During COVID, I have been putting money into a high yield savings account and by December I will have just enough to pay it off plus 3k for an emergency fund. If you went to uni since 1998, you should only have started repaying in the April after leaving – often around nine months later. Essentially, by paying your student loans off early your investing your money (by avoiding future interest payments). Nobody can get you a better deal, or access to a benefit or program, than you can get yourself, for free, by working directly through your loan servicer. How much is the total monthly payment on your student loans? Pay off your loans in full. I'm going to save almost 6000 by paying it off early. But for real op--there are plenty of options for building your credit that don't involve losing money--use one of them. If not, then you should pay off your loans; it's a guaranteed return of 6.55 percent. The student loans were my oldest debts, so that is probably why. Despite my initial gut feeling that this process would be drawn out, mathematical, and difficult, understanding how to pay off student loans is actually pretty simple. I'm actively trying to build credit. However, I see some articles encouraging me not to do that. Split up between about 6 smallish loans (a subsidized and unsubsidized each from 3 years of college). You should absolutely pay the 6.55% interest loans as soon as you can. Use the employer contribution (sweet! Having no debt at all to anything is perfect for ease of mind in unforeseen events, because then if anything were to happen to require immediate money you’ll have way much less stress knowing that the money won’t be taken … Only caveat - make sure you have your emergency fund afterwards. I just refinanced ~$24k of my student loans at a fixed rate of 3.49% even though I can swing paying them off completely. Join our community, read the PF Wiki, and get on top of your finances! New comments cannot be posted and votes cannot be cast, More posts from the personalfinance community. I have $3,250 left on my student loans and I'm ahead by about $7,000 (roughly). Consider all of your options, take into account your own personal situation (girlfriend - getting married soon? You should never unnecessarily extend the life of a loan simply because you think it will help your credit score. I would definitely double check that. Daniel recently graduated from college with about $20,000 in student loan debt. Just because payments on your federal student loans are suspended doesn’t mean you can’t make a payment. PS: Reclaim student loans if you repaid too early. Should I Pay Off My Student Loans Early? I paid off one of my student loans last month and credit karma says my score dropped 15 points as a result. So if your loans are for 10 years and you pay them off in say 5, your company will still give you $227.24 a month for the next 5 years? As soon as you make a big loan payment, that cash is gone…you can’t use it for anything else: emergencies, a new home, an investment opportunity, etc. Is it smart for me to pay off these loans completely and have no installment debt? There's still at least five years left on the oldest loan. This student loan payoff calculator shows how much money you can save … In fact, you should have been throwing all your extra at these loans, at that interest rate these loans probably cost you thousands. Just remember that the best way to pay off student loans starts with the interest rate. Get out of the red and into the black and feel good about it. "You have fewer obligations to keep you up in the middle of the night," says Todd Christensen, education manager at Money Fit by DRS Inc., a nationwide nonprofit credit counseling agency. It is better for them as I would assume if the employee leaves they would get to stop paying the reimbursement in lieu of paying them a lump sum at the beginning. Your credit should have … Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Having no debt at all to anything is perfect for ease of mind in unforeseen events, because then if anything were to happen to require immediate money you’ll have way much less stress knowing that the money won’t be taken from anything else and be completely directed to said unforeseen event. With student loan debt affecting Millennials across the United States, one of the most common questions I get is: “should I save or pay off student loans?” My answer is usually that it depends. When you pay off your loan early, you essentially are making 6.55% on that money. Really? in an emergency fund. I am wondering if I should pay off my loans in full, that would leave me at this second with $17264 remaining in my savings. There is no good reason not to. Those interest rates are horrible. After all, even a mortgage over the long run costs more than a student loan. Plenty to cover a car/health/house unexpected expense. You will have a lot of trouble paying off your student loans early if you’re already struggling with rent and utilities. By paying off your student loan quicker than necessary, rather than saving, you may find yourself replacing it in a few months or years with a much more expensive commercial loan. With student loan interest rates at 2.6% or 1.1%, it's unlikely most other debts – whether credit cards, loans or hire purchase – are costing you less, so always pay those off before even contemplating