My partner and I are currently saving aggressively for a down payment of a house in an area with a very competitive housing market. Our goal is to find a place by next year (only a desire but we’ll see) I recently finished grad school and thankfully because of scholarships and grants, it was free and I only left with $9K in student loans from undergrad. It’s divided into 3 separate subsidized loans at 3-4.5% interest
Now with my new job, our household income is slightly above $200K and we’re currently at 80K in savings from my partners job and me saving what I could during grad school. Our goals is to hopefully be at 140K savings by next year.
I was thinking of paying off my student loans as fast as possible so I can save on interest in the long term, but considering how low it is now, I’m questioning if it’s even worth it. I’m also thinking I should just pay the minimum ($140/mo) and add more to the savings for the house. Any thoughts?
Pay off my student loans as quick as possible or save for a house?
byu/JHDog03 inpersonalfinance
Posted by JHDog03
2 Comments
The only reason you wouldn’t pay off the student loans is if you’re able to invest that money elsewhere (where it exceeds the interest rate of the loan).
The math can be calculated a few ways, but ultimately comes down to: would you rather keep paying that $140/mo towards your student loans, or would that $140/mo make a significant difference in how much house you can buy?
I’m in a similar boat. I keep a small balance of ~$6k of student loans, paying slightly over the min each month. It’s because 1.) it’s my oldest line of credit, so it positively contributes to my credit score, 2.) the interest rate is super low – about 3.5%, and 3.) I can better utilize the money for other investments or just cash flow in general.