Join Early Retirement Today
Thread Tools Search this Thread Display Modes
how should I pay off my study debt?
Old 07-17-2008, 01:53 AM   #1
Confused about dryer sheets
Join Date: Mar 2008
Posts: 4
how should I pay off my study debt?


I just finished my studyand hope people here can give me advice on how to pay off my study depth, which totals at about 13.000 Euro and has an interest rate of 4.3%
I'm about to accept a job offer which gives me a generous enough salary, and my partner earns about the same working only 20 hours per week. My salary will appearantly be increased by a per diem allowance for the first 8 months while we'll be away from home with hardly any personal belongings.

We have an imergency fund of 20.000 Euro and the same amount again in a 5.0% interest account (about the highest you can get here, 1.2% of interest goes to the state as tax ). We still have to pay tax and a few other high amounts from that. Furthermore, we'll move internationally a few times within the coming two years and need decent reserves for that even though my employer will pay most of it. Furthermore, we haven't build up any pensions yet even though we're in our 30s already.

- Paying off all at once doesn't seem to result in a reduction of the total but I'll pay less interest. On the other hand we lose a large chunk of our funds
- Start in two years and pay the minimum connected to my salary, as the lender, a state institution suggests
- pay off a large monthly amount once we know how much we need for a living. For the first 8 months we could pay off more money due to the per diem allowance.
- start now but with smaller amounts so we can save the spare money for our pension (if we finally understand how to invest decently)

What are your opinions on these different options?

sunflowergirl is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-17-2008, 07:12 AM   #2
Sarah in SC's Avatar
Join Date: Sep 2005
Location: Charleston, SC
Posts: 13,411
Sunflower, I like the idea of paying it off quickly in larger amounts (but perhaps not the lump sum of all your reserves), because that gives you more momentum for saving later, and helps reinforce the live below your means lifestyle.

But, I think some of our European members should chime in on this, as I don't have a pension and don't know that much about how the system works in your country and how the pension savings and student loans affect your taxes.

“One day your life will flash before your eyes. Make sure it's worth watching.”
Gerard Arthur Way

Sarah in SC is online now   Reply With Quote
Old 07-17-2008, 09:49 AM   #3
Full time employment: Posting here.
CitricAcid's Avatar
Join Date: May 2008
Posts: 546
I feel you should start paying it down pretty soon, I like the idea of a LARGE monthly payment to bring the principal down, so the interest isn't as high a portion of your salary as would be if you waited a couple years to move and start paying it down.

You mentioned that you might have to move in three years or so. Plugging in 13,000 Euro at 4.3% over 3 years shows that if you have an extra 386 Euro a month, the debt would all be gone in three years.
CitricAcid is offline   Reply With Quote
Old 07-17-2008, 10:57 AM   #4
Recycles dryer sheets
Abreutime's Avatar
Join Date: Jan 2008
Posts: 323
As slowly as you want. 4.3% is the best debt you will ever have. If you ever plan on not paying cash for something (ie. ever plan on financing a purchase like a house), you'll wish you could get 4.3%.

I would pay the minimum until these 3 conditions are met:
1) My cash reserve is completely built up
2) My investments are fully funded
3) I realize I won't need to seek (more expensive) financing in the time it would normally be paid off
Abreutime is offline   Reply With Quote
Old 07-22-2008, 03:33 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
Join Date: Oct 2006
Posts: 7,427
I agree with Abreutime, 4.3% debt is very cheap. I have no idea how interest on student loans is treated in Europe, but it shouldn't make much difference.

The only reason to pay it off is when you have excess money AND the interest rate on your savings drops to 2-3% (which is getting to be true in the US for bank CD rates.)
clifp is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Pay $15K upfront to pre-pay 20+ years of oil heat bills??? farmerEd Other topics 16 02-14-2008 06:46 AM
Study: 43% won't have enough in retirement dex FIRE and Money 28 06-27-2006 08:09 PM
Study: 43% won't have enough in retirement retire@40 FIRE and Money 2 06-07-2006 10:57 AM
Military pay (ECI) vs military retiree pay (CPI) Nords Other topics 0 11-05-2005 10:51 AM
Sleep study... cute fuzzy bunny Other topics 10 03-30-2005 02:50 PM


All times are GMT -6. The time now is 05:29 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.