Student Loans- pay them off?

[Forevryoung]

So I'm young and single. And I have $18,000 in student loans (no other debt).

I'm seriously considering paying them off instead of letting them sit there. The interest rates for both loans ($5800 and 12,xxx) are under 3%. My payment is $181 a month (been out of school less than 2 years).

Can anyone think of any fabulous reason not to put a huge chunk of change every month toward these loans and have them paid off in 3 or so years?

I think my plan would be to put some of my savings towards the smaller one and knock it out in 6 months ($1000 each month will be tough but do-able) and then put $500 per month into the bigger one till it's gone. At some point I'm sure I'll have to drop down to less because I'll need to save for a car, possible wedding, life... but any reason NOT to?

 

[OceanAnnie]

I can't think of a reason not to pay it off. I was in a similar situation with school loans. I paid it off as quickly as I could, within a year. I threw every bit of extra money I had at that debt. It felt great to be free of it!

 

[wdwfan16]

It depends one what you are planning to do with the money. Are you saving for a home? Do you have an emergency fund? How secure is your job?

DH and I wanted all of our debt gone before we bought our home. Our students loans were at a much higher rate than 3% so we had more incentive to get rid of them.

 

[mster425]

Do you have an emergency fund of 6-12 months of your income? If not I would fund that while paying off your loan.

The interest that you pay on student loans in tax deductible, so the actual interest rate you're paying is less, if that makes sense.

Mine is 1.9% before I deduct it on my taxes, and my payment is less than $100/month, so I don't worry about it and use my money for other things.

 

[anabelle]

Are you living at home still? I would also be putting aside some savings for buying a house.

 

[mrsklamc]

Are you living at home still? I would also be putting aside some savings for buying a house.

Nah, plenty of time to save for a house AFTER paying off the loans.

 

[Forevryoung]

I am waiting very impatiently to hear back about a new job (find out first week of March) which will change things significantly.

If I get this job I have plans to move out of my parents home this summer with my DBF- no new job means no moving out, my current job is not stable enough.

I have my list of things to save for- mainly a car (mine hit 90,000 miles) and a down payment on a home. I have a 6 month emergency fund based on living at home but the emergency fund will need to be increased considerably if I move out. Although waiting 6 months after starting the new job will help.

Too much to think about! I'm trying to keep my mind busy to keep from obsessing about this potential job (I want it so badly!)

 

[bumbershoot]

There is simply NO reason to not pay those off. Get them gone. You will be so unique amongst your friends, and people will envy you. Perhaps not today, but in about 10 years? Oh yeah. You will be so free! Do it!

 

[Karlzmom]

pay them off while you can! If you wait, playing the "Deductible interest" game, etc. you may find your situation in life changes and then you are stuck with them being juggled with everything else!

 

[Wilsonfamily4]

I am no expert but here is my thoughts on this. My hubby and I graduated from college both with loans. We were in no rush to pay those off as the interest rate is just to good. We bought a house and cars, etc. All the while paying barely over the minimum payment. Then when we had our cars adn house under control we knocked of my husbands loan and hope to kill mine this summer. It is an amazing feeling not having that bill every month BUT we would much rather have that interest rate then what they offer on houses and cars.

I think with school loans you won't regret either choice you make.

 

[KS_Disney_Dad]

Not sure if you saw this article about a doctor who's $250k student loan blew up to $555k! I realize your loan may not be the same amount, but the reality of what can happen still exists.

Even if you take deferments, the clock is still ticking, and NOT in your favor!

http://online.wsj.com/article/SB20001424052748703389004575033063806327030.html

 

[wdwfan16]

I am waiting very impatiently to hear back about a new job (find out first week of March) which will change things significantly.

If I get this job I have plans to move out of my parents home this summer with my DBF- no new job means no moving out, my current job is not stable enough.

I have my list of things to save for- mainly a car (mine hit 90,000 miles) and a down payment on a home. I have a 6 month emergency fund based on living at home but the emergency fund will need to be increased considerably if I move out. Although waiting 6 months after starting the new job will help.

Too much to think about! I'm trying to keep my mind busy to keep from obsessing about this potential job (I want it so badly!)

I would not pay them off not but save for that moving out EF.

 

[windycitymom]

I would pay off your debt asap. In fact, I would suggest living at home until your loans are paid for - even if it means delaying when you move out. This is your one time to save (and pay off) as much as much money as possible. Even if it is a low-interest loan, it is still money OWED. You won't regret it later in life when you are debt-free much sooner.

