student loans

vlagrl29

I posted a couple months back about the income sensitive payments, not sure which way to go with my repayment options.  I have since decided just to stay on the graduated payment plan I've been on.  In the last 3 months I've been putting a little bit more on the payment so it goes to principal.  Now I just need to come up with a timeline of how/when I want to pay them off.  It's 35k with 2.8 fixed interest rate.  Right now I've been dividing our extra income into 3 - savings, my business, and retirement.  If I want to get this thing paid off even sooner I need to skimp on one of those things.  I'm thinking retirement and I know you guys would kill me for thinking about it - I need to you talk me off the edge.  I was looking at my IRA portfolio and currently have about $180k and have made a return of 38% in profits from my stocks I own.  I was thinking of withdrawing the profit and put it towards my debt, like maybe 10k but then I realized I'm nuts for thinking that right?

Student loans are our only debt for which I should be grateful for but it's our only thing keeping us from being "debt free".  How did you guys come up with your plans to pay them off.

formerlyGDaisy09

It sounds like you come out more ahead keeping the money in retirement rather than using it to pay down something with 2.8% interest...

Xstatic3333

Step away from the online trading site! Put down the mouse!

Awesome job on your retirement! I think we're around the same age, and let's just say you're schooling me. I would not withdraw from a retirement account for anything less than a life-or-death emergency. I could, however, justify dialing back contributions to crush your SL quicker if it's bugging you. That said, H's loans are the same rate as yours, and we don't plan to pay them off early unless some crazy windfall allowed us to pay off our house first (not likely!)

lifeonthehill

DON"T TOUCH THAT RETIREMENT!

I think maybe taking down the retirement contributions if you are doing more than 15% would be fine.

We just decided that we would throw every penny at the debt. We didn't contribute to retirement at all when we started. How quickly do you think you could pay it off at the rate you are going? Is there anything else in the budget you can cut?

Progress is progress. Even if it is slow.

vlagrl29

I stepped away - I always have a weak moment when I think about how easy it could be to pay it off with retirement.  Don't worry I won't do it.  I can't believe I even thought about it.

I can't take credit for all my retirement because most of it is from my first husbands 401k from when he passed away.  Right before the 2008 crash I put it all in a safe bond and didn't loose much money.  It stayed there for a few years and it's taken me awhile but I have slowly reinvested the cash I had in the bond.  Since reinvesting I've made about 20k in the last 2 years.  Honestly we aren't contributing much to retirement now - not even 10% because we were trying to pay off credit card debt and get a emergency fund in place.  So I wasn't even contributing for awhile (don't kill me) but I think I did well with the reinvestments and the money I made in profits.

I've messed with some calculators on student loan pay off and it looks like 15 years will be the payoff date going with our current schedule.  Being self employed our income is different at different times of the year so right now is our slow time.  Come spring I can probably put even more into it.  I need to talk to DH about it.

hoffse

Your student loan interest rate is so crazy low I wouldn't pay any of it off early.  That's a prime debt-leveraging opportunity right there.  Yes, debt leveraging means you stay "in debt" for a longer period of time than if you paid that debt off.  But because you are able to grow your wealth with your other income, you have more cash to draw on in an emergency (or for other things) when you debt-leverage correctly.  

IIRC you have said that the payments are also just not a big deal for your income levels.  If that's the case, I would treat it as one of those recurring payments that are annoying but entirely manageable (electric bill comes to mind).  I think the debt paydown thing needs to get serious when the debt is high interest (credit cards) or the sheer amount of money going out the door each month is breathtaking and potentially unsustainable if something really bad happened (my situation to a small degree... which is why we will start a debt snowball once H's car is paid off in 2016).  You are facing neither problem, so I would keep paying minimums on the student loan.  If you ever encountered some reason why you had to pay it off in a single go, you have the assets to do so.

Xstatic3333

Hey, we all have these moments of temptation! I remember being similarly talked down about a year ago when I wanted to use some of mine for a DP. Glad you're back from the ledge

vlagrl29

hoffse said:

Your student loan interest rate is so crazy low I wouldn't pay any of it off early.  That's a prime debt-leveraging opportunity right there.  Yes, debt leveraging means you stay "in debt" for a longer period of time than if you paid that debt off.  But because you are able to grow your wealth with your other income, you have more cash to draw on in an emergency (or for other things) when you debt-leverage correctly.  

IIRC you have said that the payments are also just not a big deal for your income levels.  If that's the case, I would treat it as one of those recurring payments that are annoying but entirely manageable (electric bill comes to mind).  I think the debt paydown thing needs to get serious when the debt is high interest (credit cards) or the sheer amount of money going out the door each month is breathtaking and potentially unsustainable if something really bad happened (my situation to a small degree... which is why we will start a debt snowball once H's car is paid off in 2016).  You are facing neither problem, so I would keep paying minimums on the student loan.  If you ever encountered some reason why you had to pay it off in a single go, you have the assets to do so.

That all sounds like something my dh and CPA would say. I had presented the idea to our CPA a few years ago and he talked me out of it as well. Obviously not the first time I have thought about it.

Wulfgar

My federal student loans are in the 1.65%, 20 year pay-off position so I am in a similar boat as you.  There is no reason for me to pay these off early or my private loan at 3% since the total $230 a month in payments will not make too big of a dent in my family's budget.

It is MW's student loans that we are trying to be more aggressive with since they are much higher.  Her undergrad is roughly 4.5% and her grad loans are roughly 7%.  We also have other more critical home repairs that have to be done.

Currently with how well the stock market is doing, using any retirement for anything else is just not smart financially.

