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Stinkin Student Loans
Old 12-29-2006, 04:26 PM   #1
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Stinkin Student Loans

I guess my issue isnt if Im being irrational but rather how irrational I am.

I have student loans of about $80,000.00 right now. I consolidated a few years ago and once I finish getting all my interest rate reductions it will be a loan at a 1.85% rate for the next thirty years. For now I am doing interest only as I figured I could pay down higher interest rate money (private student loans). However, the amount of that loan and the fact that none of my payments were going to principle made me add a bit to my monthly payment. I didnt like paying $200 a month and see it just disappear from my quicken graph (I know it kept my liabilities from increasing but it was still diheartening) So now Im paying a whopping $30 bucks a month towards principle.

Somedays I think Im being ridiculous and should just keep paying the minimum because I can get a better rate in a simple savings account.

Otherdays I just want to pay aggressivly to get rid of the loan even though in my head I know it isnt the smartest move. I just really hate that money hanging over me.

I dont think there is a question here- I know the best money move but having a big chunk of debt makes me crazy. Guess Im just in one of my "All Debt is Bad" moods.
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Re: Stinkin Student Loans
Old 12-29-2006, 04:31 PM   #2
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Re: Stinkin Student Loans

I've got the same "problem" with $120k at ~0.75% locked for 30 years. No way am I paying anything extra on it. Plus, the interest is tax deductible above the line! Sure, I'll be paying student loans well into ER, but I know I can beat 0.75% returns many other places. Look at it as an investment.
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Re: Stinkin Student Loans
Old 12-30-2006, 01:24 AM   #3
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Re: Stinkin Student Loans

I'm just curious, how did you guys get such low rates? I thought the lowest rates available on most student loans were still 4 or 5%.
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Re: Stinkin Student Loans
Old 12-30-2006, 09:19 AM   #4
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Re: Stinkin Student Loans

I feel for you young guys that have student loans. I come from the school of "all debt is bad", but in this case I would agree with justin. If you got a low rate loan that's fixed, don't pay it off.
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Re: Stinkin Student Loans
Old 12-30-2006, 12:52 PM   #5
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Re: Stinkin Student Loans

A low interest rate loan is just gravy for YOU... don't sweat it...

Put it in 'safer' investments such as bonds or CDs... don't play in the market with the money unless you have a big portfolio where the 80K can be paid by writing a check...

DONT SWEAT THIS LOAN EVER!!! Don't pay principal unless you have to...
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Re: Stinkin Student Loans
Old 12-30-2006, 02:39 PM   #6
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Re: Stinkin Student Loans

Quote:
Originally Posted by macdaddy
I'm just curious, how did you guys get such low rates? I thought the lowest rates available on most student loans were still 4 or 5%.
I gotta know this also. My kid's loans are mostly 6-8%. These are "PLUS" loans. Many consolidation offers come with 3% origination fee.
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Re: Stinkin Student Loans
Old 12-30-2006, 03:21 PM   #7
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Re: Stinkin Student Loans

Guess I'm in the minority...when I got out of school I couldn't wait to pay them off, and did w/in about 3 years...despite lots of "advice" from folks that it was a bad idea. I also paid off my 30 year mortgage in 3.5 years too despite the relatively low rate...just never could feel "wealthy" if I owed anybody any money.

My advice always is to either stay out of debt or else get out of debt as quickly as you can and you'll never regret it. I've never met anyone that regretted being out of debt; I know plenty of people who had great intentions to borrow money low, invest it high and pocket the difference - but that doesn't always work...it takes discipline, and you never know what twists and turns your life is going to throw at you 5-10-15 years down the road - all of a sudden you start drawing on the money that is supposed to be earning the higher interest and yet you still owe the original loan.

You'll never regret being out of debt. You can show me 100 spreadsheets that "prove" I am wrong...but I won't beleive 'em
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Re: Stinkin Student Loans
Old 12-30-2006, 05:31 PM   #8
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Re: Stinkin Student Loans

Quote:
Originally Posted by OldMcDonald
Guess I'm in the minority...when I got out of school I couldn't wait to pay them off, and did w/in about 3 years...despite lots of "advice" from folks that it was a bad idea. I also paid off my 30 year mortgage in 3.5 years too despite the relatively low rate...just never could feel "wealthy" if I owed anybody any money.

My advice always is to either stay out of debt or else get out of debt as quickly as you can and you'll never regret it. I've never met anyone that regretted being out of debt; I know plenty of people who had great intentions to borrow money low, invest it high and pocket the difference - but that doesn't always work...it takes discipline, and you never know what twists and turns your life is going to throw at you 5-10-15 years down the road - all of a sudden you start drawing on the money that is supposed to be earning the higher interest and yet you still owe the original loan.

You'll never regret being out of debt. You can show me 100 spreadsheets that "prove" I am wrong...but I won't beleive 'em
Hmmm... well, if your mind is made up then of course we can't change it no matter how much proof we give...

BUT, this is different than the people who do the credit card float, who might or might not make their payments on time and do have to pay down principal... AND are only getting the money for 6 months or a year and then flipping....

