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Try to pay off student loans? Or just keep paying minimum?

VolatileAgent3 59 22 February 21, 2016 at 06:35 PM
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So I have like 200K in students loans (undergrad + grad school Mad)

Right now just much paying minimum. I'm paying like $2k each month.

Should I try to pay them off? Or just keep paying minimum, use my money for other things like investments or retirement?

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#2
List out your income and expenses
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#3
Listen to the Total Money Makeover. It's on Youtube: https://www.youtube.com/watch?v=FPB14zFlRbI
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#4
Quote from MCeatalot View Post :
Listen to the Total Money Makeover. It's on Youtube: https://www.youtube.com/watch?v=FPB14zFlRbI

Lemme boil that down. I often listen to DR on the radio but his advice is far from sage:

If you have debt, live in a cardboard box if you have to to pay it down ASAP.

Oh yeah, ahead of that is an emergency fund, but you do absolutely zero in your life (including investing, retirement, etc) before you pay off the debt.

Wow what a revelation - to "get out of debt" you just pay it off!
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#5
What is the interest rate? Fixed or floating? What is your overall debt load? Where do you plan on investing? What is the expected return on that investment?

I HOPE you are pulling in a very substantial income with that kind of debt load. I would suggest living modestly (but not like a pauper) until you pay that debt off (or at least anything with an interest rate over 4%). I'd first build up an emergency fund (6-12 months of expenses), then set up auto-pay to investment accounts (don't just do stock, bonds, etc---think hard assets like real estate, etc.), set a reasonable budge and try to accelerate payments on high interest or floating interest rate debt.

Personally, i'm pretty debt adverse. I came out of school with a decent amount of student debt (but nowhere near yours). First thing i did was pay off my private debt because it was an adjustable interest rate and it was the highest rate. All that remains now is my consolidated gov't debt. I could pay it off now, but at 2.5% interest, i get a better return investing those dollars.

In the end: You need to enjoy your life. You need to minimize debt. You need to invest for the future. There's a balance somewhere. You worked hard for your money, just don't waste it.
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#6
pretty soon we will have a bailout. pay the minimum.
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#7
Quote from VolatileAgent3 View Post :
So I have like 200K in students loans (undergrad + grad school Mad)

Right now just much paying minimum. I'm paying like $2k each month.

Should I try to pay them off? Or just keep paying minimum, use my money for other things like investments or retirement?
What are the balance and interest rate on each loan? Private or not?

What is your income and expenses? Other debt? Where do you live?

Do you have a 401k match at work? Are you utilizing it?

In general, yes, you should try to pay off your loans. You agreed to do that when you took them out. That said, the order in which you pay them back, or how quickly, depends on the answers to my other questions. If you're missing out on a 401k match at work, for instance, I'd say you probably want to take advantage of that before aggressively paying off the student loans. Of course, if the loans are at some crazy interest rate, paying them off as soon as possible is the best course of action, regardless of what else is going on. You may also want to consider consolidating some or all of the loans to get a better rate and/or make the payments more manageable.
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Marshall: Have the rest of you guys figured out by now that mmathis is the smartest guy on SlickDeals?
#8
wrong thread
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Last edited by politicaljunkie February 23, 2016 at 07:55 AM

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#9
What degree did you get for $200k?
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#10
Quote from 8mpg View Post :
What degree did you get for $200k?
accounting, most likely.
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#11
Quote from mmathis View Post :
What are the balance and interest rate on each loan? Private or not?

What is your income and expenses? Other debt? Where do you live?

Do you have a 401k match at work? Are you utilizing it?

In general, yes, you should try to pay off your loans. You agreed to do that when you took them out. That said, the order in which you pay them back, or how quickly, depends on the answers to my other questions. If you're missing out on a 401k match at work, for instance, I'd say you probably want to take advantage of that before aggressively paying off the student loans. Of course, if the loans are at some crazy interest rate, paying them off as soon as possible is the best course of action, regardless of what else is going on. You may also want to consider consolidating some or all of the loans to get a better rate and/or make the payments more manageable.
I was trying to point out the irony of DR in my post. According to his "baby steps" you invest absolutely $0 until the debt is paid off (except perhaps mortgage). There is no rationalization of interest rates. He would literally advocate paying off a 1% loan before putting any $$ into a guaranteed 5% return investment. Why? The "baby steps [daveramsey.com]".
It's the equivalent of finance for the brain dead. Investing isn't until step 4. Nevermind if you blow 10 years of returns living on cardboard to pay down a 1.5% car loan or something, you MUST follow the steps.
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#12
Quote from Dr. J View Post :
I was trying to point out the irony of DR in my post. According to his "baby steps" you invest absolutely $0 until the debt is paid off (except perhaps mortgage). There is no rationalization of interest rates. He would literally advocate paying off a 1% loan before putting any $$ into a guaranteed 5% return investment. Why? The "baby steps [daveramsey.com]".
It's the equivalent of finance for the brain dead. Investing isn't until step 4. Nevermind if you blow 10 years of returns living on cardboard to pay down a 1.5% car loan or something, you MUST follow the steps.
Nowhere did I suggest that he pay off a 1.5% loan before investing. In fact, I implied the opposite. Every person's circumstances are unique and none of us can give truly informed advice without knowing at least some specifics.

Dave Ramsey's advice applies to people who generally can't handle credit - and for those people, it probably does make sense to pay off every penny of debt before investing. For those of us can use credit wisely, the "baby steps" method sounds like a waste. Neither is the wrong approach for all people - or the right approach for all people.
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#13
May I know how much you're earning now
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#14
Quote from mmathis View Post :
Nowhere did I suggest that he pay off a 1.5% loan before investing. In fact, I implied the opposite. Every person's circumstances are unique and none of us can give truly informed advice without knowing at least some specifics.

Dave Ramsey's advice applies to people who generally can't handle credit - and for those people, it probably does make sense to pay off every penny of debt before investing. For those of us can use credit wisely, the "baby steps" method sounds like a waste. Neither is the wrong approach for all people - or the right approach for all people.

My point was, DR is not a financial advisor nor is his advice sage. Want to get out of debt? PAY IT OFF. Wow what a revelation.
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#15
Quote from Dr. J View Post :
My point was, DR is not a financial advisor nor is his advice sage. Want to get out of debt? PAY IT OFF. Wow what a revelation.
People aggressively pay off debt can do it in short amount of time. There is no guarantee of certain percentage investment return in short period of time. There is no risk and no question about the debt one has to pay off, especially with the student loan, but there are always risks in investments. It is naive to compare the two without taking risks into consideration.

Dave kept saying the philosophy from his program is common sense and yet people ask questions about this like the OP which makes the common sense marketable. You are criticizing Dave simply because you can't grasp the opportunities out there from people who lack of common sense. That's the definition of sour grapes.
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