best way to pay off college loans

pebbleinmyshoo · #1 (**permalink**) 10-07-2008, 02:52 PM

thought i'd give this a try for some intelligent opinions from older and wiser people. my family immigrated to the US in the early 1990s and for various reasons, they have been just getting by in typical older immigrant, blue-collar worker fashion. i ended up paying for 8 years of private schooling by myself and graduated this past may. i'm very on top of my finances, have no credit card debt, paid off my car in a year and then sold it, and have a stable job that i hope stays stable in this economy.

background on the question:
i have two sets of school loans coming up this winter,
$1525, payments start Jan 1st
$7470, payments start Mar 1st

no-interest loan of 4K starting Jan 1st (but i'm not worried about that at all, will continue making at least min payments til its finished while investing my savings)

i have most of the money now, thanks to frugal living (about 45% of my net salary goes to living expenses, i'm saving/giving away about 55%) and the sale of my car. i'm also putting away about 1 paycheck a month into savings (anywhere between 600-900+) to have enough saved up for the entire loan amount by march. investing/retirement planning aside, i'm wondering if i should just send those checks out now to get this burden off my back (since it's all coming up in a few months anyways) or wait a few months and see where the markets/economy goes (i work in investment) and potentially have 6mos worth of living expenses for emergencies saved up.

i had all of my cash sitting in high yield savings accounts up until a week or two ago when things got too crazy for my liking, so i guess i'm wondering if it even matters what i do, seeing as how it'd only be a few months time difference.

any thoughts? i know i want to pay off the loans asap, and refuse to pay any interest on them, but the volatility is making me a bit nervous to send the money in now, considering that's all i have to my name. though to add, i'ved lived pretty much week to week or month to month for as long as i can remember w/o letting it take over my life.

thanks!

User Name · #2 (**permalink**) 10-07-2008, 07:34 PM

First off, WOW! Great job on making smart financial moves. As for your situation, the economy is crazy and will get a lot worse before it gets better. I would be sure you have 8-12 months of emergency funds before dishing everything out to school loans. Really with the economy the way it is, I would personally have even more. It might suck a little to have to pay the interest but I'm sure you will be worse off if something came up, say you lost your job, or was sick/hurt and could not work. If your money was just in a high yield savings I would have left it there since your now insured up to $250k. Where is it now? I hope not under your mattress.

If you have more then that you could use a separate institution or have a beneficiary. I would also wait until they are closer to being due and collect the extra interest off the savings account. Why miss out on free money? When the time is closer to pay on the loans and you are comfortable where your emergency fund and other financials are, I say pay it off. Then you will have no debt as far as the school loans go and won't have to worry about the interest. If not, then just deal with some of the interest and be happy knowing your prepared for the worse.

Gizmo · #3 (**permalink**) 10-17-2008, 02:28 PM

Wow...i feel you pain

Sponsors