Student Loans / Debt Payoff

[je55]

I was looking at my student loan statement today, and the interest rate made me a bit queasy - 6.125%!

Knowing that every other bit of debt we have (mortgage and cars) is below 4%, I feel like we should be working hard to chip away at the loans.

What are your thoughts, MM?

SL: $14,500 @ 6.125%
Cars: $16,500 @ 3.9% (this is for two new to us cars)

Only other debt is mortgage.

EFund is 15K. I am tempted to take a chunk of it and throw it at the student loans. It makes me feel sick that we paid $900+ in SL interest last year, and made about $100 in interest on our EFund.

Jobs are stable, etc.

[cahabalily]

If it makes you feel better, the student loan interest is a tax write-off....

Also, my SL are at 6.8%.... I'm still in school so they aren't accruing interest yet, but they will.

And to answer your question, I need more info - what is your monthly net pay, how much/any 'extra' is there in your budget?

[Roc A Bee]

How much do you add to savings each month?

[je55]

Sorry for the delay . . . We net just over 6k / month during two paycheck months (after insurance, 401k, etc.)

Expenses are as follows:
Mortgage: $1795
Gas: $680 (a lot of this is reimbursed by H's company)
Cars: $500 (min payments, two cars, five years, 3.9%)
Groceries: $300
Utilities (water, gas, electric for 3/1/1 home): $250
Restaurants: $225
Student Loans: $200 (min payment, 6.125%, often throw bonus / commission checks at these loans, so way ahead on payments)
Cell Phones: $195
Cable / Internet: $155
Entertainment (includes Netflix, booze, any $ spent on non-necessities during the month): $150
Car Insurance: $130 (pay yearly, this is what we save per month for yearly bill)
Shopping (household items, pet stuff, gifts, etc.): $125
Everything Else: $100

We usually put around $1,200 into savings each month. I would love to say that we were more dedicated to holding onto this, but a lot ends up getting spent on vacations or trips to visit family.

Can't wait to get your thoughts!

[nygalinpa]

Why not just pay more per month? It seems like you have the room in your budget to do that given how much you put into savings.

[Susie]

Looking at your budget, I'd say once you get yourself to $18k in savings (3 month e-fund) I'd start putting that $1200/mo. toward the SL instead of savings. But I would not necessarily clean out savings to pay off the SL.

May 13, 2012 14:39:18 GMT -5 cahabalily said:

If it makes you feel better, the student loan interest is a tax write-off....

Not for everybody. There's an income cap.

[pamela]

There is a very low income cap for writing off SL interest and at $6k/ month net you may be close to it. I'd be throwing at least an extra $600 a month towards them until you meet your savings goal and then the full $1200.

[je55]

With commissions and bonuses, we will be flirting with the AGI where the interest deduction is "reduced because of phaseout."

www.irs.gov/publications/p970/ch04.html#en_US_2011_publink1000178272

Hopefully this info helps someone else out there!

[Roc A Bee]

I think you have plenty in your efund. I would make a vacation line in your budget for those expenses. Depending on how you are doing for retirement, I would throw an extra $800 at the student loans, so a total of $1000 a month and get those out of the way.

[cahabalily]

May 14, 2012 9:26:19 GMT -5 @littlemoxie said:

May 13, 2012 14:39:18 GMT -5 cahabalily said:

If it makes you feel better, the student loan interest is a tax write-off.... Also, my SL are at 6.8%.... I'm still in school so they aren't accruing interest yet, but they will.

And to answer your question, I need more info - what is your monthly net pay, how much/any 'extra' is there in your budget?

Not always. There is a maximum income cut off, not sure where it is exactly, though.

Didn't know that! We're not anywhere close to it, so it's never been an issue.... I guess that's even more incentive to get ours paid off before I graduate, because my salary will more than triple at that point.

[Deleted]

May 13, 2012 14:39:18 GMT -5 cahabalily said:

If it makes you feel better, the student loan interest is a tax write-off....

Not necessarily. Once you reach a certain income level, you can no longer write them off. Also, while this doesn't apply to the OP, but you can only write off a max of $2,500 a year (and the amt of how much depends again on your income level).

So knowing nothing about OP, you can't make a blanket statement that the interest will, in fact, be a deduction.

www.irs.gov/publications/p17/ch19.html

ETA- and I should read the other responses first