Sisugal

Do NOT touch your retirement funds!
Take a hard look at your monthly budget and see where you can tweak it and add those savings to your SL payments. (eating out? entertainment? clothes? vacations? groceries? cars? gifts? cell phones? internet? cable?  ) cutting a small amount from several places will add up.

brij2006

Definitely don't touch the retirement.  Just leave that there and let it work.

I don't know your full stance on getting out of debt, but it sounds like you're ready to just have these gone.  So I'm going to advise in that direction.  Even though the interest rate is low.  

What would it look like if you were to only have your Efund at $1k (applied the remainder toward the SL), stopped retirement contributions, and buckled down on your monthly budget?  How would it look if you applied all of that toward the student loans and focused solely on getting those gone?  Including any extra money?

I would definitely put that into a snowball calculator and see how quickly you can get them gone by buckling down and focusing solely on 1 thing to keep you motivated.  Rather than splitting it between extra payments, retirement, and savings.  

One thing that I will mention, if this will take you 1-2 years, just think of how much faster you can get your efund fully built and increase to 15% retirement contribution, when you don't have that student loan payment.  

vlagrl29

brij2006 said:

Definitely don't touch the retirement.  Just leave that there and let it work.

I don't know your full stance on getting out of debt, but it sounds like you're ready to just have these gone.  So I'm going to advise in that direction.  Even though the interest rate is low.  

What would it look like if you were to only have your Efund at $1k (applied the remainder toward the SL), stopped retirement contributions, and buckled down on your monthly budget?  How would it look if you applied all of that toward the student loans and focused solely on getting those gone?  Including any extra money?

I would definitely put that into a snowball calculator and see how quickly you can get them gone by buckling down and focusing solely on 1 thing to keep you motivated.  Rather than splitting it between extra payments, retirement, and savings.  

One thing that I will mention, if this will take you 1-2 years, just think of how much faster you can get your efund fully built and increase to 15% retirement contribution, when you don't have that student loan payment.  

I've always been nervous to have only 1k in an e fund considering we got it to 6k earlier in the year and had already had to use 1500 this year and are down to 4500 and I want it to get back to 6k and ideally 10k is my ultimate goal, but it's so hard for me to prioritize what is most important.

I would have to play around with figures and see if we could get it paid off in 2 years.  That would be awesome.  Currently my previous mindset has been to get a fully funded efund, then contribute to retirement more.  Since we had to use some of that e fund this year I was still contributing to retirement and repaying the savings.  Also, we will be TTC towards the end of next year so I need to think about that as well.  Luckily our insurance is awesome on the ACA and the most we will pay is $4500 to have baby next time.

kyrgyzstan

vlagrl29 said:

brij2006 said:

Definitely don't touch the retirement.  Just leave that there and let it work.

I don't know your full stance on getting out of debt, but it sounds like you're ready to just have these gone.  So I'm going to advise in that direction.  Even though the interest rate is low.  

What would it look like if you were to only have your Efund at $1k (applied the remainder toward the SL), stopped retirement contributions, and buckled down on your monthly budget?  How would it look if you applied all of that toward the student loans and focused solely on getting those gone?  Including any extra money?

I would definitely put that into a snowball calculator and see how quickly you can get them gone by buckling down and focusing solely on 1 thing to keep you motivated.  Rather than splitting it between extra payments, retirement, and savings.  

One thing that I will mention, if this will take you 1-2 years, just think of how much faster you can get your efund fully built and increase to 15% retirement contribution, when you don't have that student loan payment.  

I've always been nervous to have only 1k in an e fund considering we got it to 6k earlier in the year and had already had to use 1500 this year and are down to 4500 and I want it to get back to 6k and ideally 10k is my ultimate goal, but it's so hard for me to prioritize what is most important.

I would have to play around with figures and see if we could get it paid off in 2 years.  That would be awesome.  Currently my previous mindset has been to get a fully funded efund, then contribute to retirement more.  Since we had to use some of that e fund this year I was still contributing to retirement and repaying the savings.  Also, we will be TTC towards the end of next year so I need to think about that as well.  Luckily our insurance is awesome on the ACA and the most we will pay is $4500 to have baby next time.

Thanks Obama!

vlagrl29

kyrgyzstan said:

vlagrl29 said:

brij2006 said:

Definitely don't touch the retirement.  Just leave that there and let it work.

I don't know your full stance on getting out of debt, but it sounds like you're ready to just have these gone.  So I'm going to advise in that direction.  Even though the interest rate is low.  

What would it look like if you were to only have your Efund at $1k (applied the remainder toward the SL), stopped retirement contributions, and buckled down on your monthly budget?  How would it look if you applied all of that toward the student loans and focused solely on getting those gone?  Including any extra money?

I would definitely put that into a snowball calculator and see how quickly you can get them gone by buckling down and focusing solely on 1 thing to keep you motivated.  Rather than splitting it between extra payments, retirement, and savings.  

One thing that I will mention, if this will take you 1-2 years, just think of how much faster you can get your efund fully built and increase to 15% retirement contribution, when you don't have that student loan payment.  

I've always been nervous to have only 1k in an e fund considering we got it to 6k earlier in the year and had already had to use 1500 this year and are down to 4500 and I want it to get back to 6k and ideally 10k is my ultimate goal, but it's so hard for me to prioritize what is most important.

I would have to play around with figures and see if we could get it paid off in 2 years.  That would be awesome.  Currently my previous mindset has been to get a fully funded efund, then contribute to retirement more.  Since we had to use some of that e fund this year I was still contributing to retirement and repaying the savings.  Also, we will be TTC towards the end of next year so I need to think about that as well.  Luckily our insurance is awesome on the ACA and the most we will pay is $4500 to have baby next time.

Thanks Obama!

Yes….it is great!  All those horror stories I fed into really didn't apply to us.  I'm starting to see how Universal health care would be great.