Financial Advice--Keep our Savings or PAY OFF OUR LOANS!

[bisous]

DH wants to pay off our student loans. DH graduated 13.5 years ago from art school with a whopping 170K in debt. Today we've got the money in the bank to pay off the remaining 42K. We have about 60K in our savings. We've not always been so fortunate and just a few years ago, we had almost 15K in credit card debt instead! We've been working hard and savings a lot (and have benefitted from the COVID relief bills).

*I* think we should keep it as savings. My biggest motivation is to let it grow/remain and when real estate costs drop, we can finally buy a house! DH just wants the debt GONE. I can certainly see where he is coming from. Our student loan debt is not at those super low levels that some people were lucky enough to secure. Our remaining loans are at 6.8%. Still, my big fear is that we'll lose our current housing where we have crazy low rent (1200 per month!). If we were to find "comparable" housing somewhere it might be (no joke) 2-3 times what we're paying right now. So my motivation is to sit at the ready for needing to purchase a home.

My primary motivation is to enable a home purchase in this area. This feels like the insurmountable obstacle. We also only have one (14yo) car right now. DH's job has been relatively secure despite the pandemic. My much lower paying job is very secure, we're booming!

WWYD?

PS The reason I post here is really the anonymity (and the good advice). Most of our IRL friends and family have strong opinions about our loans, our spending habits, etc. even when they don't know the full story. I value your opinions too as I don't think I'm the most financially savvy person. I actually think DH has a good head for those sorts of things. I'd be ok if you guys were more on his team! Let me know either way!

[MSWR0319]

DH wants to pay off our student loans. DH graduated 13.5 years ago from art school with a whopping 170K in debt. Today we've got the money in the bank to pay off the remaining 42K. We have about 60K in our savings. We've not always been so fortunate and just a few years ago, we had almost 15K in credit card debt instead! We've been working hard and savings a lot (and have benefitted from the COVID relief bills).

*I* think we should keep it as savings. My biggest motivation is to let it grow/remain and when real estate costs drop, we can finally buy a house! DH just wants the debt GONE. I can certainly see where he is coming from. Our student loan debt is not at those super low levels that some people were lucky enough to secure. Our remaining loans are at 6.8%. Still, my big fear is that we'll lose our current housing where we have crazy low rent (1200 per month!). If we were to find "comparable" housing somewhere it might be (no joke) 2-3 times what we're paying right now. So my motivation is to sit at the ready for needing to purchase a home.

My primary motivation is to enable a home purchase in this area. This feels like the insurmountable obstacle. We also only have one (14yo) car right now. DH's job has been relatively secure despite the pandemic. My much lower paying job is very secure, we're booming!

WWYD?

PS The reason I post here is really the anonymity (and the good advice). Most of our IRL friends and family have strong opinions about our loans, our spending habits, etc. even when they don't know the full story. I value your opinions too as I don't think I'm the most financially savvy person. I actually think DH has a good head for those sorts of things. I'd be ok if you guys were more on his team! Let me know either way!

That's a high interest rate. I think I would pay off some of the loan but not all of it so you still have some in savings. I would also consider putting some in savings and some towards the loan, instead of all in savings as additional extra money comes in or make extra payments on the loan when you deem you have enough money in your savings. How much you use of your savings is up to you guys depending on how much you would need for buying a house/car in the future as a down payment and what you need as a cushion for emergencies.

[bisous]

That's a high interest rate. I think I would pay off some of the loan but not all of it so you still have some in savings. I would also consider putting some in savings and some towards the loan, instead of all in savings as additional extra money comes in or make extra payments on the loan when you deem you have enough money in your savings. How much you use of your savings is up to you guys depending on how much you would need for buying a house/car in the future as a down payment and what you need as a cushion for emergencies.

Thanks for weighing in! A true 20% down payment in the area would need to be much larger than what we currently have. (By like 100K) Honestly, that would take a long time to amass. And I feel like we're in a bit of a housing bubble right now.

DH is saying at least pay off the loan that is being sold to another company. That would leave us with 38K. Maybe we do that?

