I’m going to have a pretty cheap living situation and definitely could afford to pay 2k a month, which would pay off these loans in like 4 years. Is that always the way to go?
I could also pay $900 a month and pay them off in ten years, which would mean paying about $30,000 more in interest. But that way I would have better savings and retirement contributions early on.
Graduating with 77k in loans (7.5% avg interest) with 80k salary before bonus. Looking for best way to navigate.
byu/Fancy_Career_3366 inStudentLoans
Posted by Fancy_Career_3366
6 Comments
This is a personal decision. If it were me, I would make sure to get my emergency fund set up, my employer match in my 401k and then max my Roth IRA, but then throw everything else at this.
Federal loans?
Numbers probably slightly favor aggressive payoff.
Are you in a PSLF-eligible profession?
Also, are you anticipating big pay increases over the next 10ish years?
I follow Ramit Sethi who had some pretty solid advice on it being “six in one, half dozen in the other”. If you hate debt, the mental health of paying them off makes the most sense. If you can stomach the debt, split the strategy: hit the minimum payment and then split what’s left over to your Roth IRA and paying down more debt.
I’m in a similar boat to you (on loan amount and interest) and would recommend not doing what I’ve done: bounce between the two. That being said, no one could have predicted the past eight years. The S&P 500 return has been higher than usual. Student loans have been in forbearance. I took that opportunity to stash cash in retirement funds and am happy I did so.
Are your loans federal in your own name, federal Parent PLUS loans in a parent’s name, private, or a mix of those 3 categories?
With federal loans your options are fundamentally your options are 1) aggressive repayment, 2) PSLF or similar employer based forgiveness programs, or 3) IDR plan based forgiveness. If you have parents who took out Parent PLUS loans on your behalf the above still applies with caveats around how those loans differ from your loans. With private loans? Aggressive repayment is your best bet and strategic refinancing helps immensely
I would consider using the avalanche method to aggressively repay your loans, which includes strategically paying off your highest interest *rate* loans off first/early. If you don’t currently have a 3-6 month emergency fund I would try to fix that first. I’d also suggest checking out the r/personalfinance money management advice in their [prime directive](https://www.reddit.com/r/personalfinance/wiki/commontopics) wiki (which also has a [flow chart version](https://i.imgur.com/lSoUQr2.png)) because it makes middle-class financial management easy and their wiki explains *a lot* in more plain language
I was sort of in the same boat as you when I graduated in 2018. Federal loans of 55k and a 60k salary. I lived with my parents for 2 years and threw 2.5k a month towards the loans and paid them off in 48 months. I used the 6 month grace period after graduation to save up a decent emergency fund first though. Looking back I’m so happy I paid them off super quick because now with a mortgage and car payment I can’t imagine having a 600 student loan payment.