Monday, October 20, 2008

WWYD

So,

Cris and I are in a predicament. Cris's student loans are coming due in November. We have all but $500 saved up to pay them off in full. This is so great because besides our home, we would be COMPLETELY debt free. With the economy the way it is, we are wondering if it would be better to invest the large sum of money and make more than the monthly payment on our student loans, or pay the loans off in full.

WWYD?

6 comments:

Lindsey said...

what loan has the higher interest rate? If it was me, I would probably pay off the student loans first, and than you'll be able to focus more on the mortgage payment. It will also help you get any other funding in the future if you only have 1 large loan (the house). Just my thoughts!

Annie Atkin Rasmussen said...

I'm pretty sure I'd pay off the student loans, probably because I'm a wimp about investing. I guess in my mind, the loans would be paid of for sure but investments aren't always so sure.

SMILES2ALL said...

I would pay off the student loans first. Then just keep on saving money like you were for the student loans and put that into a savings account, or even into the house payment and pay your house off faster. let us all know what you decided to do.

Braydan and Jessica said...

I would just pay it all off, but you're the finance girl and I don't know anything really :)

Johns Family said...

Pay off the loan in full... it is better to be out of debt with the economy the way it is.. Cory and I just had an extra 1000 and we used it on our little debts and it is so nice to be almost completely debt free...but that is just me...I would pray about it too.

Lacey Rennemeyer said...

Callie,
I know you posted this a while ago, but I just read it, so sorry this advice is so late. I think you should consider a few things before you decide:
*What interest rate will you get on the student loan? I ask that because John and I had federal student loans, and the rate was so low to start with, plus they discount it if you do automatic withdrawal and make payments on time, etc. We literally have one right now that is 0.625% - even the 1% return you get on a savings account is better than that, so we aren't paying it off. Plus, making steady payments on a loan over time improves you credit score.
*Do you have an emergency savings account? Most people recommend saving 3-6 months of living expenses in case of a rainy day. I would save some for that before putting it all on a low rate student loan.
*Do you itemize your deductions on your tax return? Student loan interest paid goes on a tax return as an adjustment, which means it can reduce your AGI regardless of whether or not you itemize deductions. If you aren't able to itemize your deductions and take advantage of the mortgage interest deduction, you may be better off using the money to pay down your mortgage. Plus, if you look at an amortization schedule, paying even a few hundred extra dollars on your mortgage now can end up saving you thousands of dollars in interest in the end - much more than the interest you would save by paying off a low rate student loan.
Sorry, that was a really long explanation. I know everybody else recommended paying off the student loans, but there are a lot of other things you should consider besides just getting rid of the monthly payment. Good luck with whatever decision you make!

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