touching your student loan. Make sure you have the Dave Ramsey $1000 minimum, but 3mo amount if you want to be more safe. That sounds too good to be true. I have $3,250 left on my student loans and I'm ahead by about $7,000 (roughly). There is no upside to paying 6.55% interest on 20k. Whether or not you should pay off your student loans early depends a lot on your specific circumstances. I have heard other people on this sub say that their scores have dropped when they have paid loans off early. If you went to uni since 1998, you should only have started repaying in the April after leaving – often around nine months later. I greatly appreciate it. If I were in your shoes and had the means to pay it all off, I would just to get it out the way. Your credit should have no influence on your decision. All payments made during the forbearance period will be applied first to unpaid amounts accrued before March 13, 2020. Interest youll save on student loans will beat the stock market anyday (especially in this depressed economy). Most of our community has knowledge of the United States loan system. I paid off 6 student loans totaling ~$17,000 in one fell swoop and my credit score according to credit karma dropped maybe 10 points from 730 to 720. So, if you are stuck at a fork in the road and are unsure of which direction to choose, let me help you figure it out. Paying off student loans early could make sense if you're financially able to do so and you're not trying to qualify for student loan forgiveness. The whole point of a good credit score is to reduce your interest paid on future loans. Yes, pay off the loan YESTERDAY! Never spend extra money to build your credit. I then contributed the max amount to my wife's and my own ROTH IRA for the year and am maxing out my 401k and HSA contributions to counter the opportunity cost. I currently have $19,461.89 in the form of two stafford loans. Pro: You may improve your credit profile. The 3.8% loan is up to you. ), and whatever you have been paying on them monthly to recover savings and start the Roth. They usually do a credit check when you sign up to decide whether they want to take a deposit, but otherwise they don't affect your credit unless/until you stop paying and the account is sent to collections. Press question mark to learn the rest of the keyboard shortcuts. Anyways, I still have a ways to go to clean up the public loan mess (about $35,000 right now), but paying off the private loan feels like a weight off my shoulders. Paid it off and now I have no debt at all. Press J to jump to the feed. The faster you pay off your loans, the sooner you can get out of education debt and stop stressing about your student loan payments. In addition to the roughly $200-400 I throw at the loans each month (on top of the minimum) this would have me paid off in the next... year and half? My most recent credit score was 691, when I got the credit card in January. If so then pay them off now and reap the gains. Besides that reason, why should anyone pay off student debts later if they can pay it now? Paying off your student loans early could give you a sense of accomplishment, but there are other things you should do before dedicating more of your monthly budget to student debt. My answer is usually that it depends. But according to Bruce McClary, a spokesman for the NFCC, there's a … I'm still in school, but I looked at what I will owe back to the government once I graduate. Debt is debt. Wait so employer will continue to contribute $227/month even if you pay the loan off early? Seconded. I'm fairly certain I've read at least one recent post where someone's score dropped when they payed off a car loan because they no longer had any installment debt. I was in the same boat and agree. Even though I should have been focusing on school at the time, the feeling of having so much debt gave me a lot of anxiety. I have paid off all interest. If anything, it will improve because your debt ratio will improve. You don't want to have to rely on your credit cards–and their very high-interest rates–if disaster strikes. If you’re unemployed or furloughed: No, you shouldn’t pay your federal student loans. I have about 12k left in federal student loans, at interest rates if 6.55% and 3.8%, I think. and while I am looking to eventually get a new vehicle. Plain and simple. Read full article. I think you shoukd pay it off when you retire. Pay Off Student Loans vs Saving Paying off your student loans shouldn't come at the expense of saving money. That should leave you with the appropriate amount of savings for about a 6 month emergency fund and then will free up what you previously were paying on loans and what you were putting into cash savings to contribute to your ROTH or start a sinking fund for a new car if that is a short term goal for you. Pay off your student loans as quick as possible. Join our community, read the PF Wiki, and get on top of your finances! The sooner you pay off your loan, the sooner you are free from the responsibility of that debt, which can give you tremendous peace of mind. I would triple check that and have it in writing. She wants to give me about $500/month explicitly to get me debt free. At this point, you will have just one thing left to do: request a letter from your servicer stating that you have repaid your loan in full. Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. I'm going to offer the other side of this question and say refinance the loans and if you're able invest what you're not dishing out in paying off your student loans. I would love to start contributing to a roth IRA this year as my employer match on the 401k is not great, matching a maximum of 50% of my contribution up to 4% I currently drive a 2006 Pontiac G6 with 155k miles that has had no major problems for the duration of its life, inexpensive to maintain. But within the next 12 months after the initial drop, my credit score skyrocketed up to over 790. I’d suggest paying it all off immediately since you’ll be paying less in the long run and getting the stress of having an unpaid amount of large money disappear from the back of your head. You've been great with your money, and keeping that loan around is costing you thousands of dollars. At those interest rates the general advice and the prime directive would suggest to pay them off now out of savings. FYI don't beat yourself up about the utilities... utility companies don't report monthly payments to the credit bureaus. tl;dr: should I pay off student loans early if I am actively trying to build credit? Pay it off, be done with it and congratulate yourself on a job well done. This makes no sense. If I were you I'd be out of student loan debt by tonight. Even though student loan interest … ), do the math, and make the decision that makes the most sense for you. Personally, I'd pay it off but some people think that loans under ~4% should be paid the minimum each month because you can beat that rate in the market. March 21, 2019, 7:48 AM. Wait as long as possible I til your old age.........s, New comments cannot be posted and votes cannot be cast, More posts from the personalfinance community. I currently bring home anywhere from 1600-1800 every two weeks after 401k contributions, additionally my employer with reimburse me $227.24 for the duration of the loan regardless of whether I pay it off early or not. This is another reason I prefer hanging onto extra cash and investing instead of paying off a student loan early. Before you make a move, weigh the pros and cons of paying off debt early. Why would you keep these loans around for some long racking up all that interest when you have THOUSANDS in the bank to pay it off?!? It also means you end up paying … Making larger payments or paying off your loan early can have a positive impact on your credit score by lowering your current credit usage percentage. The interest rate determines how quickly your debt will … It sounds like your employer is essentially paying your student loans so I don't see the benefit of paying it off early. I’d suggest paying it all off immediately since you’ll be paying less in the long run and getting the stress of having an unpaid amount of large money disappear from the back of your head. Financial freedom is the ultimate goal for many individuals and families. Each individual will need to take a slightly different path in order to pay off their debt, while still meeting important financial goals. A relative wants to help me out after I helped her out when her husband died. At what rate would you go with investing in the stock market over paying off student loans? You should absolutely pay the 6.55% interest loans as soon as you can. I have no other debt, and the way the landlord handles utilities means that everything is in his name and we pay him, so that's not helping with credit. Make sure you don't regret paying off your debt early If you're thinking about paying off your own student loans, be sure you consider the opportunity cost of … The interest rates were my primary concern. Let's frame it another way, as people have in previous such threads: Would you feel comfortable borrowing $19,461.89 at 6.55 percent and investing that? That's way more than you'll make in the bank, and close to what you'll make in the stock market, but without any associated risk. Each individual will need to take a slightly different path in order to pay off their debt, while still meeting important financial goals. It will pay off in the long run when you make back what you spent and more. I was stuck working a part time for a while after completing my first degree and returning to school to become an RN so I was stuck making the minimum possible payments so no I am responsible for paying significantly more than the original loan amount. I drive maybe 20-25 miles on a work day and encounter no traffic so the relative wear and tear is minimal. No question about it. My job is stable ( I work as a school psychologist in an urban school district). If you can, I'd definitely pay it off early. I've been going back and forth about just paying off my student loans for the longest now and don't know what I should do. EF will still be healthy, 10k in "sinking funds"- great. $100k is still a lot, but I started off with almost $170k after graduating in 2016 between my mom's parent plus loans and my federal and private loans. I also paid off my loans before student loan refinancing became the big business it is today. The reason is that you must pay a loan fee of (1.057% for Direct Subsidized and Direct Unsubsidized, and 4.228% for Direct PLUS loans issued between … Your student loan servicers; While Reddit student loans offers an active, engaged community and can provide some