Student Loan Payoff? Should I?

[Anonymous]

First I would like to say thanks in advance to everyone here...this is great site!

I have been watching Suzy Orman religiously and I have a question about paying of my student loan.

Here is a snapshot of my financial situation.

44 years old

No credit card debt.

No loan debts of any kind (looking for condo this year but haven't found one yet).

100,000 in Retirement

120,000 Savings

I gross roughly 75K per year (Married, but I am the only wage earner).

Credit Score 690.

 I have 15K in student loan debt (5% interest.

I was thinking about paying of the SL but I am kinda scared because of the economy and so many job losses.

I work for the government but we are also going through major budget cuts (Thanks Arnold). So it is a scary time.

Other than the Married tax credit, my student loand is the only "deduction that I have at the end of the year.

One of the depressing things is that they take so much interest with each payment. My payment is 145 and I pay 200.00 to get it down a little faster....So would it be a better financial move to just pay it off or keep making the payment have the deduction and also have a continued positive payment from it on my CR????

Thanks in advance for any advice on this subject...

Message Edited by Mkris7 on 08-18-2009 11:31 AM

[Peach8321]

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@Anonymous wrote:

First I would like to say thanks in advance to everyone here...this is great site!

I have been watching Suzy Orman religiously and I have a question about paying of my student loan.

Here is a snapshot of my financial situation.

44 years old

No credit card debt.

No loan debts of any kind (looking for condo this year but haven't found one yet).

100,000 in Retirement

120,000 Savings

I gross roughly 75K per year (Married, but I am the only wage earner).

Credit Score 690.

 I have 15K in student loan debt (5% interest.

I was thinking about paying of the SL but I am kinda scared because of the economy and so many job losses.

I work for the government but we are also going through major budget cuts (Thanks Arnold). So it is a scary time.

Other than the Married tax credit, my student loand is the only "deduction that I have at the end of the year.

One of the depressing things is that they take so much interest with each payment. My payment is 145 and I pay 200.00 to get it down a little faster....So would it be a better financial move to just pay it off or keep making the payment have the deduction and also have a continued positive payment from it on my CR????

Thanks in advance for any advice on this subject...

Message Edited by Mkris7 on 08-18-2009 11:31 AM

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I would suggest speeding up the payments more, if your budget can handle it.  If you have $120k in savings (easily obtained?) then I'd pay $500-600/mo on the loans.  The "tax deduction" isn't worth paying interest on loans for that long of a time period and you'll want to pay them off faster so you can put much much more into retirement.  Also, if you and your wife plan to get a house soon, it'll be nice to not have a student loan payment to have to make as well.

Just a side note...if you have NO debt besides the loan, your score is fairly low (assuming it's not a FAKO...where did you get it?).  You should be using your credit cards and just PIF every month.  That will help raise the scores for when you do apply for a mortgage.

hope that helps

[Anonymous]

Your observation is correct, my score is fairly low but to me is is AWSOME considering I started 2 years ago with a 560......I have been working hard for the last few years correcting several financial mistakes that I had made in the past. So I am just trying keep "best practices" and keep building on the momentum that I have.....Thank you for the great advice, I agree what you suggested makes more sense.....I can probably boost my payments up to about 400 per month and still feel fairly safe and meeting my saving goals.

[IOBA]

Another suggestion is to follow up with the lender to make sure the payments are being credited properly.

Some of the lenders like to consider extra money as next month's payments, etc, to continue to collect interest and drag things out.

When I was paying on mine, I always paid extra to principle, as often as I could.  The lender (customer serviced rep) actually told me to "STOP it.  She said we are not a bank.  We tell you to pay $200 a month, you pay $200 a month.  If you give us $400 a month, that is two months payments."  (argh!!)

I was constantly on their phone to get them to correctly apply payments.

Lol - they also told me it was "illegal to pay it off early.  She said I signed a contract for 10 years payments and I must pay for 10 years." 

I paid it off within a year or so.  Argh! 

