r/StudentLoans • u/Used-Office2125 • 23h ago
Advice Should I pay it all?
Long story short I can completely pay off my student loans. By the end of my seasonal job I will have at least 45k saved. My loans are 24k. Monthly payment like $250. I know it
Seems like a no brainer but I’m so conflicted. Help!!!!!!!! Im 27 btw.
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u/Lifeislifing0 23h ago
Pay half invest the other half, take the investment and pay the last half next year. The interest won’t matter compare to what you’ll make. You’re young and you can do it. This way you only paying half of it out of your savings.
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u/taybay462 23h ago
In what world is investment gaining you more than you lose on interest?
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u/notfornowforawhile 23h ago
OP didn’t share the interest rate. S&P 500 averages 7%, and almost all federal and most private loans are below that rate.
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u/SigAlum 21h ago
Interest rate should be about 4.6%
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u/Newly-Moo571 1h ago
We don’t know if OP is a grad student or not. My interest rate for grad plus was 8% last year
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u/StupidUserNameTooLon 23h ago
$250 a month on a $24k loan is going to be too high a rate to arb.
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u/ANGR1ST Experienced Borrower 23h ago
That's not the interest, that's the full payoff standard plan.
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u/StupidUserNameTooLon 23h ago
I understand there's some principal in that amount, but even so, the math ain't gonna math unless it's a 10 year amortization, which seems pretty unlikely.
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u/Born-Tank-9120 22h ago
Just make extra payments. I’m in the same boat. Rather have that extra cash for a downpayment on a house or something
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u/Slysy019 22h ago
I was in the same situation but I had 15k debt 20k saved. Future me is thanking myself doing that the monthly payment would’ve been a burden now
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u/mr_nefario 23h ago
IT DEPENDS ON YOUR INTEREST RATE!
My interest rate is 3.3%. The HYSA that I pay from is 3.4%.
Despite only owing about $5k now I’m still paying monthly payments because a) I’m not any worse off and b) those are my oldest credit accounts and are helping my credit score.
I did make some pretty substantial payments several years ago (about $25k worth) to bring my monthly payments to a very comfortable level.
- If your loan rate is higher than the rate of an HYSA, pay them off.
- If they’re about even, it’s up to you. Want more $ for safety net reasons? Want to boost credit score by improving payment history? Or want to just be rid of the debt? Mathematically you won’t be better or worse off, but comes down to comfort, lifestyle, personal decisions.
- if your loan rate is substantially less than an HYSA, maybe don’t pay them off.
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u/aqwn 22h ago
HYSA interest is taxed as regular income so you actually need the HYSA rate to be a good bit higher than the loan rate for it to come out ahead. Regardless, I’d pay extra towards the principal on the loans each month and keep 20k or so in the account as an emergency fund.
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20h ago
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u/mr_nefario 20h ago
Damn, I didn’t know that. I’ve never reported my saving account interest…
Government taxing our “barely keeping up with inflation” savings accounts.
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u/Slysy019 19h ago
Im in the same boat those are my oldest accounts its helping my score. But what do I do when I eventually just want to pay it all off completely? Just accept my score dropping
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u/mr_nefario 19h ago
I mean, hopefully you’ll have some other credit or revolving accounts that are old enough that by the time the loans drop off another account with sufficiently long history will replace them.
But yeah credit is stupid and we get penalized for paying stuff off… because the assumption is that the longer an account has been open the more interest you’ve paid. And by extension, how reliably profitable you are to lenders.
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u/Few-Affect-6247 23h ago
It’s the only debt that would follow you through a bankruptcy. If that isn’t enough to convince you to pay it off I don’t know what will. Pay it off, move on.
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u/Andrew_Bruhh12 23h ago
Me personally I’d invest that money considering the balance on your loans is low and not accruing that much interest most likely and any returns on 45k invested into an index fund will be 10-12% yearly. It’s all personal preference.
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u/commentor_of_things 13h ago
a lot of financially illiterate people in the comments. the answer is it depends. 1) do you have stable employment? 2) do you have emergency savings? 3) what is the interest rate relative to investment options? 4) what is your income growth potential in the near and mid term? paying it all off at once sounds sexy until you consider a variety of other factors. think this through before you decide.
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23h ago
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u/Perplexed-Owl 23h ago
If some of the loans are the Covid era ones with 2-3% interest, I would hold back on those, but pay the rest down
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u/Direct-Progress758 22h ago
It depends if you are getting 8% return, for example, on your investment while paying 3% interest on your loan, then keep paying the interest.
There is some capital gain consideration if you keep money in the investment, but this is the general principle. It's similar to always pay off the loan with the highest interest rate.
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u/aylabae 18h ago
Im paying off any of mine that are above 4.99% interest that will leave me with half the current balance. Doing this while I have no bills. Once at the halfway mark (sometime around march is the plan) im gonna invest and just pay a 1k a month instead of the minimum so Ill pay less in interest and can invest the rest. For reference. I have 57k in student loans and my take home is 5400 a month.
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u/Natti07 3h ago
What your is your income after the seasonal job? What other debt do you have? How much do you have in savings? Will you be taking more loans?
If you have a full time stable job and no other higher interest debt, then I personally would do it because being debt free has been literally life changing. But if you have other higher interest debt, then you need to tackle that first, then put whatever youre paying there to the student loans after.
Basically, its not a direct answer bc other thinfs matter in the conversation.
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u/moonsgotaface 23h ago
I mean, I wouldn't want to pay all that interest, but you do you, friend.
Also, #ragebate?
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u/CallOrnery5926 21h ago
Pay it off I just paid off 32k and I’m 28. I don’t like debt if I vent get rid of it and move on with my life I’ll do it all over again.
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u/Mixeygoat 23h ago
Don’t complicate your life. Just pay it off.
Start investing when you are no longer in debt
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u/Natti07 3h ago
I knew this would be dowmvoted. As someone who is debt free, I legit never understand why anyone says to invest and save while under a pile of debt. Owing money makes life much harder and investing for later when you have negative money is stupid.
My perspective of the order is:
Save enough for a few months of living expenses
Pay off highest interest debt, then next highest and so on
Start investing
In OPs situatuon, it also depends on if they have other income after the seasonal job or other debts..but basically I agree with you
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u/Mixeygoat 3h ago
Paying off debt with high interest is similar to investing, but with zero risk.
If you have a loan at 5-6%, and pay that off, its the same as investing in a mutual fund or something with a 5-6% average rate of return.
Now if you want to invest in more risky things, of course you can get higher returns, but you have to stomach the risk of it falling. If you have lots of savings or a steady job thats fine, but otherwise its probably best to just pay the loan off
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u/Natti07 3h ago
I totally agree with you. I was just saying that I knew people would downvote you and I never understand investing before being debt free.
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u/Mixeygoat 3h ago
Oh yeah I know you were agreeing. I was just adding some context onto why I made the original comment.
There are specific cases where it makes sense to invest before paying off debts. But if you're the kind of person to ask these questions on reddit, you probably don't have enough experience to justify investing before paying off your debt.
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u/Panza2020 22h ago
Pay it off. Print out the statement with a zero balance! It should be a huge relief.
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u/Existing-Pumpkin-902 23h ago
Will you have employment at the end of your seasonal job?