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Pay off my SLs now, or wait?

Slabenstein
Valued Contributor

Pay off my SLs now, or wait?

I've been going back and forth on paying off my student loans, since I have the ability to do so now and Nelnet has been a pain for about the last year, but I'm not sure so I thought I'd bounce it off you guys and see what you think.  I have two consolidated loans w/ Nelnet, about $4.5k remaining principal, and 18 remaining payments.  Payments are not suspended, and are $260/mo.  I have the money in my savings to just kill the loans, and the points I see in favor of doing so are: 1) I don't have to deal with the payment processing issues Nelnet seems to be having anymore, 2) we get $260 back in our monthly budget, which needs it for my SO's SLs, and 3) I save some small amount of interest.  The points I can see against are: 1) if SL forgiveness happens and if these loans are included (they are federal but aren't federally held) then I've basically wasted $4k that could have gone to my spouse's loans and 2) my FICOs will presumably drop some due to having no open installments.  I don't really care about the score drop, so it's just the potential to have lost money if loan forgiveness happens that gives me pause.  But that it would apply to my loans and that it would happen at all seem like pretty big if's to me.


Message 1 of 8
7 REPLIES 7
Cinnahs
New Member

Re: Pay off my SLs now, or wait?

Are these federal student loans eligible for the covid forbearance? If yes, you should not pay anything up front and instead sock the money in a HYSA so that it can earn interest. Just when the forbearance is sent to end, pay off the loan in full. If these are FFELP loans ineligible for the forbearance, pay it off in full right now. There is no point in being charged interest when you have the funds to eliminate the debt entirely.

Message 2 of 8
Slabenstein
Valued Contributor

Re: Pay off my SLs now, or wait?

They're not eligible for coronavirus forbearance.  The remaining interest I'd pay over the life of the loan isn't much, so it's kind of weighing that against maybe possibly "losing" the money I used to pay it off if any SL forgiveness happens.


Message 3 of 8
calyx
Super Contributor

Re: Pay off my SLs now, or wait?

Honestly, I wouldn't hold off on paying off the loans for student loan forgiveness, particularly since they aren't covered by CARES (it wouldn't be far to assume that the same sorts of requirements would be in place).

 

I'm a finances over FICO person, so I'd pay them off.  When my installments are all paid, I am willing to take the FICO hit just to be out of debt.  If you are the kind of person who would get an SSL, then just keep it rolling.  If not, pay it off and keep the interest moneys in your own pocket.



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Message 4 of 8
Slabenstein
Valued Contributor

Re: Pay off my SLs now, or wait?

I'm 900% not the kind of person who would get an SSL.


Message 5 of 8
ACN323
Regular Contributor

Re: Pay off my SLs now, or wait?

@Slabenstein I'd say pay them off lol.

 

We just paid off my husbands in Dec. to the tune of $60k... We sold our house and used most of the entire profit to pay that amount off. It literally was the hardest thing to do, to watch that money come in and go right back out, but having that extra $1k a month and no debt has been REAL nice! We contemplated holding off to see if there would be any SL forgiveness plan as well, (majority of his were private..maybe 10k in Federal) but decided to bite the bullet. I thought his scores would take a huge drop since his loans were like 13 years old, and we didn't have any credit card debt reporting..and the mortgage loan was also gone, but they stayed the same around 750's?

 

Good luck with whatever you decide to do!

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Message 6 of 8
FutureMePlease
New Visitor

Re: Pay off my SLs now, or wait?

If you have state tax benefits available for funding a 529 plan, (if you have to pay state income tax), this is a great option. If you park a net contribution by the end of the calendar year, you can withdraw in 2022, pay the student loan, and reap a tax benefit for the 2021 tax year. This is because up to 10k of eligible student loan debt can now be paid via a 529 plan. So if you were looking to to keep your funds in a savings account while in forbearance, this could result in an underappreciated benefit for you.

Message 7 of 8
FutureMePlease
New Visitor

Re: Pay off my SLs now, or wait?

The forgiveness for disabled students included a refund of recent payments! If that would apply to other forgiveness, that may be an incentive to pay

Message 8 of 8
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