Pay Off My Student Loans In Full or Make Monthly Payments?

[whitecat5000]

I have the ability to pay off my student loans completely now and be done with it. It would almost completely wipe out my savings, but I would be debt free. Also I would save about $8,000 in the 20 years if I paid it off in full now. Just asking for feedback.

I hear three main theories from friends/family.

1. Keep paying the loans as is because it will show a good credit history, and it's very important to have savings in the bank.

2. Pay them off because you never know what will happen in the future and no debt is good debt.

3. Pay off extra each month. That way there's credit history and also savings on interest and in the bank.

The hospital I work for does not offer loan repayment contracts. So that option is out. And I'm financially lucky enough where I don't qualify for almost all loan forgiveness/help from third parties. What do you all think? Any feedback?

[OCNRN63, RN]

i would pay them off in full! you lucky dog!

pay them off in full, that way you can put more money in your savings, which will build back up quickly. why let them make money from your debt? plus, if you have a 401k or 403b, you'll have more money to contribute to that. free money from your employer!

[HolyPeas]

just think about what happens of your car breaks down the day after you clean yourself out though

[bstullis]

Reading and listening to debt control talking heads like Dave Ramsey (I agree with him on nearly everything while in debt) teaches me to keep a small emergency fund ($1000.00 but I prefer more like $1500-2000.00). If your savings is more than $1000 you have enough to cover most (if not all) emergencies (even broken transmission on many older cars) and then you are debt free. Monthly income increases by your monthly payment, if it is 100.00 or more, you will replenish your savings that much faster and be debt free for longer. "Live like no one else now, so you can live like no one else later" keeps you thinking about all those baby boomers who have no retirement but have a Cadillac and can't afford their meds/food for the month.

Pay It Off with a baby emergency fund and start working on your full emergency fund (3-6 month income savings). after that, the sky's the limit.

[CT Pixie, BSN, RN]

Not a fan of wiping out the savings account..then again I'm not a fan of debt or paying more than I really have to (interest, interest, interest). If paying it off would totally wipe out my savings account and leave no 'cushion' I would never do that. I think I'd pay a decent chunk of it off (leaving me with a decent cushion in the savings account) and then make monthly payments with a little more added in. That way I'd be establishing credit, paying my debt quicker thus not incurring additional interest AND still have some savings to fall back on in times of need.

[hiddenheart]

Keep a small cusion, but put as much as possible on the loan to bring down your balance, I will give you an example, on a 20 year loan, if you only borrowed $20,000 at only 5% interest you would have paid back over $31,000, WOW!. if you put that $20,000 in the bank at 0.5% interest and let it gain interest, you would have only earned just over $1000 (Yes, I know we don't earn that much interest in our savings accounts and probably you are paying more than 5%interest on the loan and you probably own more than the $20000, but is is just an example). I don't believe in giving away my hard earned money, by bringing down the balance you won't be paying as much in interest.

[joanna73, BSN, RN]

Everyone should have a savings account, if possible, especially in this economy. I'm also paying loans, but I make sure I pay myself first. Sure, you could be debt free, but if you can manage 3-6 months savings, that's ideal. Pay more than your minimum payment. You could even make an extra payment once in a while, but keep some savings.

[Jennie.K]

I think you're asking the wrong people. Find a financial adviser, or get some books on the topic. How do you know any of us know what we're doing with money?

I definitely agree with this.

[joanna73, BSN, RN]

We don't claim to be financial advisors, but the OP asked a reasonable question. You don't need a degree in finance to make good financial decisions, either. Overall, the majority of posters agree....keep some savings, while paying down the debt.

[nursie_nursie_415]

If you can, PAY OFF THE LOAN. You have no "savings" if you're already in debt. Fluidity accounts for some peace of mind but really, any money you "save" is not helping you out of debt. If you pay off your loan & find you need some cash, there are always credit cards (not the best choice but still better than owing a crooked loaner). Worst case scenario: you cannot find work & you file for bankruptcy because of credit card debt which you CANNOT do with student loans. Student loans are the devil & need to be eliminated pronto. Better to suffer from 7 years of bankruptcy on your record than a lifetime of student loan debt that probably can never, EVER be erased & will only grow into an uglier monster. (Google: Student debt horror stories.)

I used credit cards to pay for LVN school & then LVN-RN school. I was able to pay them off quickly on 0% interest (given they were paid within a year I believe?) after transferring the balance to another credit card. I lived with my parents & maintained a frugal lifestyle (thankfully no children or outstanding expenses to deal with). When you take out a student loan, you don't have as much control as compared to other ways of financing your education. I have been blessed & fortunate to be able to have the option to use credit cards to finance my lifestyle (I even purchased my first vehicle with 2 credit cards & paid them off in the same way within 5 months while living with my parents & working my butt off). I know my decisions are not fit for everyone's situation but it worked VERY well for me & I hope this post can help at least one other person on this site to gain some insight, hope & alternative mindset. Good luck to everyone in pursuing this expensive education.

[Aongroup1990, CNA]

Pray, god will take care of anything and find resources.. Try not to take out too much.

[MrChicagoRN, RN]

What interest rate are you paying? Remember that student loan interest is tax deductible, even if you don't itemize.

Its important to have cash reserves in case of emergency. Its great to be debt free, but it's even better to be able to maintain a steady cash flow for a few months if diversity strikes. Build an emergency fund, maybe throw a few bucks extra towards the loan every month then make accelerated payments.

[DoGoodThenGo]

FWIW student loan debt is often referred to as "good debt" in that the interest rates are often low (when compared to credit cards for instance), and the record of on time payments builds an excellent credit score.

If you can replace your savings easily and are comfortable living without for the duration, then by all means pay off your student loans. Or, consider simply doubling up the payments as with a mortgage to knock down some of the interest charges and pay off the loan sooner.

Would advise however if you have any other debt such as credit cards to pay them off first.