If the $1200 does not accrue any interest, I'd recommend taking $100 each month and paying down that balance for 9 months ($900 july'09-mar'10) and then in April payoff the $300 (before May 2010).
If there is interest charges on this debt, then always PIF (pay in full) each and every month in order to not take on additional debt (in the form of compounding interest charges). PIF also shows in your credit reports, and proves responsibility and no interest in adding to your debt.
Regarding the student loans...
Generally it's best to start with the highest interest loan first; and Sallie Mae is in deferrment so leave that alone for now. Concentrate on the other 6.8% loan from Wachovia.
Currently you have 40k+ of debt mostly in the form of student loans. Your income is 41k, but you have $500 left over each month to either save or throw at debt. Which is not a good debt to income ratio... but student debt is usually viewed more favorably.
I'm not sure whom you talk with, but I think you need to talk with a true financial advisor, not a real estate agent, nor any type of bank, nor anyone who stands to gain personally by telling you something that just is not in your best interest. Just general people may not know what's in your best interests either. Some of the things you are being told sounds off-the-wall to me.
Should I save cash or pay off debt before I buy a home?
Pay Off Debt or Save for a House
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On the other hand, if you have low-rate student loans (below 6%), then you should save for a house instead of pushing to pay them off. Student loans are considered good debt, so lenders look upon them more favorably. In addition, much of the time you can earn a better return on investments. And finally, those loans can be deferred or put into forbearance if times get tough.
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Debt Total: Of course there is an exception to this policy. If you have a large amount of debt, say more than 30% of your income goes to debt repayment of any kind, then you need to start paying down debt.
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