Paying off Loans with Lump Sum Forum

[DELG]

I'd pay that shit down asap. That's my personal take on it, but I'm very debt-phobic and would want as clean a slate as I could get coming out of school to get a move one with the rest of my life. Some on here will tell you otherwise and that's fine. However, even the folks I know who have something crazy like 2% interest on their school loans from way back when still bitch about not paying down their stuff faster before they bought a house and had kids. Ya, it's less than inflation and yada yada but it's annoying as hell to have a good chunk of your check each week going to school debt when you finished the degree however many years ago. Just my two cents.

Those people are stupid.

[UVAIce]

Paying off your student loans, or not taking them out in the first place, is generally the right decision for most people. I would recommend at least not taking out any grad plus loans. In the end the analysis has to be what the real cost of your loans will be compared to what you might be able to do with your money somewhere else. That being said, there are few "for sure" investments that will give you guaranteed payout of ~7% interest a year (and the real per annum is higher given the loan fees, etc.).

I know that in my personal situation, which is likely different than yours, I will be putting money towards buying a house before I go crazy with my student debt. But I will also be saving $5k in taxes a year with my home mortgage deduction, and guess where I am going to be stashing those tax savings, student debt.

One important aspect you need to think about, which the poster before me alludes to, is that you can't pay your bills with the student debt that you've paid off. It's always smart to have some funds stashed away in case of random emergencies - your car breaks, you have a big unexpected medical bill, etc. - as you don't want to be caught in a situation where you have to charge that to a credit card with ~18% interest.

[UVAIce]

Put aside at least 3 months worth of an emergency fund, then use the rest to pay off your loans from the highest interest rates on down. Student loan debt is often considered the worst type of debt to have because it isn't dischargeable in bankruptcy (in most cases). Plus, I wouldn't want to deal with a student loan payment for the next 15-30 years if I knew I once had the option to pay the loans off. Save the money you would have used to pay down the debt each month for extra savings/home down payment/accelerating your remaining debt repayment. If you're interested in getting better with personal finance, listen to people like Dave Ramsey and Suze Orman.

I dare you to recommend worse people to listen to

They're a great start for someone who doesn't know much about personal finance. Besides, they pretty much advocate living below your means and paying down debt aggressively. What's so wrong with that?

My problem with these kinds of folks is that they aren't espousing anything fundamentally new. The message is essentially to spend less - this stops an individual from continuing to borrow - pay off debt - it's tough for the random retail investor to find any kind of investment that will produce an after tax return higher than the interest on even a good credit card, and to save money - protects an individual from borrowing to cover emergency costs. I also believe that a lot of these people advocate investing in bullion, which should NOT make up the majority of anyone's investment portfolio. And even with all of this the answer is not always to pay off all the debt immediately.

[suzige]

I'd pay that shit down asap. That's my personal take on it, but I'm very debt-phobic and would want as clean a slate as I could get coming out of school to get a move one with the rest of my life. Some on here will tell you otherwise and that's fine. However, even the folks I know who have something crazy like 2% interest on their school loans from way back when still bitch about not paying down their stuff faster before they bought a house and had kids. Ya, it's less than inflation and yada yada but it's annoying as hell to have a good chunk of your check each week going to school debt when you finished the degree however many years ago. Just my two cents.

Those people are stupid.

i <3 your avatar. that is all.

[ScottRiqui]

I know that in my personal situation, which is likely different than yours, I will be putting money towards buying a house before I go crazy with my student debt. But I will also be saving $5k in taxes a year with my home mortgage deduction, and guess where I am going to be stashing those tax savings, student debt.

How will you be saving that much? Mortgage interest is tax-deductible, but you'd have to be paying something like $18,000/yr in mortgage interest for the deduction to actually save you that much in taxes.

[180kickflip]

I know that in my personal situation, which is likely different than yours, I will be putting money towards buying a house before I go crazy with my student debt. But I will also be saving $5k in taxes a year with my home mortgage deduction, and guess where I am going to be stashing those tax savings, student debt.

How will you be saving that much? Mortgage interest is tax-deductible, but you'd have to be paying something like $18,000/yr in mortgage interest for the deduction to actually save you that much in taxes.

I have zero experience with mortgages, but aren't the early years of paying ofF a house primarily interest? Like you start with payments at like 90% interest 10% principle and over time the ratio shifts toward principle.

[ScottRiqui]

I know that in my personal situation, which is likely different than yours, I will be putting money towards buying a house before I go crazy with my student debt. But I will also be saving $5k in taxes a year with my home mortgage deduction, and guess where I am going to be stashing those tax savings, student debt.

How will you be saving that much? Mortgage interest is tax-deductible, but you'd have to be paying something like $18,000/yr in mortgage interest for the deduction to actually save you that much in taxes.

I have zero experience with mortgages, but aren't the early years of paying ofF a house primarily interest? Like you start with payments at like 90% interest 10% principle and over time the ratio shifts toward principle.

Yeah, you kind of take it in the shorts for the first few years, but even with a $250,000 30-year mortgage at 5%, that's only about $12,400 in interest during the first year, and it only goes down from there. Of course, with a $375,000 house, $18k in interest for the first year would be about right. The number just seemed high to me because my house wasn't near that expensive 15 years ago.