Pay off student loans?

[hbomdiggity]

I have 2 remaining student loans with a total outstanding principal of $15,500:
#1 $6,882 at 4.12% expected pay off 2/25
#2: $8,618 at 3.5% paid off 11/29
Total monthly payment is $337

In 2021, I paid $668 total in interest (roughly the same for each). I am not able to deduct interest due to income.

I believe this is our highest interest debt. Mortgage is at 3.25%, cars are 2% and 0%.

The monthly payment is not a hardship and at this point I’m not interested in re-financing to save a few pennies. The interest is annoying and as anyone with student loan debt - esp starting in the six figures - knows, the day these will be paid off with be cause for celebration.

[sandandsea]

Yes I would pay them off asap. I am a fan of getting rid of as much debt and recurring monthly payments as possible.

[gt7301b]

I would pay them off just to be done with them.

[simpsongal]

Hmmm, I used to be team pay off, but I have about $20K left (started w/$160K) and I refinanced them to a low interest rate (2.5%) on a 5-year payment schedule last year. I'm just used to them and the interest rate is way lower than any of rate I could get on a mortgage or a HELOC - it's basically like a free loan in a high inflation environment. My payment is $400/mo. I'm sure we could chunk it off, but I have other goals right now re: renovations and vacations. If it were like $10K or less, maybe? IDK.... if we need to finance a car in the future, we might try to pay them off in anticipation of that new payment. It's a balance.

In your case, I would snowball the high interest rate loan and pay it off in chunks. Or refinance both loans into a low 5 yr fixed rate and take the low interest loan. There's no downside to a refi, unless you think you can get these paid in less than a year (in which case the interest saving probably isn't worth your time).

[sometimesrunner]

Are these public or private loans? I don't think I would pay off more student loan debt than I had to right now just in case Biden makes a move on them.

[Susie]

IDK.  I guess it depends on what else you could or would do with the money if you didn't pay them off. 

I have around $39k left, from an original $140k, and I've totally lost my appetite for paying it off beyond the monthly auto-debits.  It's spread over 3 loans, $3820 at 2.07%, $17,805 at 2.625%, and $17,479 at 4.24%.  H is in a similar position, with about $41k left from an original $120k, at similar rates.  Between us we have 7 loans, 4 of which have balances in the $3-6k zone each.  So easy to pay off.  But... if I'm not going to pay them all off, where's the satisfaction in going from 7 loans to 6, or 5, or 4?  I have zero motivation.  Absolutely any other thing I could do with the money would be more rewarding.

[midwestmama]

hbomdiggity, DH and I are in a similar situation. We have about $22K left to pay of his student loan, interest rate is 3.625% and monthly payment is $293. The monthly payment isn't a hardship, and we aren't able to deduct SL interest either due to income.

We use bonuses to fund big purchases/payoffs/trips, but paying off his SL has not been a priority compared to other items. (For example, this year we want to use bonus money to pay down the mortgage a bit and also do some home improvements (e.g., some landscaping, a couple new exterior doors, maybe new countertops in two bathrooms).) Once the balance gets to around $10K (in about 3-4 years), then I think we'll just pay it off to be done with it.

[chpmnk1015]

I would...even if it's just to be able to take the money each month for something else
. Or maybe one then snowball to the other..

[hbomdiggity]

Jan 26, 2022 10:15:21 GMT -5 sometimesrunner said:

Are these public or private loans? I don't think I would pay off more student loan debt than I had to right now just in case Biden makes a move on them.

#1 is a refinance of a private loan
#2 is a federal consolidation loan (my oldest loan, back when that was a thing)

I have a hard time thinking any Biden relief would apply to me, but admit I have done zero research on what is being discussed.

[hbomdiggity]

We don’t really have any firm plans for what we could do with the money. We are considering some potential landscaping/deck upgrades in the next year or two. Longer term we plan to buy a 2nd home.

[ellipses84]

I’d “snowball” to pay the minimum on the lower interest federal loan and put some extra towards the principal of the higher interest private loan.

Student loan reform / forgiveness was a part of Biden’s campaign agenda. So far this has been a waiver for the PSLF program to allow a lot of repayment to those in public service who were denied before I.e. If you worked in public service and paid loans for 10 years but weren’t eligible because you had the wrong type of payment plan, they are now being forgiven. This applies to educators, non-profit, gov’t, medical, etc. employees so it’s worth trying if you are in these fields. It’s for direct federal loans (with ways to consolidate non-direct gov’t loans). I do think there could be more forgiveness, especially if Ds do well in midterms, but I think private loans will be the last priority so it’s probably unlikely for those. There’s was talk of a blanket amount, like $10k to everyone, so I think it could be worth waiting a year to see how things go before you pay off everything.

[goldengirlz]

Give the high interest rate, I’d be tempted to just pay them off.

That said, we’re not paying off H’s student loans early because it’s the kind of debt that would be discharged if anything were to happen to him. I’d rather use the money for things that benefit both of us. But he has about six figures in loans left so it’s a lot more money. When we get down to the $15-20k mark, maybe we’ll knock them out then to be done with them.

[sadlebred]

I'd pay them off. I doubt the $10,000 will apply to any sort of private loan. Or at least pay off the private loan.

[hbomdiggity]

Jan 27, 2022 14:32:35 GMT -5 @meepmeep said:

This might be a Captain Obvious question, but do you have $15K in cash sitting around to pay them off? If you have the cash and it's just sitting in savings earning very little interest and not earmarked for any near-term goal, then it absolutely makes sense to pay them off. But, if you would have to pull the cash from an investment or emergency fund or even a save-to-spend account for a nearer term goal (house renos, etc.), then I wouldn't.

This is a good question. I def wouldn’t sell anything to pay them off. I will get a bonus in a few months that could pay off at least one, so I was thinking more along those lines.

[midwestmama]

Jan 27, 2022 14:32:35 GMT -5 @meepmeep said:

This might be a Captain Obvious question, but do you have $15K in cash sitting around to pay them off? If you have the cash and it's just sitting in savings earning very little interest and not earmarked for any near-term goal, then it absolutely makes sense to pay them off. But, if you would have to pull the cash from an investment or emergency fund or even a save-to-spend account for a nearer term goal (house renos, etc.), then I wouldn't.

Thank you, @meepmeep, your Captain Obvious question made me think more about this!  Last month we sold DH's truck and have that money sitting in our money market account.  We were going to use it to pay most of the new truck he just bought, but we decided instead to finance it with a 0% interest rate.  So now DH's SLs have the highest interest rate, and we're paying more in SL interest in a couple months than we would get in a year with letting the money earn interest in our account.

I talked with DH this morning about paying off his SL now, and he is on board.  He's going to call this morning to pay it off!  So with that, our only debt will be the mortgage and DH's truck.  And we'll get almost $300 back each month by not having that payment. 

I'm so happy this board helps me really think through things from an MM perspective!

[simpsongal]

Nice midwestmama

The comments re: savings are so true - I got our 1099 interest statement from one of our savings accounts and it was a whopping $30. LOL.