One thing is that if we aren't saddled with debt any more it actually opens up our ability to move elsewhere in the country. So long as we had high debt payments we need a fairly high income that comes with a HCOL. Once that is gone we can make a lot less and live better...

[o_mom]

Thanks for weighing in! A true 20% down payment in the area would need to be much larger than what we currently have. (By like 100K) Honestly, that would take a long time to amass. And I feel like we're in a bit of a housing bubble right now.

DH is saying at least pay off the loan that is being sold to another company. That would leave us with 38K. Maybe we do that?

One thing is that if we aren't saddled with debt any more it actually opens up our ability to move elsewhere in the country. So long as we had high debt payments we need a fairly high income that comes with a HCOL. Once that is gone we can make a lot less and live better...

Is there any way to refinance the student loans to a lower rate?

We haven't dealt with student loans in so long, I have no idea if that is even an option.

I would probably hold off paying down. The economy is not back yet, there are a lot of unknowns and there is a potential for the housing bubble to burst. Being ready to buy when the market goes down (either your current place or another) could be a good thing. Cash can cushion a lot of things. Think about this... could you handle a new (to you) vehicle, and a new house at the same time? Murphy's Law and all...

If anything, I would look at the effect of an extra 10% payment on the highest interest loan... don't do a big chunk, but chip away at it a little more and be ready to pull back if things go pear-shaped.

[bisous]

Is there any way to refinance the student loans to a lower rate?

We haven't dealt with student loans in so long, I have no idea if that is even an option.

I would probably hold off paying down. The economy is not back yet, there are a lot of unknowns and there is a potential for the housing bubble to burst. Being ready to buy when the market goes down (either your current place or another) could be a good thing. Cash can cushion a lot of things. Think about this... could you handle a new (to you) vehicle, and a new house at the same time? Murphy's Law and all...

If anything, I would look at the effect of an extra 10% payment on the highest interest loan... don't do a big chunk, but chip away at it a little more and be ready to pull back if things go pear-shaped.

Yes, our funds are this high (vs paying off our loans) because of the uneasy situation with COVID. Also, with student loans if we hit a problem with employment, we can always defer the loans. (Though we'd hate to do that!)

I think a lot of DH's motivation is to just finally be done with paying our loans! We have a HS Junior so we'll have some expense there soon. Yikes!

[jgenie]

I would pay off part of the loan but wouldn’t pay it all off at once. Take a chunk out of the highest interest rate loan and increase your monthly loan payments. That way you both get what makes you comfortable. I keep having this same conversation with our accountant. My solution is to increase our monthly mortgage payment plus hit our mortgage with a big payment at the end of each year. Congratulations on getting to where you are now!! I know how hard you guys have worked to make it here!!

[specialp]

If I am remembering correctly, you are in a month-to-month rental with an elderly person who has almost never raised the rent and who has no relatives and who hasn’t disclosed how the rental property you call home would be handled after her death. Is that right?

[SnuggleBuggles]

I think I'd make a dent, like $10-15,000.

[niccig]

I agree with paying off a chunk but not all. Federal Student loans are all in forbearance right now, no payments and no interest right now through September 2021. If this applies to you, a payment will all go to balance. And as no interest until September, you could wait a few more months and pay more later if you don’t need it.

We have similar situation and decided to hold on to some money rather than put it elsewhere as there’s enough uncertainty with DH and work. I’ve increased my work to make up most of DH’s pay cut and we cut elsewhere. Having that chunk helps not feel worried if the pay cut continues. We haven’t needed to dip into it but it could help out if there’s an emergency.

I only have 2.5k left on my grad school loan and I’ll pay it in September when payments start back up. I understand DH wanting to get rid of it!!


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[essnce629]

I'd call the loan company and ask if they'd lower the total loan amount if you make one large payment all at once. I had $12k left on one of my student loans and the company (Navient) contacted me 2 weeks ago and said if I paid $4400 in one payment they'd forgive the rest and close out my account! I said yes and now it's paid off!