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Student loans are back

December 15, 2009

I was anticipating this, but the official letter arrived yesterday:  It is time to resume repaying my student loans on 2/1/2010 at $122 a month.  They have been in deferment at 0% for the past year and a half while I was a half time student (subsidized Stafford).

You guys might think this is insane, but I realized I’m on the 20 year repayment plan.  I haven’t decided what I think about that.  On one hand, the rate is relatively low (4%) and I’m likely better off investing my money elsewhere.  Plus I’m eligible for the student loan interest tax deduction, at least while T is in school, bringing the rate down.  The rate will drop again after some number of consecutive payments.  And $122/mo really isn’t going to affect my life much.

On the other hand, really?  I’m going to be over 40 and paying student loans?   This is an emotional reaction, not a mathematical one.

I figure once the balance gets low, it will be tempting to just pay them off.   But for now, I think I should stick to my other plans and goals and pay them monthly as scheduled.  I have a lot of saving to do in the next couple years.  Or maybe round up to $150….

What do you think?

Anyway, until I find out about raises and such (performance review went well), this is the only new thing in my 2010 budget.

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20 Comments leave one →
  1. cuteellaisbold permalink
    December 15, 2009 9:00 am

    I’m paying the minimum on mine for the reason that until my income increases a bit more, things are REALLY tight. If/when I can, I throw some more money at them, but I’m working on an e-fund too so sometimes it’s tough to justify paying more when I have a 4% interest rate and it’s tax deductable.

  2. December 15, 2009 9:06 am

    I think you should pay $150 and maybe reevaluate to do more after you feel comfortable when some of your saving goals have been met. Also, I haven’t been to your site lately (just RSS feed) and I really like the new look! 🙂

    • December 15, 2009 10:42 pm

      thanks! I like it too, though I still have a few tweaks (progress bars, etc.)

  3. December 15, 2009 9:53 am

    I plan on paying just a little extra on mine until our incomes increase. It really depends on how much you have to throw at them each month and how it will impact your other goals.

  4. December 15, 2009 10:18 am

    My rate is 2.25% for 20 years – so I really don’t have a lot of incentive to pay it off!

    My plan is to pay minimum on it until I’m out of debt and have an E-fund fully funded.

    Then I’m (planning on) paying $200/month while saving towards other goals at higher interest rates than 2.25%.

    Since the rate is so low, I see absolutely no reason to pay it off early when I can easily invest the “extra” payment to get much higher returns.

  5. December 15, 2009 10:23 am

    Maybe you can stick to your other plans and monthly budget. Is there anything that you can cut a bit? If not, then maybe the student loan is where you can snowflake any extra money at the end of the month. 20 years is a long time, imagine the interest that is going to accumulate over that time?

  6. Kara permalink
    December 15, 2009 10:28 am

    Interest works in both ways. Extra thrown at the student loan that could be invested elsewhere accumulates over 20 years too. If you assume the average rate of return beats 4%, it is a better choice.

  7. December 15, 2009 10:34 am

    A few (maybe six?) months ago, I upped my student loan repayment by around $15 and it shaved 7 years ( if i remember correctly) of the amortization… HUGE.

    I would round up, but don’t go crazy until you reach some of your other goals.

    • December 15, 2009 10:06 pm

      I just did the same calculation and rounding up 15 dollars shaved 1.5 years off the loan!

      But I did find out that my actual loan is 10 years, not 20 – so that was helpful. 😉

  8. December 15, 2009 10:39 am

    You’re not alone! My loan was deferred for the last six months and I have to start making monthly payments again at the end of this month. I am only paying around $100/month though right now because I qualify for a government assistance program. I think I’m on a ten year plan? (I should really figure out the details of the loan someday… But the government almost tries to hide the info from you, like they can confuse you into overpayment or something.)

  9. Jill permalink
    December 15, 2009 10:46 am

    I’m with everyone who says pay a little extra. It never hurts, and it might even bring your payoff date forward, which could potentially ease the “40 year old with student loan” thing. Anyway, Good Luck!

  10. December 15, 2009 10:55 am

    Same here…interest is really low (2.3%) so I don’t have much of an incentive. I’d much rather save for retirement, or pay off my car loan. I imagine once 40 starts getting close I’ll get a bit more “excited” about paying it off though…

  11. December 15, 2009 11:35 am

    I’d up it to 150… it’s money you probably won’t miss, and every little bit helps!

  12. December 15, 2009 2:53 pm

    I agree with the rounding up crowd. If you’re not going to miss that extra money, why not shave down that debt a little more quickly?

  13. December 15, 2009 4:01 pm

    I went for the 20-year repayment as well because I didn’t get interested in PF until after I started paying them.

    My plan is to contribute a little bit extra each year, maybe around $1000, which doesn’t seem like a lot in comparison to everything else, but is a little less than a year of principle payments. This way it won’t affect day-to-day as much, but I’ll still get it paid of a little earlier.

    And hey – I’m not getting anywhere near the 4% interest I’m paying on the student loans!

  14. December 15, 2009 8:32 pm

    The number that bothered me was the amount of interest I was paying to Sallie every single day.

    For me, the only way I was every going to have that weight lifted was to obsessively pay it off.

  15. December 15, 2009 10:31 pm

    wow! Thanks for all the responses. I had already made my 2010 budget with $150/mo, so I think I’ll do that, at least for now. It does shave something like 5+ years off. Thanks for validating my plan!

    Will I miss the extra money? Well, I honestly would save it in another fund (I’m thinking car fund) and I would notice it at the end of the year. But still.

    @dog – I think that I’m paying interest of couple dollars a day — it adds up, but it doesn’t feel burdensome. Still, it is never a bad move to pay off a loan, even if there is a mathematically “better” move.

    @PA – same. consolidating my loans was my first pf move ever, and it was so confusing at the time.

  16. Stacey permalink
    December 16, 2009 8:24 am

    I’d round up to $150, then start agressively paying it off as your income grows. I’m 25 and paid off my loans last year – it feels GREAT and I don’t regret it. But I’ve always been very anti-debt, and it’s a very personal decision.

    Everyone talks about the tax deductions for student loans and mortgages. Do you really want to pay $100 in interest to save $15-$25 in taxes? The deductions are great if you’re steadily paying down the loan, but they should never be a reason to keep a loan around. 🙂 I don’t think you’re doing that, but I just wanted to throw that out there.

    • December 16, 2009 8:33 am

      The tax deductions are merely a factor to consider when evaluating the actual interest rate I’m paying. I actually am not eligible this year due to income, and once my fiance is out of grad school, we probably will again be ineligible. So it is a small factor.

      I don’t think I’d ever regret paying off my loans. But they are also one of my lowest priorities.

  17. February 27, 2010 3:18 pm

    When it comes to weddings, somebody is going to think you’re doing it wrong, no matter what you do.

    I think you have to choose your priorities and spend the most there. It is so easy to just look up and be 5 figures over budget if you aren’t really careful.

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