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Student Loan Payoff? Should I?

Valued Member

Re: Student Loan Payoff? Should I?

I make a little more income than the OP and usually get NO tax deduction from my student loan interest.  Info here on income limits to qualify for a deduction: Tax Topic 456 Student Loan Interest Deduction  In recent years I'd get maybe $30... but if you make too much money like I do now it doesn't count at all.  Perhaps you have other tax considerations being married and it does benefit you?  At 5% I'd pay that off immediately (or at least faster than currently) and forget about the minimal tax benefits, which I doubt are as beneficial as not paying 5% interest on the loan itself.


My student loan is through US Dept of Education and while they did that whole apply-extra-payment-to-next-month thing and then wouldn't even send a bill if I had enough accumulated from overpaying, once I consolidated I set it up to just deduct a larger amount each month automatically.  A couple phone calls took care of it and now it's almost all paid off.  It was silly to keep paying $50 a month when my income had gone up considerably in the years since school. 


I sold my house this year and no longer have a mortgage either.  While I started to worry about not having that interest deduction either (far bigger than a student loan one!), it realized it was silly to have a mortgage JUST for the tax benefit.  My dad did take out a small loan on his house after he paid it off to maintain the homeowner exemption and that was slightly in his favor, but overall I'll pay the govt more on taxes and in the meantime have that mortgage payment in my pocket/savings and give more to charity too.

Message 11 of 18
New Visitor

Re: Student Loan Payoff? Should I?

First off how much of a tax advantage are you receiving when you file your taxes? I really don't see much of a tax advantage so I would pay it off. Take that 200.00 a month you are paying for the student loan and put it in savings so instead of paying interest you will be earning it. If you decide to buy that condo you will have no debt ratio and that will help you in getting the property you want. The recommended amount you should have in savings just in case you lose your job is one years of salary and you are well over that. Keep up the good work.
Message 12 of 18
Senior Contributor

Re: Student Loan Payoff? Should I?

Mkis -- what did you do?


Did you use your savings to pay off the student loan in full?  Are you banking the loan payments you were paying into savings, to rebuild?


Have you found a condo yet?  Smiley Happy 

Message 13 of 18
Established Member

Re: Student Loan Payoff? Should I?

Forgive me for not answering this post in a long time..been sidetracked by work and things. In the end I paid it off. This seemed to be the consensus of the advice that was given and while psychologically it was hard to part with 12K at all once, it feels good not to have any debt at this point in my life (First time I have been there). I would like to thank everyone who participated in this post...YOUR ALL GOLDEN!!!


This is a great community....Wish every one the best



Message 14 of 18
New Member

Re: Student Loan Payoff? Should I?

Hey All,


Thanks for all the great advice here.


I have 5K in private student loan debt and 10k in Federal loan debt.

I have defaulted on the private loan once and am now able to pay it off in full.


What is the best way to clear it from my credit report once it is paid in full?


Any advice is appreciated.


my current score is 569 and am working towards 650 within 2 years.  Is this possible?



Message 15 of 18
Senior Contributor

Re: Student Loan Payoff? Should I?

My advice would be to pay off the smaller loan immediately (the private one).   Then sock everything you have into the larger student loan.


It will feel wonderful to have the debt paid off!  Smiley Happy

Message 16 of 18
New Member

Re: Student Loan Payoff? Should I?

I appreiate the reply.

Thanks what I'm thinking I'll do.

Will my score improve will a "paid in full" on credit report on this loan even thought I have history of missing payments?

My understanding is that it will take time for the missing payments to have less negative impact on my score.




Message 17 of 18

Re: Student Loan Payoff? Should I?

Hello, My credit score improved when I paid off my private student loan. However, I did not have any student loan missing payments that were recorded on my credit report. In light of that, I am not sure how much the pay off will impact your score with the missing payment issue. What I recommend is to request the lender to delete the "missing payments" tradeline and update your credit report to state "paid in full". This strategy has worked for me when clearing my credit as long as the balance was paid. Some lenders have deleted records all together at my request. It depends on the creditor/lender and if there is a statute of limitations involved on the recorded debt. Since "Paid in full" is a good reflection on your credit report, see if they can update your records and remove the missing payments. If the missing payments are recorded as "lates - 30, 60, 90 days delinquent", then it will probably not get removed. Not sure, but you can ask. The other thing is to try not to let late payments hit your credit report. Always call them and make a promise to pay date to avoid late payments on your credit report. Late payments decreases your score tremendously. I was surprised at how kind creditors can be if you call them and let them know what is happening. I am experiencing job loss and have maintained my credit by calling creditors and staying in touch. I never let anything hit my credit report if I can help it. Also, inquire of insurance (debt cancellation program) with your credit card companies (if this is available) in the event of job loss. I was able to cancel out 2 credit card debts by having this insurance while I am not working. I am so thankful for this type of insurance. Otherwise, my credit would have suffered. Hope this helps and good luck.

Message 18 of 18