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20k in Student Debt/30k in Bank

M

mikegg

Platinum Member
I got 20k in student debt left. I have 30k in the bank. No car debt or mortgage.

Should I pay off the entire 20k immediately or should I pay month to month for the next 3 years?
 
Student loan rate is usually ridiculously low.

I have 7K left over, I was tempted to just pay it off since it's annoying. I called up and the rate was 2.7%~ LOL.

That's LESS than the inflation.
 
Yeah, my student loan is at like 2.5%...no urgency to pay it off (though I probably will once my wife's car is done).
 
Unless you are getting a higher return on those funds than the interest rate on your loan, pay it off.

KT
 
Don't take it the wrong way but not knowing the interest rate on a $20K loan makes you sound very financially illiterate.

I am not surprised however, since basic finance 101 is no where to be found at the high school or college level (unless you are in that field of study).
 
KeithTalent said:
Unless you are getting a higher return on those funds than the interest rate on your loan, pay it off.

KT
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What if the op has 5k in monthly expenses and is at risk for losing his job? We need more information about the op's finances to provide useful advise.
 
the DRIZZLE said:
What if the op has 5k in monthly expenses and is at risk for losing his job? We need more information about the op's finances to provide useful advise.
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Well he certainly made it sound like the money was not required for day-to-day living, but who knows.

KT
 
Hold back an emergency fund and put the rest on the loan. If you budgeted correctly, in a few months/years you'll be able to knock out the rest. If your situation isn't as comfy in the future, you will still have a reserve.
 
this totally depends.

if you are on like some subsidized stafford loan at 2-3% it might be worth keeping. if its some private loan at 7-10% then uh pay it.



in the end you have to think, yes you have $30k cash. if you have a $20k loan, well think about it this way.

if you need any money over the course of that loan from a bank can you get money for that purpose at a lower rate than the student loan.

like say you need a used car. used car loans are about 5%. if you pay off the student loan then need to buy a car next year and borrow $15k @ 5% then well you just lost. instead you could pay for that car in cash and keep debt on the loan at a lower percent.


cheap credit that is subsidized is not necessarily something you should give up unless you are stupid with money and would spend the cash on other crap just because you have an itch to waste money when you have it. and well that happens to lots of americans.
 
also depends on the payment. i owe like $16k in student loans but its consolidated at 2% rate and my payment is $180/month which is nothing really. i could have paid it off in a big chunk but instead used the money for other things like down payment on a house, down payment on a car, etc.

if your payments are like $500/month and it's kind of hurting you to have to pay it, then maybe paying it off will give you some breathing room. but if it's low and not really holding you back, i say pay it off monthly.
 
senttoschool said:
I got 20k in student debt left. I have 30k in the bank. No car debt or mortgage.

Should I pay off the entire 20k immediately or should I pay month to month for the next 3 years?
Click to expand...

This isn't cut and dry. What kind of return are you getting on the cash, and what is the rate on the loan? Do you need a cash cushion right now or in the near future?

I know the adage is to pay it off if you're not getting better returns than the rate, but it really depends if you want to have a certain amount of cash on hand for whatever reason. Maybe you anticipate needing a down payment. Or, in my case, we just had a baby and racked up some CC debt since my wife and I both took a chunk of time off. Now I'm letting that balance ride a bit because I want to rebuild my cash cushion just in case something should happen. In fact, the reason the CC debt exists is because I didn't want to burn through cash while we were on parental leave.

So basically, it depends on your situation and your goals. I'm not big on carrying debt, especially not revolving debt like I have now, but the circumstances warranted an exception. They may for you (or not).
 
How about finding out the percentage rate, monthly payment, monthly income/expenses?

You gave minimal info for your question.
 
senttoschool said:
I got 20k in student debt left. I have 30k in the bank. No car debt or mortgage.

Should I pay off the entire 20k immediately or should I pay month to month for the next 3 years?
Click to expand...

duh.. the answer is obvious...

use the 30k to Short APPLE! It's the next blackberry
 
I'm in the same position. Wife and I have about $36k left. I could pay it all off by the end of next year. I keep going back and forth on whether to do that, or just keep a comfortable emergency fund.
 
Zeze said:
Student loan rate is usually ridiculously low.

I have 7K left over, I was tempted to just pay it off since it's annoying. I called up and the rate was 2.7%~ LOL.

That's LESS than the inflation.
Click to expand...

lol you're actually safer holding that debt than paying it off as long as it's below inflation you're technically still making money right?
 
OP needs to find out what his interest rate is. I don't see how you could not know that. That's like going to a job and not knowing how much you're being paid.

If you have a stable job, then I say pay it off. You'll avoid paying uneccesary interest, and you can rebuild you savings faster by not having a studant loan bill every month.
 
Kill it with fire. I would love to be in the position to do that. Just end it now . You never know what will happen next. You can avoid that never ending cycle of payments.
 
Depends on the interest rate, your income (for tax deduction purposes), job stability, and your desire to have it paid off. Let's say it is a flat 5%. That's $1000 interest this year. If you aren't over the income limit, you can write that off, so it might actually cost you $700 or so. It will shrink each year. Calculator for a 10 year span shows about $5500 in interest. After taxes, maybe $4000. Over 120 months that's $35 a month to keep your savings vs. paying it off. Sound worthwhile?
 
Zeze said:
Student loan rate is usually ridiculously low.

I have 7K left over, I was tempted to just pay it off since it's annoying. I called up and the rate was 2.7%~ LOL.

That's LESS than the inflation.
Click to expand...

Mine is at 6.5% 🙁 Sucks. I'm paying it off as fast as I can while still leaving a little bit in the bank. Aiming to be done by Christmas.
 
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