Debt Repayment Advice/Input

[showtime]

Hi everyone, first post here and looking forward to hearing some advice on our situation.

To summarize, me and my wife got married in 2011 and both just turned 27 years old. We live in Chicago and I make around 80k/year including bonuses and my wife makes around 55k/year including bonuses. My salary has been increasing around 5-7%/year since I first started working there in 2008 and my wife's is pretty flat as far as annual salary growth.

Right now, we are renting and have no debt other than student loans (which is very sizable). We share 1 car (paid for) which works as I commute.

Anyways, about 4 months ago we got fed up and decided to get on the Dave Ramsey plan to pay down our huge $117k student loan debt as fast as possible. We came out about $15k ahead after our wedding thanks to our parents and after our emergency fund threw that chunk at our loans. Since March, we've paid off an additional $16k at our loans (Wife's bonus came in of around $5k).

So now with our loan balances of today we still owe around $86,500. My number crunching shows we can have this paid off in around 26 months, most likely a little sooner with bonuses and salary increases.

I guess my question is whether this is still the best plan since all the loans are now at 2.3% or lower (variable rates though). I get an employer match of $0.25 per dollar I invest up to 5% of my salary - I am contributing the minimum to get the match. Per Dave Ramsey we stopped my wife's since her employer doesn't match to get as much cash to attack debt with. I have around $23k in 401k and my wife has $3k since she barely started before we got on the debt snowball.

Below's our loan information (hopefully formatted well). Any input/thoughts would be appreciated. I've read that some would say to pay minimums and invest as much as possible since we are so far behind. My thinking was that in 2 years we'd both contribute 15% of salary to retirement and let our income build our wealth since we won't have any payments (we'll then save for a down payment after debt is paid too).


Loans
$12,450.44 @ 2% (MP= $102.32)
$12,126.28 @ 2% (MP= $99.66)
$11,549.93 @ 1.75% (MP= $93.64)
$13,129.89 @ 1.75% (MP= $106.44)
$11,593.08 @ 2% (MP= $91.15)
$12,825.33 @ 2% (MP= $100.84)
$10,809.37 @ 2.33% (MP= $133.37)
$2,065.57 @ 2.14% (MP= $58.44)

Total $86,549.89

[riverwed070707]

You're going to get varied opinions here becuase your overall financial picture is pretty good. Personally, with the loan balances as high as they are I would definitely want to pay them off quickly HOWEVER I would never stop contributing to retirement to pay off a low interest student loan. You should both be contributing AT LEAST 10% of your income to retirement, have a small savings for emergencies and then tackle the debt with what's left. Increase retirement to 15-20% once the loans are paid. You're young enough you definitely won't be behind.

That's a massive amount to pay off in a short time so congrats to you and don't forget to give yourself small rewards along the way to avoid burnout! Keep up the good work.

[snafu]

Has your wife explored why her income has remained flat? Is there potential for significant increases elsewhere or is it the industry? Does she get other benefits like job satisfaction or colleagues that makes up for the lack of money?

I suggest you contribute 12% to retirement fund as the earlier years are more important than later years. What does the plan hold? you need to monitor your holdings and understand the progress.

[showtime]

Has your wife explored why her income has remained flat? Is there potential for significant increases elsewhere or is it the industry? Does she get other benefits like job satisfaction or colleagues that makes up for the lack of money?

I suggest you contribute 12% to retirement fund as the earlier years are more important than later years. What does the plan hold? you need to monitor your holdings and understand the progress.

My wife's a HS teacher so the salary is pretty much industry related. I know at least at her current school salaries are pretty static, maybe get COL adjustments. As far as whether she could get more elsewhere, I'm sure she can but loves her kids, school, teachers, etc. If she were to get her Masters down the road that could increase her earning potential down the road.

My 401k plan investments are attached (hopefully).

[jpg7n16]

I don't blindly follow DR. Especially in a situation like this. On high interest rate debt, paying off early makes a lot of sense. Not in your situation though.

I would MUCH rather you build up your retirement savings than accelerate payment on these loans. Heck, you can find FDIC insured CDs paying more than that. For long term investing, I'd expect that you would be significantly better off in 30 years if you paid the mins on the SLs and invested 15% of your income towards retirement.


Your wife's a teacher. Does her district have SL forgiveness programs? Does your job?