Looking for the best strategy to knock out these loans.

[gngo2007]

So after finishing undergrad/grad school about a year ago, i've been able to pay off all of my cc debt. But my student loans are currently hovering around $220,000. I consolidated them upon graduation and am currently on an IBR plan with a 6.2% interest rate. Originally, I had the plan of making minimum payments for the 20-25 year loan forgiveness plan. However, with all of the news about that getting cut, I'm not sure what the best option would be. Should I try to knock them out ASAP (5 years), or should I try to gamble for the potential for loan forgiveness so that I can save up for a down payment on a house. Thanks again for the help!

[Anonymous]

Pay the minimums now and work towards saving up a 20% down payment for your home PLUS 6 months of emergency savings that includes your loan payment minimums.

Buy a house and then up your emergency savings to include 6 months of mortgage payments.

Then attack the loans.

You’ll thank me in 10 years when life throws surprises at you but you have a ton of equity in your home and 6 months of funds to live on!

That interest rate sucks but following the rules of 20% down and 6 months nest egg means you’ll be financially solid forever.

[Anonymous]

I am in the same boat, I am on 30yr repayment, paid off all credit cards and 1 of my smaller private loans. Have my large federal loan and one small private left.  Paying minimum allowed me to put 15% down on house, didn't quite make it to 20% before my lease was up so I went ahead and bought early.  Just finished building 3 months savings (all monthly expenses including mortgage) and working on paying off my small private loan.  After that I will hit the fed loans hard and when all is said and done I should be done at 15yrs post-grad.  I am leaving loans in the 30yr repay just in case life happens but plan on paying extra monthly.   My initial plan was to hit loans hard but with mortgage rates lower than student loans and tax incentives on mortgage interest it made more sense to buy the house now.  

The biggest help for me was creating an excel template so that I could map out extra payments and see all debt in black and white.  Something about creating a plan makes it easier to plan the attack.  Unfortunately there are far too many of us in this boat.  Just keep your eye on the finish line!

[Anonymous]

http://somerandomguyonline.com/debt-fatigue/

[Anonymous]

Honestly, I am on IBR too and the cheapest thing for me to do is to pay the minimum.  Anything else will cost me more.  I will never have the loan paid to zero.  After 20 years I will still owe about 25,000 (just over 60,000 currently)  I will need to take a year off work because that 25k will be treated as taxable income.  Sabbatical time.

The only way it is cheaper to pay off sooner is if my income doubles.  If my income doubles, I will be able to pay off the loans quite easily.

[Kree]

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@gngo2007 wrote:

So after finishing undergrad/grad school about a year ago, i've been able to pay off all of my cc debt. But my student loans are currently hovering around $220,000. I consolidated them upon graduation and am currently on an IBR plan with a 6.2% interest rate. Originally, I had the plan of making minimum payments for the 20-25 year loan forgiveness plan. However, with all of the news about that getting cut, I'm not sure what the best option would be. Should I try to knock them out ASAP (5 years), or should I try to gamble for the potential for loan forgiveness so that I can save up for a down payment on a house. Thanks again for the help!

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IBR plans are grandfathered in, if you sign up, you have it regardless of future offerings. Also if you work for the federal government, or for a 501C nonprofit, there is an additional loan forgiveness program available, which cuts down to 10 years, and forgiven debt does not count as income. If this applies to you, the cutoff is either 12.31.17 or 4.30.18, so apply soon. google PSLF