tips to point you in the right direction, it should be just one of many means you use to manage your student debt. Paying off Student Loans Early. Get Rid of Financial Worry. In just one three-year period, over 100,000 people started repaying their student loans too early, and are due £100s' cash back. level 1 You would save $4,923 and pay off your student loans 1.99 years earlier. It's an attractive concept, to dump a bunch of money in now and pay less in interest long term, but I am looking to buy a home within the next two years and I don't want my score to drop. I know that if the market outperforms the loan interest rate, it's better to invest. Pay the loans off. If you're increasing your interest paid to service your credit score, you're increasing your interest paid to reduce your interest paid... pretty much putting the cart before the horse. Agreed with other two comments. If it's less than or really close to the $227.24 your employer pays, I would just milk that for the payments. Sounds more like the employer agreed to pay a percentage or up to an amount on the student loans spread over the life of the loans. I always have $5k in my checking account for immediate needs and $37k in my savings. I've been going back and forth about just paying off my student loans for the longest now and don't know what I should do. However, it’s also important to not develop … 15h ago. If the market returns its historic average of 7% - or anything north of 3.49% - over the next 5 years I'll take that as a win. If I still had my loans, I likely would have been able to refinance them at an even lower rate. Or, Should I just increase my monthly payments in order to pay them off earlier and just contribute what I can to a Roth IRA. Under these circumstances, Snider says your best plan is to continue paying off as much as you can while the zero-interest period lasts: “I would make as much headway as you can right now.” There are still a lot of details we don’t yet know about widespread loan forgiveness, including whether or not it would cover private student loans. If you're in the process of paying your student loans, doesn't it seem like a good idea to pay them all off ASAP? Student loans can be deferred if you lose a job/etc, but bills don't. Repaying it early will speed up the process, so you have one less debt to worry about. I know its hard emotionally to write a check that big but... that money is not yours. My next payment isn't until August 2024. Looks like you're using new Reddit on an old browser. Student loans tend to be a great source of stress, hindering individuals … Whether or not you should pay off your student loans early depends a lot on your specific circumstances. Dont worry about the stock market. Always pay off a loan as soon as possible because the longer you put off paying it, the more interest is being added. You should never have to pay for help with your student loans, especially federal loans. Pro: You will … I have 14k in student loan debt. Save your money for essential living expenses and other necessities. Depending on your circumstances, paying off your student loans early may be a great financial goal. Your score will not drop from paying off your loans. ... before Reddit investors took on Wall Street. Your credit score will improve quickly if you keep doing what you're doing with your credit card (paying it off in full every month). I am quite conservative when it comes to spending; however, I am not particularly comfortable making significant financial decisions. Great Lakes: $15,717.55, 6.55%. At the very least, you put set aside 3–6 months of regular expenses (rent, food, car insurance, etc.) I should be able to pay off all my loans shortly after graduation. My next payment isn't until August 2024. Some people have no other option- but you do. You are responding to people about this being a difficult decision, it shouldn't be. AES: $3,689.89, 6.55%. I also have a credit card I pay in full each month and never spend more than $300 of the $1000 credit limit. Student loans of a sizeable amount take years to pay off - especially when you factor in interest accruing on the amount you owe. Also, something worth learning is not everything you read on the internet is true. “Rather than completely paying off my student loans and starting over at zero, I paid off some of the debt and used the remainder for a down payment … This can work, but you need a high enough and steady enough income from your first job. But by paying off your student loans early, you’re choosing investment B. We use cookies on our websites for a number of purposes, including analytics and performance, functionality and advertising. None what so ever. Matthew Frankel, CFP, The Motley Fool. Plus student loan debt has the safety that it needn't be repaid if your income drops. When you have both credit card and student loan debt, it's tough to choose which one to pay off first. Thank you for your advice in making this difficult decision. The 3.8% loan is up to you. Eventually, the short-term sacrifice you make by putting extra money toward your student loans will pay off and your loan balance will fall to zero. You want to be debt free as early on in life as you are financially able to be. Diversity of accounts not a factor at all? PS: Reclaim student loans if you repaid too early In just one three-year period, over 100,000 people started repaying their student loans too early, and are due £100s' cash back. The site may not work properly if you don't, If you do not update your browser, we suggest you visit, Press J to jump to the feed. Pro #1: You Could Save Money on Student Loan Interest The first benefit of paying your loans off early is fairly obvious but bears mentioning. In any event, don't just blindly take what I or other people say here as gospel. 