Quote:
Originally Posted by RachelJane9
In personal finance books, student loans have always been categorized as "good debt." Here's my pickle: I'm questioning whether high interest private student loans should be treated as "good" or as "bad." How fast to pay them off?
I have $60,000 in student loans. About $12,000 of that is low-interest, fixed-rate federal student loans. About $50,000 is private loans with adjustable rates which are at 7.25% even now, and have been as high as 14% in the past. I have minimal credit card debt (less than $1,000).
I have been able to carve out roughly $1500/month for savings and/or debt paydown. (two incomes, and my husband and I are "dorm parents" in exchange for free rent).
Should I behave like a person with $50,000 in bad debt and funnel all extra money toward paying that off ASAP? That leaves me with no down payment for a house in three years or so. (I'm 25, my husband is 28). But it also frees up my choices (like staying at home with the kids I want to have in a few years). I don't believe it's a mistake to put off buying a house until you can truly afford it. Maybe in our situation we can't afford it until after these bad loans are gone.
What do you think?
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You need to first, pay off the credit card IN FULL. Credit Card companies are cutting limits, raising rates to as high as 42%, and much more so don't get caught up in that. Next, you need to tackle those private school loans. Student loans can be "good debt" or "bad debt". If you make an investment in your future that allows you to get a good career and make more money, it is good. If not, or you take out more loans then you'll make, it's bad. Also, student loan debt is never forgiven, you can not claim it in bankruptcy and even if you die, it is still there. You really need to wait for a house and children. Forget the "American Dream" and keeping up with the jones, Kids are VERY VERY expensive. And so can be the house. There is a lot of extra work, time, and money that goes along with both, that people do not realize. Without 20% down on the house, your walking right into what started the economy to crash and all these people losing their houses. Cut out all the extra spending and live on a tight budget. It might suck but in a few years when the loans are paid down, you have an emergency fund and down payment on a house, you will be glad you did. Your future children will be too because they will have parents that can afford to take care of them and give them the advantages to get ahead further in life then you did.
05-17-2009, 12:02 PM
How fast to pay off student loans?
