about people paying off their debt. I've read tons of books on the topic as well, but nothing really talks about student loans.

So do any of you have tips for student loan debt? Or do you just pay it and not think about it?

My DF and I have no credit card debt, my card is almost paid off (it has 0% interest), and we just bought a house. So should I bother trying to pay extra if I can? Or should I put any of that into the house? Or maybe for Disney?

I hope this question is appropriate. I feel guilty for spending money on Disney when I have other bills to pay. I feel like I can justify the mortgage, but I don't know about the student loans.

BTW between the two of us, my DF and I have $50,000 in student loans.

 

[MHopkins2]

It depends on a lot of things, but without knowing the exact situation, if it were me, I would still take vacations. You have no "consumer" debt; you've already purchased a home and are building equity in it; you're (I think from your post) making at least your installment amount on your student loans. Unless they're at an exhorbitant interest rate - unlikely since they're student loans - I would spend some "fun" money and not worry about it. My only other question is do you have a regular savings plan?

 

[harleyquinn]

Yes, I have a savings account that I put $300 a month in right now. And I have $60 a month going to a 401K type retirement fund in addition to my Public Employee Retirement fund. And I pay the students loans each month.

Now the $300 might change once I start paying all those new house bills, but DF and I are committed to saving 10% of our income.

I think I'm answering my own question aren't I? I think I have it all pretty well figured out and if I can use some money for Disney I should be able to recognize that!

Your question really made me think...thanks!

I just wonder how we're all dealing with the student loan debt. As I said before none of the books I can find really talk about it at all, its a realtively new form of debt.

 

[ibleedblue]

Just make sure you've got your student loans locked in at the lowest rate possible. My loans were through the Stafford program and were variable each year in July. The government offers you the chance to refinance and lock in at a lower rate almost any time. I was able to lock in at 4 1/8% a couple of years ago and if I let them do automatic drafting from my checking account they take another 1/2% off, so my rate is effectively 3 5/8%. Before I refinanced, I was paying over 5% and when I started repayment I was paying 8.25%. I just pay the minimum each month and don't worry about it. It was more of an investment (like a home) than an expense (like credit card debt) anyway and with such a low rate I'm not paying a ton in interest. Of course my loan was only about $15k, not $50k.

 

[robinb]

I consider Student Loans to be long-term debt, like a mortgage or maybe a 60 month car loan. As long as you are making your payments, you should be fine. Instead of paying them off more quickly, you should build up a "nest egg" so you have living expenses covered for a couple of months if one of you loses your job. You also may want to speak to a financial advisor who would be able to help you save, invest and pay off debt in the correct order.

 

[patsal]

As long as you keep making the student loan payments they will go away. DH and I just keep making the payments. Undergrad should be paid off soon--it is auto draft so I really don't think about it at all. My graduate school loans, I do the same thing. Though I owe about $15k they will all be paid off by 2010 so I just don't worry about it. It is better to save for your retirement than to pay off the student loans early. When ever we have bought anything the financial people always tell us not to worry aboutthe student loans. I kind of figure we will have them in one form or another until we die! As soon as my grad ones are paid off it will be time for DS to go to college and I'll be doing the student loans for parent thing!

 

[DisKim]

How do you refinance your student loan through the government. Mine is still at a very high interest rate and I would appreciate this information.

 

[ibleedblue]

Originally posted by DisKim
How do you refinance your student loan through the government. Mine is still at a very high interest rate and I would appreciate this information.

Here's the webpage. Student Loan Refi.

 

[DisKim]

Thanks so much!!

 

[mom2alix]

Another great tip is that you can use Upromise for your student loans if the loan is through one of the loan services that allow you to sign up. My husband had his loan through Mohela (Missouri) and we were able to use monies accumulated in Upromise toward paying it off. It's not a whole lot of money, but I figure anything that helps reduce the amount is pretty cool.

 

[floridafam]

We just pay ours every month.

We paid off our credit cards a few months ago and contribute to a 410K and other things.

Even our mortgage broker said just pay it every month but pay other things off first if you have a chunk of money. Student loans are just looked at differently than other debt.

 

[canwegosoon]

Since student loan intrest is tax deductable, I think it is important to keep those deductions, espically if you are approaching the 100K combined income mark. The house is great, I would also consider putting a little more toward IRA or pretax retirement accounts now. Time is a great multiplier of intrest!!! If you have 8-10 months "emergency funds" you could do what ever you like with the money. I like resort real estate as a hobby

 

[DisKim]

Thanks ibleedblue for your link. Unfortunately, I just have one loan and can't consolidate. I just can't seem to shake this high interest rate on my students loan. I consolidated years ago when the rates were high. Maybe I'll take a class and take out a loan just so I can consolidate. Just kidding!