[IOBA]

PS - I don't have any tax deductions either.  It's not the end of the world.  Taxes are easier.  And I enjoy having all of my money in my pocket.

Hardship has arrived (economy and such) and I tell ya, it's a blessing only having to worry about the bare bone basics and NOT worrying about a student loan payment or a cc payment... 

[sunflower17]

Hi I just joined this thread and recently paid off one of my student loans.

Like others on this thread, I agree lenders do not like that because they make more money off of you the longer you have the loan.  I was actually asked why I wanted to pay mine off.  My recommendation is to get rid of it as soon as possible.

I still have a big one for $87K and I am trying every which way possible to get rid of this thing.  Even when I pay $500 a month, the next statement just continues to grow.  It is a nightmare. It is the only debt I have left, but I want to get rid of it.  If I knew this when I was younger, I would not have borrowed so much, but I wanted to get an Ivy League education and had no financial support.

My advice, get rid of it as soo as you can.  Otherwise you will end up paying double or triple for this thing if it hangs around. 

Good luck.

[IOBA]

Congratulations on paying off the one student loan!!!  

Can you pay more than $500 a month on the 87k loan?  Make sure they credit any extra towards the principle, not interest, and not towards the next month's payment. 

[sunflower17]

thanks for the congrats!!  I need to hear that sometimes as I do not have any support. 

thanks for the tip in applying the payment.  I noticed that the Sallie Mae Reps are not clear with this and usually try to apply it towars an extra month when I pay twice.  i will call them today and have them apply my payment appropriately for my October payment.

I am actually trying a new experiment now.  I am planning to take out a small personal loan to pay towards my student loan and build up my credit score at the same time.  Since I have paid off all my debt aside from this last monster loan, I need more credit activity in order to increase my middle score.

It feels so good to be getting ahead and accomplishing my financial goals, but now my issue is i hate my job and where i am located overseas, but have to stick it out to avoid financial issues again.  life is tough.

[IOBA]

Sallie Mae was not kind to me.

I made payments (equal to or greater than the monthly amount) every two weeks (payday).  EVERY single time, I had to call up, deal with people who read from a script, and did not understand the concept of paying debt off.

EVERY single time, I had to battle and follow up and follow up (email and phone calls) to get them to REAPPLY the payment correctly.

I was told, quite a few times, that I was NOT allowed to make extra payments on my loan.

I was told, quite a few times, that I was NOT allowed to pay off my loan early.

I was told, quite a few times, that I needed to refinance my loans, into one payment, longer term.  I refused to do this!  All my extra went to the smallest balance first, until it was paid off. 

Pay as much as you can, as often as you can, and follow up to make sure the payment is applied correctly!!!  A note with payment (even if done online) or a phone payment does not guarantee that the payment will be applied as you wish. 

Keep at it!!!

It sounds like the last loan is one loan?   Just keep at it.  Every little bit helps!  Interest usually acrues daily.

If it was me, I would NOT take out a small loan to apply towards the student loan.  Why incur the fees?  Pay off the student loan super fast!  Your credit score should go through the roof!     Afterwards, if you still want to build your credit, carefully consider your options.  If I understand correctly, most lenders look at total monthly obligations and total debt.  Adding more debt is not going to help. 

[sunflower17]

you are right about Sallie Mae.  They do try to discourage you from a pay-off.  They tried this with me.  I am actually considering switching to the Dept of Education.  I know most of these companies are the same but I was told it is better to deal with them.  Do you have any info about transferring loans to the Dept of Ed?  My fear is that if I do not build another income stream from somewhere, I am never going to pay off this loan.  With interest building everyday, it is vitually impossible to get rid of this thing even with paying $500-1000 a month.  My balance is $87K.  I am also considering switching to a US government job which will pay up to $10K a year if you stay with them for three years....something like that.

I dont know what else to do.  I am overseas any my ability to do extra hobbies on the side to earn extra money is not possible.  I really want ot get rid of this loan. Any other tips would be appreciated.