Comments on: Help a Reader: Student Loans or Savings?

By: J. Money

J. Money — Tue, 09 Oct 2012 02:51:54 +0000

Honestly I think you guys are doing great! I know what it’s like to want to do BETTER and just kill it even more, but unless one of you hustles on the side and brings in even *more* money, I think you may have the best system already in place there. Some times it’s just about prioritizing for the time being until things change, ya know? And plus – you can’t always count on *when* you’ll have a new baby either ;) We tried for two years and then finally was blessed with one, while a friend of ours tried 1 time and a month later was pregnant. I think as long as you’re relatively stable and have a solid income, it’ll totally be fine. There’s never a *right* time in my opinion to have kids, so I say just go w/ what you feel is best and it’ll work out just fine. You’re gonna love it! With or without debt :)

By: Wade

Wade — Sun, 07 Oct 2012 23:35:55 +0000

Hi,

My wife(23) and I(25) are currently dual income, grossing $109,000. We have been out of college for about 18 months now, and are currently hacking away at our combined student loans/one car of $68,500(Originally $94,000). We are paying $3,000 per month to all loans, $1,400 of which is the minimum payment.

We really want to start a family, but I am not willing to do so until we pay down all of our loans and can survive off my military income(in case we decide she is going to stay at home).

We are currently maximizing her 401k matching program($172 monthly/$2,112 yearly), which makes her retirement saving double that at $4224/year.

I am currently contributing 10% to my TSP(a military 401k) which makes my retirement savings $424 monthly/$5,088 yearly.

What I am thinking of doing is keeping her matching the same(it would be stupid to throw away free money) and lowering my contributions to 5%, instead of 10%, giving us $200 more per month for loans. Also, we would try to trim some savings else-ware($250). But the big problem is, how much will this hurt our retirement plan for the future?

As I said, we really want to get these loans out of the way, so we can focus on a family…Our current plan gets us debt free in 20 months, but we want sooner….Any suggestions?

By: J. Money

J. Money — Sun, 24 Jun 2012 14:45:31 +0000

Great info – thanks for sharing! And good luck kick its ass! :)

By: Kris

Kris — Sat, 23 Jun 2012 20:12:10 +0000

Lots of good advice! Just reading it motivates me to keep plugging away at my own debt!

I graduated w/ about $50,000 in student loans. I decided to use Dave Ramsey’s snowball method – but I decided to focus on paying down my unsubsidized loans before the subsidized. It is my understanding that if loans are in deferment, interest does not accrue. This does not apply to me right now as I am making payments, but it is a back-up safety net to use if I ever need to defer payments.

http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp
Direct Subsidized Loans—Direct Subsidized Loans are for students with financial need. Your school will review the results of your Free Application for Federal Student Aid (FAFSASM) and determine the amount you can borrow. You are not charged interest while you’re in school at least half-time and during grace periods and deferment periods.

By: Steve O

Steve O — Mon, 05 Dec 2011 20:12:40 +0000

I don’t like your initial reaction… Those had better be really good degrees (M.S. in Finance, Mathematics, Physics, etc.) to be worth $100,000 ending debt! For example, a MSW (social work) doesn’t do anything besides qualify you for $30k/year starting jobs. We have a perception in our society (which we convey to those 18 year olds) that education is priceless. If you know beyond a shadow of a doubt that you want to be a philosopher or teacher or social worker, then go for the degree, but I think it’s irresponsible to say that degrees which you could get for $30,000 total are worth $100,000.

By: TheGooch

TheGooch — Sat, 04 Jun 2011 16:40:12 +0000

I’d focus on Emergency Fund first, between $1000-$2500 . It’s there to prevent unforseeable expenses from knocking your budget off track, or force you to take on more debt to handle a car repair, etc. Next get 1months expenses saved up to that no matter what happens, you can keep your payments up for another month while you handle the issue.

Finally, go for broke on your debts. Personally I prefer Dave Ramsey’s debt snowball method, though it may cost you more in interest, it gives you more peace of mind. Whichever is worth more to you, go with that.

Good luck!

By: J. Money

J. Money — Fri, 13 May 2011 19:42:34 +0000

Awesome, congrats!!! And so true about tracking = motivation too. That’s how I get when doing my Net Worth each month, even if it goes down. Seeing how it grows eventually over time is killer, just like watching debt go away month by month. Thanks for sharing :)

By: Jenna

Jenna — Fri, 13 May 2011 18:54:18 +0000

@Megan, I am three years out of grad school and totally sympathize with your dilemma! For me, not having at least a decent emergency fund was stressing me out. I paid my standard monthly payment on my loans and saved up $5k for emergencies. (I was only contributing to my 401(k) what my employer would match – I’d recommend you take advantage of whatever match they give you. Their match is probably a better return on your investment than any organic return you’ll find.) Then I started diverting the extra to loans instead of savings. If you’re getting bi-weekly paychecks (as opposed to two per month), budget for 2 paychecks each month, and use the “3rd paycheck” in those months that have 3 paydays to help accelerate your savings/payments – it’s an easy way to trick yourself into the extra money. To your point about the “brain switch,” it might be hard at first, but the more you start seeing your loan balance decrease, the more motivated you’ll be to paying it off. Track the balance monthly so you can look back and see the progress you’re making as you go along to keep you motivated…even if that number is overwhelming at first. I’m two months away from paying off the highest-rate of my two loans, and I can barely wait! Best of luck to you!

By: Christine

Christine — Mon, 09 May 2011 00:17:15 +0000

hmm that is a tricky question.
More than likely she has a budget in place for basic needs and knows how much it costs her to live.
I would start out with pulling together an emergency fund 3-6 months living expenses in saving which shouldnt take too long considering she lives at home. Then I would do a percentages game with the extra money she has left over after her living expenses.. You know there is no wrong or right percentage, she just needs to figure out which is more imortant, paying off student loans or saving for retirement… she could do a 60%-40% type of scenario or do an 80%-20% depending on what her “values” are For me I had put together my 3-6 months living expenses emergency fund and had my basic living needs budget put together then anything extra I put (am putting) towards my debt because I want to be completely debt free (except for my mortgage asap) and then I will be able to contribute A LOT into my retirement. With all that said I will be debt free in ~2 years and Im only 25 so I will have more than enough time to stuff money away into retirement. Even my father in law (who is an accountant and brilliant when it comes to financial security) recommended I focus on knocking out my debt as fast as possible then go onto the retirement accounts.
Hope that makes sense and helps ?!?

By: Ray Martin

Ray Martin — Sun, 08 May 2011 16:15:02 +0000

I agree that doing a little bit of bot paying off debt and saving for retirement is best, but you still have to decide how much to put toward each. Some things to consider are: 1) after consolidating your student loans, what’s the interest rate? 2) Does your employer do any 401k matching? If so, you wouldn’t want to leave any potential money on the table. 3) at 24, aggressively investing, what kind of return could be expected on your retirement account?

If your interest rate on the loan is higher than the percent you might expect on your retirement funds, then get that crap paid off asap! But if it’s low, your employer matches well and you expect to see a solid return on your retirement investing because you are buying in at such an early age, the. Take your time on the student loan and start puting that money to work for your retirement. One plan isn’t going to fit everyone or every situation.