 

[HaleyB]

Student loans are good debt- like a house, nothing to worry about. However if you are locked into a high rate you may want to talk to a financial adviser about it that might change things. It sounds like you are doing everything right.

 

[crisi]

We paid my DH's for about five years, then I got sick of writing out the check each month. So we threw a bunch of savings at them.

Here is my thing.....debt is a cash flow burden (you have to make the payment every month, instead of putting that money into savings, or dinners out, or whatever), in addition to burning whatever you are paying in interest. I'd rather have the cash flow than the savings. There have been too many times in my life where I don't have much left when I pay bills, that I don't like having bills and will do what I can not to have them.

 

[harleyquinn]

Wow! I thought no one would reply to this at all!

Thanks everyone!

I consolidated my loans with Sallie Mae and my interest rate is only 2.35 and after 36 payments it'll drop to 1.35! So I guess I'm way better off than I thought!

I think I better have my taxes done for me this year I've never done anything but Telefile as I never made anything Now I have a real job, a house, a husband (after June 19th, student loans. Ack!

Thank you all so much! i feel much better now!

 

[floridafam]

This may have already been mentioned but you may be able to deduct the interest you pay on your student loans off your taxes.

We do.

 

[nicknamy1996]

The interest on the student loan was always very easy to deduct, even doing simple tax returns. You didn't have to itimize your deductions like you do to claim other types of interest/expenses. You could do standard deduction and still claim student loan interest.

They also just (this year or last) changed some importiant rules on the interest. The increased the income limit at which the interest becomes non deductable. Also it used to cut off at 5 years. You could deduct the interest for 5 years then you were out of luck. They made both those changes for me just in time. I was in my fifth year and my wife and I were getting near that original income limit.

My situation is VERY similar to bleed blue's in that i too owed around 15k at 8.25. I'm now down to just under 7500 and at last check my interest rate was under 2% (not locked) Last year I paid a total of 204 dollars in interest. After claiming the interest my return (should have) went up about 65 bucks. Meaning for the year I paid about 140 for those loans. I do autopay (as I do with EVERYTHING, a check book lasts me a year these days) so it's a no brainer for me. The first of every month the take a fixed amount out of my checking account for my loan. I overpay (or at least try to) on every loan I have. But not on that one, It's the chepest one by far. If I have extra money it goes to my car loan, after that is paid off any extra will go to my home loan.

At 50k that loan will be around for a while, I would suggest doing the consolidation, set up autopay, claim it every year, and forget about it (except to watch for lower int. rates) Because again its the cheapest one to carry, and if you have extra cash(that for odd some reason you want to apply to a loan to save on interest, rather than going to Disney World with) put it towards another loan. And if after that you still hate the fact of not making extra payments on any loan you have you can set up your auto pay to for any dollar figure you want. If your payment is 288.32 (and you can afford to) set up the auto pay for 300/month. It will add up over time and make it easier to balance your check book each month.

On a side note I just had an offer to consolidate my loans (at a slightly higer but fixed rate then my current rate) You get them a lot when you have student loans, and I usually throw them away, but this one would come with a $500 payment coupon that could be used right away to reduce my principal. I was on that! Especially with (so I hear) the int. rates getting ready to climb back up. But in order to take advantage you had to owe at least $7500 and I was just under that.

 

[HappyLawyer]

mine would be paid off if we stopeed going to disney, but i'd rather go to disney-lol

 

[floridagirrl2]

DH and I have about 35,000 in student loans. We just write the checks every month and forget about it--the loans will be paid off before we retire (we both went back to school in our late 30s), and neither of us believe in foregoing vacations in favor of paying off student loans .

I would build up an emergency savings fund before I would pay off any loans, personally--the two biggest causes of personal bankruptcy are divorce and poor health. If one of you became ill and were unable to work, could you pay all your monthly expenses on one income? If not, an emergency fund should (IMO) be a top priority.

I know you said you don't have consumer debt, but for people who do, I have heard that it is also better to stash away 3-6 months (minimum) living expenses even before paying off credit cards--the rationale being that, if you do have an emergency, you will end up running up the credit cards anyway if you do not have an adequate emergency fund.