OT: Student Loans

[CrazyEyeKillah]

"Here's one more quick question...I contribute to my 401K and some other retirement vehicles. I am a financial planner, so I know the importance of starting early, so I really don't want to stop doing that, but would it be smarter (from those of you who know) to go ahead and contribute that towards my student loans instead of 401K?"

I think most financial people would say, if your company matches your contributions to the 401K, continue to contribute to the 401K up to the company match because that it is essentially free money. If you are currently doing more than the match, put that excess into your student loans.

Your student loan debt is definately not bad at all. As someone stated earlier, it is well below the average. I on the other hand am sifting through the issues associated with 160K in student loan debt due to marrying a fellow law student.

 

[TheStateUofMS]

Yeah man I'm not stressing about it, I just hate seeing paying almost double what the original loan balance was, but the tax deduction is pretty nice. Anyway, hopefully you're wife will be able to pay that off soon.<div>
</div><div>Like I said I'm a financial planner and I met with a med school student who was going to have close to $200K in student loan debt after school and he planned on having it paid off in 5-6 years or less....was he crazy? I don't know, but I do know that doctors and lawyers make a hell of a lot of money.</div>

 

[HighPointDawg]

in my career.. Basically same company (one acquisition in there) and nice upward movement during my time..

I also just balanced my checkbook and my $168 student loan payment and wife's $195 (17- MC never send a kid there) student loan payment posted for the month. I have contributed to my 401k throughout and also own rental properties and 2 LLC business's that have some cash flow but mostly just a nice tax deduction.

That said.. if I could go back to my first 2-3 years out of college and back off the retirement stuff and pay my loan off (nothing I can do with the wife loan that her parents stuck her with after making her go to that awful overpriced school) I think I would do it.

Just the mental state of having one less "bill" would be worth it...

Oh and I have 2.8% rates.. which is how I've justified not paying them off for years

 

[patdog]

You should always contribute to the 401(k) at least as much as your company will match. If you don't you're turning down free money.</p>

 

[eurotrash]

Clevon in "Idiocracy" knocked up half the trailerpark. He ain't need no money. But, like you, I waited as well. The values of a middle class, college educated...uh...American.

 

[TheStateUofMS]

My company doesn't match because I have a pension, but I contribute 5%.

 

[ckDOG]

We will be paying down a small fortune for the next 25 or so years at fixed rates. The way I see it, after 15 years of inflation, those last 10 years of payments will seem like buying a happy meal...

 

[boomboommsu]

1. My federal student loan was negotiated down to a 1.375% rate.

2. "Prime"IS the 3-month treasury rate, currently 3.25%. The rates change when the prime rate changes, which is Jan, April, July, and Oct 1. It hasn't changed ina while though.

3.http://www.finaid.org/loa...ivateconsolidation.phtml

4. correct. but when privately consolodating, there is a 1% origination fee. i'm not sure on the round up rate, i thought it was 1/8 or .125%. maybe the round up is different for public vs private.

granted, most of my experience has been with the private market. maybe the only way to lower your federal rate is to lessen your term (like i did lowering mine to 10 years).

 

[fishwater99]

[No message]

 

[boomboommsu]

if you're paying $2500/year for 25 years, then your $2500 payment in 2037 is really ~$1200 with 3% annual inflation. i'm not gonna do the math, you're still paying a good bit more than you borrowed, but leaving out inflation makes it seem worse than it is.

 

[boomboommsu]

in strict econ terms, you may or may not see a 6.5% return on your 401k funds. IMO we are set for a decade or longer of low returns, unless you are a trading house with a super computer located next door to the stock market exchange running HF algorithms. adding in the tax savings, if you hold those funds until you retire, AND your tax rate on those marginal dollars is less than your current tax rate, then you MIGHT see a better return in the 401k if you can pull an average annual5 or 6% return after inflation.

however, that money would never be available to you for decades. if you pay down debt with it, then when it comes to borrowing money for say a house, in effect it is money available to you.

IMO,stocks are overvalued right now, and bonds are priced very high, and emerging markets....i can't make up my mind on. any time in 2010 to mid-2011 i'd have said keep the 401k contribution just to diversify a little bit, as long as you can afford to still lower your debt term to 10 or 15 years. but right now i'm expecting a crash, and don't see much of a return on current contributions, so i'd say pay down debt with it at present.

but please follow what i said before, and assure that your extra loan payments are going directly to principle on your highest rate loan. the losses from not getting that done right outweigh any of these other marginal returns.

 

[woozman]

No doubt. My wife and I waiting to have kids until we were in our 30s and by then we both had really great jobs and were making good money. So in our case it didn't make sense for one of us to stay at home (i.e. the income lost from one of us quitting work was not close to the amount that would have been saved by skipping dacare).

But you're 100% correct, those little bundles of joy are expensive. Our daycare runs $950.00 per month and that is after they apply a $100 discount for having two kids enrolled. Then the food bill is much more, meds, doctor visits, bigger (safer) cars, etc.

I'm about to get two raises, though. My daugther starts Kindergarden this fall ($425/month raise) and my son is almost potty trained (roughly $20/week raise). I also quit smoking last month so that's good for another $160/month. Damn, I may buy a Jag! Or maybe start saving for college and a wedding!