 

[Golf4food]

My loans are at 1.9%. I have zero incentive to pay them off early, really. $103 per month? I can get more return on even CDs right now even though they are only around 2%. Plus the interest is tax deductible, even though it is not a lot. Nothing wrong with paying them off early if you have the cash and everything else under control, but neither is there anything wrong with just paying the minimum on them.

 

[mrsklamc]

Do you and DBF plan to own or rent?

If between the two of you, you can save enough cash to avoid PMI on a mortgage, that might be my only exception to the "Pay them off, and pay them off ASAP"

Of course, I would also strongly recommend not purchasing a house with someone you aren't married to- people who ARE married and break up sometimes have a hard time getting the other person to sell. I wouldn't risk it with a BF. But that's just me.

 

[DansBride2009]

I would pay them off! If you owe nothing on your car, consider yourself lucky!

How are maintenence and repairs on your car? Is it in good working condition? If so, who cares if it's got 90,000 miles on it?!?

Drive it. Drive your car until the wheels fall off. Drive it until it hits 300,000 miles (if that's possible lol) and clanks when it goes down the road.

PAY OFF YOUR DEBT ! You do not need a new car right now unless you are putting more money into repairing your car than buying a new one, if that makes sense.

You have $18,000 in student loans, why would you wait to pay it off? Work 2 jobs, do whatever you can to get rid of that debt !! If you can, get an emergency fund going so if something does go wrong, like you get sick, you can pay for it.

Good luck ... but remember, it is OK to have 90,000 miles on a car if it's running perfectly well !!

 

[deerhart]

Nah, plenty of time to save for a house AFTER paying off the loans.

It depends on time lines. At that low of an interest rate and with the tax deduction, your almost far better off putting money in savings instead of socking everything towards the debt. Now if she has loans that the interest rate fluctuates, then that is another story. I know most of my student loans the max interest rate is like 4% (and they are down to like 2% right now)

Given the state of the economy and just coming out of school, the op needs to have an emergency fund. Even more so because IF something does happen, you can defer those student loans if you choose (and just use the emergency fund to pay other bills) or use that fund to also continue to pay the student loans.

 

[Irin997]

I would pay them off! If you owe nothing on your car, consider yourself lucky!

How are maintenence and repairs on your car? Is it in good working condition? If so, who cares if it's got 90,000 miles on it?!?

Drive it. Drive your car until the wheels fall off. Drive it until it hits 300,000 miles (if that's possible lol) and clanks when it goes down the road.

PAY OFF YOUR DEBT ! You do not need a new car right now unless you are putting more money into repairing your car than buying a new one, if that makes sense.

You have $18,000 in student loans, why would you wait to pay it off? Work 2 jobs, do whatever you can to get rid of that debt !! If you can, get an emergency fund going so if something does go wrong, like you get sick, you can pay for it.

Good luck ... but remember, it is OK to have $90,000 miles on a car if it's running perfectly well !!

90,000 miles on a car is nothing. My car is getting close to 190,000 miles and it's running beautifully. It's the exact reason why I bought a Honda - I knew I didn't want a car payment for a long time.

Personally, I think it's stupid to pay off such cheap debt so soon. You could easily save up that same amount of cash and earn interest (even though interest rates suck right now). Keep in mind that interest you're paying on student loans is tax deductible.

If anything I'd be saving up to buy a car in order to not have a car payment that will likely have a higher interest rate than 4% and depreciates the second you drive it off the lot.

Actually, an even better idea would be to max out any retirement plan you have instead.

 

[deerhart]

90,000 miles on a car is nothing. My car is getting close to 190,000 miles and it's running beautifully. It's the exact reason why I bought a Honda - I knew I didn't want a car payment for a long time.
.

I can't seem to get a car past about 125k. Either it gets totaled in an accident that's NOT my fault OR it has a major item break that is going to cost more then the car is worth to fix. THe last two trucks we had around that mileage, in one the entire back break system failed (over $1500 to fix) and the second one the fuel pump broke and the cost to fix plus tow was well over $1000.

 

[Irin997]

I can't seem to get a car past about 125k. Either it gets totaled in an accident that's NOT my fault OR it has a major item break that is going to cost more then the car is worth to fix. THe last two trucks we had around that mileage, in one the entire back break system failed (over $1500 to fix) and the second one the fuel pump broke and the cost to fix plus tow was well over $1000.

Oh boy, don't tell me that! So far my car is alive and kicking and I'm hoping to get a minimum of another 2+ years out of her. Of course, I have put a lot of money into her, but all I've put in is still cheaper than a new car. My main concerns are more about driving a safe car with my DD8. Not that my Honda isn't safe, but there have been a lot of technological and safety advances since 1997.