The OP said he has 30 years... I did a quick calculation and said he could put it in a 5% average CD and take the spread... in 30 years he would have an ADDITIONAL $167,000....

Now, if you want to throw away $167K to feel good that you are not in debt... go right ahead... but my worksheet shows that is is a very very bad idea....

And, let's say it is only 20 years... well, that is still $80K..

About your argument of what will happen.... if I am in such bad shape 15 or 20 years down the timeline then screw them... this would be the least of my worries... I am sure something else would be worrying me a lot more..
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Re: Stinkin Student Loans
Old 12-30-2006, 07:53 PM   #9
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Re: Stinkin Student Loans

Regardless of what extra you pay that 200$ is going to be paying interest.
Because you will be paying back in deflated dollars 80K will probaly be one weeks salary in 30 yrs
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Re: Stinkin Student Loans
Old 12-31-2006, 04:37 AM   #10
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Re: Stinkin Student Loans

Quote:
Originally Posted by OldMcDonald
You'll never regret being out of debt. You can show me 100 spreadsheets that "prove" I am wrong...but I won't beleive 'em
No problem, we'll work with you.

How much can you loan us at 6%?
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Re: Stinkin Student Loans
Old 01-01-2007, 07:02 PM   #11
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Re: Stinkin Student Loans

I locked in with a .7% rate reduction because I was "still in school". Then I get 2.25% additional reduction phased in over the first 4 years of the loan for using bank draft autopay and for paying on time. That's a net of 0.75%. I found a good lender (non-profit).

I invested a lot of the loans I took in real estate or stocks. It has worked out well.
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Re: Stinkin Student Loans
Old 01-02-2007, 12:56 PM   #12
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Re: Stinkin Student Loans

Quote:
Originally Posted by justin
I locked in with a .7% rate reduction because I was "still in school". Then I get 2.25% additional reduction phased in over the first 4 years of the loan for using bank draft autopay and for paying on time. That's a net of 0.75%. I found a good lender (non-profit).

I invested a lot of the loans I took in real estate or stocks. It has worked out well.
As a tax-payer, let me be the first to say I appreciate the opportunity to assist you in your first steps towards FIRE :.
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Re: Stinkin Student Loans
Old 01-02-2007, 03:20 PM   #13
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Re: Stinkin Student Loans

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Originally Posted by bbuzzard
As a tax-payer, let me be the first to say I appreciate the opportunity to assist you in your first steps towards FIRE :.
As a fellow tax-payer, I'd like to thank you for your contribution to my FIRE fund and to encourage you to take advantage of any legitimate government handouts .
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Re: Stinkin Student Loans
Old 01-03-2007, 08:23 AM   #14
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Re: Stinkin Student Loans

Quote:
Originally Posted by OldMcDonald
... I've never met anyone that regretted being out of debt....
Let me introduce myself. My name is Mike, I'm 34 and have a wife and one kid. There, you've met me.

We used to have a 30 year mortgage that we had to pay PMI because we were in a rush to get into a house. After 2 years, we re-financed our mortgage because the house value had gone up enough to get out of PMI, and interrest rates had gone down. The lender I picked had a 20-year fixed rate mortgage available at ~5%. We chose that instead of a 30-year mortgage because then we would get out of debt sooner and pay less interrest.

Within a year I regretted it. I saw how if I went with the 30-year loan and invested the difference in monthly payment, I'd have enough money to pay off the loan earlier. I could have done something like making the regular payments for 17 years, then doing a final lump-sum payment to pay it all off.
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Re: Stinkin Student Loans
Old 01-04-2007, 09:40 AM   #15
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Re: Stinkin Student Loans

Quote:
Originally Posted by OldMcDonald
Guess I'm in the minority...when I got out of school I couldn't wait to pay them off, and did w/in about 3 years...despite lots of "advice" from folks that it was a bad idea. I also paid off my 30 year mortgage in 3.5 years too despite the relatively low rate...just never could feel "wealthy" if I owed anybody any money.

My advice always is to either stay out of debt or else get out of debt as quickly as you can and you'll never regret it. I've never met anyone that regretted being out of debt; I know plenty of people who had great intentions to borrow money low, invest it high and pocket the difference - but that doesn't always work...it takes discipline, and you never know what twists and turns your life is going to throw at you 5-10-15 years down the road - all of a sudden you start drawing on the money that is supposed to be earning the higher interest and yet you still owe the original loan.

You'll never regret being out of debt. You can show me 100 spreadsheets that "prove" I am wrong...but I won't beleive 'em

^^^^^^^^^^^ I agree with what he said ^^^^^^^ Old school here, Paying intrest is bad, Collecting intrest is good. To each his own. However if you can get your intrest rate reduced to 0.75% even I would have to reconsider that option.
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Re: Stinkin Student Loans
Old 01-04-2007, 10:07 AM   #16
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Re: Stinkin Student Loans

Quote:
Originally Posted by MonarchDon

^^^^^^^^^^^ I agree with what he said ^^^^^^^ Old school here, Paying intrest is bad, Collecting intrest is good.
How about rephrasing it as: "Paying more interest than you're collecting is bad"?
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