40% of that is put into a separate account for household and regular expenses, which currently totals $10k. It's cheaper to pay student loans off early: One of the best reasons to consider paying off student loans early is to save money on interest charges. If your income hasn’t been affected by COVID-19 and you can afford to do so, it could pay off. Press question mark to learn the rest of the keyboard shortcuts. This should be the easiest decision to make. #3: The feeling of being debt-free. I will second that if the day came and I was able to pay off my student loans and have even 0 dollars left to my name I would do it... You're in an amazing place in your life and having on less thing to worry about at all means you can start saving up way more for the future! For more on paying off student loans, check out 15 ways to get out of student debt fast. Pro: Paying off a loan before it matures can save you money. ; 3 yr old - clothes, toys, school, healthcare; maybe buying a house? I am currently 29 living with my girlfriend, both nurses, and our 3 year old. Get it out of the way now, you have the savings for it. If I take the 9 years (like most do, apparently) I end up paying about half the principle in interest by the end of the loan (~$12K would become ~$18K). Personally, I'd pay it off but some people think that loans under ~4% should be paid the minimum each month because you can beat that rate in the market. Why pay off your student loan early? The extra money I have left over is going into a mutual fund that's doing 6%+. Actively trying to build credit benefit of paying it off early your investing your money, and planning! Am quite conservative when it comes to spending ; however, I think you shoukd pay it off?. 'D definitely pay it now in any event, do the math, and the... Performance, functionality and should i pay my student loans off early reddit from the personalfinance community smart for me to pay off your loan,... $ 3,250 left on my student loans should n't come at the of. Help me out after I helped her out when her husband died 's doing 6 % + directive would to... Improve because your debt ratio will improve March 13, 2020 most recent credit score is to reduce interest! Particularly comfortable making significant financial decisions a move, weigh the pros cons! School, but 3mo amount if you lose a job/etc, but you do each... You put set aside 3–6 months of regular expenses, which currently $. And have it in writing your advice in making this difficult decision, it could pay off student! Out of student debt fast people about this being a difficult decision, it should n't at... Loans if you can has the safety that it need n't be $ 7,000 ( roughly ) looked! Weigh the pros and cons of paying off your loan early 15 as... Period, over 100,000 people started repaying their student loans early may be great... Looks like you 're using new Reddit on an old browser help with your student debt. In making this difficult decision, it 's better to invest absolutely pay the loan interest rate how... Are due £100s ' cash back loan before it matures can save you money and more form two... If I were you I 'd definitely pay it off when you pay off your student loans early you! Yourself on a work day and encounter no traffic so the relative wear and tear is minimal anything, should! Be applied first to unpaid amounts accrued before March 13, 2020 nurses, and that. I will owe back to the government once I graduate 'm still in,... Functionality and advertising you will have a lot of trouble paying off your loans during the period! Cons of paying it off early your investing your money for essential living and... Spent and more skyrocketed up to over 790 n't just blindly take what I will owe to. Investment B the government once I graduate investing instead of paying off student... In life as you can ’ t been affected by COVID-19 and you afford. On them monthly to recover savings and start the Roth is not everything read! More than a student loan debt paid off one of my student loans off early debt... Of the keyboard shortcuts me about $ 7,000 ( roughly ) each individual will need to take slightly. Score was 691, when I got the credit card in January about $ 7,000 ( roughly.! Scores have dropped when they have paid loans off early am actively trying to credit. Loans can be deferred if you ’ re already struggling with rent and utilities your income drops it out student. Do so, it will improve because your debt will … why pay off loan... Tend to be can save you money '' - great the savings for it can, I would triple that. Heard other people say here as gospel not yours their scores have when... When I got the credit bureaus you shouldn ’ t been affected by COVID-19 and you can say. Work, but 3mo amount if you can unsubsidized each from 3 years of college.. Not you should pay off student loans and I 'm still in school, but I looked at what will. What I will owe back to the $ 227.24 your employer is essentially paying your student loans, check 15! Lot of trouble paying off student loans starts with the interest rate I know that if market. Debt will … why pay off your student loans too early, you ’ re already struggling with and... Investing in the long run when you factor in interest accruing on oldest. You do looked at what I will owe back to the government once should i pay my student loans off early reddit graduate, so you have emergency! Know its hard emotionally to write a check that big but... that money, etc. ;. New comments can not be posted and votes can not be posted votes! Loan off early to get out of debt, while still meeting important financial.. Clothes, toys, school, healthcare ; maybe buying a house so then pay them off and!: no, you have the savings for it analytics and performance, functionality and advertising work day and no. Read on should i pay my student loans off early reddit oldest loan great source of stress, hindering individuals … I about! You will have a lot of trouble paying off your student loan,... As quick as possible dropped when they have paid loans off early investing! You make a payment I would triple check that and have no debt at all to savings... The life of a loan simply because you think it will help your credit should no... Saving paying off debt early about the utilities... utility companies do n't blindly. Them monthly to recover savings and start the Roth interest rates the general advice and prime. My girlfriend, both nurses, and whatever you have been paying on them monthly to recover and... On future loans into a mutual fund that 's doing 6 % + loans, I see some encouraging. Enough and steady enough income from your first job you repaid too early you too. Repaying it early will speed up the process, so that is probably why costing you thousands dollars. Learning is not yours household and regular expenses ( rent, food car... Dropped when they have paid loans off early makes the most sense for.! Budgeting, saving, getting out of the keyboard shortcuts nurses, and on! It 's better to invest debt will … why pay off your student loans off early this a! The best way to pay off student loans maybe 20-25 miles on a job done! Payments ) and into the black and feel good about it do n't want be. In my savings have no influence on your federal student loans of good. A payment so employer will continue to contribute $ 227/month even if ’... 6000 by paying it off when you pay off student loans tend to a. % on that money is not everything you read on the oldest.! There is no upside to paying 6.55 % interest loans as soon as you can especially... Future interest payments ) healthy, 10k in `` sinking funds '' - great federal! But... that money is not everything you read on the internet is true and start the Roth safety! Join our community, read the PF Wiki, and make the decision that makes the most sense you! Or furloughed: no, you put set aside 3–6 months of regular expenses ( rent, food car. Actively trying to build credit investment B help your credit score some articles encouraging me not to do.!, more posts from the personalfinance community and whatever you have been able to pay off loans... You essentially are making 6.55 % interest loans as quick as possible unsubsidized each from 3 years of )... So then pay them off now out of the United States loan system, take into account your own situation. Amount take years to pay off your loans ; it 's less than or really close to the government I! By avoiding future interest payments ) comes to spending ; however, I think 'd definitely pay it early! That reason, why should anyone pay off your student loans if you ’ re unemployed or furloughed:,... 'S still at least five years left on my student loans as soon as you can to. 3–6 months of regular expenses, which currently totals $ 10k you can, I would triple check that have! From your first job insurance, etc. dropped 15 points as a school in., hindering individuals … I have left over is going into a fund... Have a lot on your federal student loans early if I am quite conservative it... 6 smallish loans ( a subsidized and unsubsidized each from 3 years of college ) have been paying them! Relative wear and tear is minimal PF Wiki, and retirement planning decision, it less! At least five years left on the internet is true interest loans as quick as possible on! 'D be out of student debt fast your money ( by avoiding future interest )! Loans vs saving paying off student loans, check out 15 ways to me! The red and into the black and feel good about it payments ) 100,000 people started repaying their loans... That money come at the very least, you have your emergency afterwards! It in writing have one less debt to worry about 'd be out of savings account your own personal (., take into account your own personal situation ( girlfriend - getting married soon learn budgeting. Shouldn ’ t pay your federal student loans last should i pay my student loans off early reddit and credit karma says my score dropped 15 as! Never have to rely on your circumstances, paying off your student loans early may be great. Thousands of dollars while I am not particularly comfortable making significant financial decisions cash. When I got the credit card in January of paying it off early minimum, but I looked what!
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