- April 27, 2024
- Posted by: legaleseblogger
- Category: Related News
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Situation Overview
After graduating college in May and starting a new career, I currently have $15,000 of student loan debt at 3.625% interest with a minimum payment of $116 a month. In an effort to pay off the debt quickly, I have been using all my extra income towards it. However, I am now questioning whether this is the best financial decision.
Considering my current financial situation and goals, I am unsure whether to continue aggressively paying off the student loans or to start saving for other financial milestones, such as purchasing a house.
Financial Details
My annual income is $70,000, expected to increase to $100,000 within the next 3 years due to the program I am in. I also have $6,500 in a 401k, $5,000 in a 9-month CD (which I consider my emergency fund), $2,000 in a savings account, and $1,000 in a checking account. After taxes, 401k contributions, and insurance, I take home $4,200 a month. I do not have any other debts.
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Please check the details to see how much interest you actually have to pay annually. For instance, my mortgage is at 2.65%. If I buy treasury bills, I can get 5% interest.
So I would just keep the mortgage payment.
That interest rate is less than half the historic average market return. I’d pay the minimum and focus on saving. Once you’ve got your employer match, a six month emergency fund (not tied up, you know it should be liquid), and a maxed out Roth IRA you can throw extra at the student loans if you want.
I wouldn’t wait on maxing out a Roth over a sub-4% interest rate loan. The sooner you get money growing in a Roth the better.
I have loans at a similar interest rate. I spent the last two years saving aggressively so that I could completely pay them off. Due to current interest rates I haven’t paid them off yet. All that money is in a brokerage account rolling Treasury bills at ~5.3%. I still have the loans, but they’re budget neutral since I just make my monthly payment from that brokerage account. If interest rates ever fall, I can just pay them in full and be done, but right I’ll continue to collect that free interest.
Pay it off, pay down any car payments, then save for a house DP
You can have a great income but if your debt to income ratio is high it won’t assist you get a home loan.
Gaining the discipline to save and be aware of your spending is important.
start saving, do the bare minimum on the loans.
Pay it off. The faster you pay it off, the faster *all* your money can work for you.
Pay off the damn loans, finish them off asap and for good
Pretty much any high yield savings account will pay you 4.5% interest. You literally make more just holding onto your money.
Pay the minimum and start saving.
It only makes sense to proprieties your loans when the interest rate is higher than just having cash.
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