Should I accelerate my payment of student loan?

**Petunia 100** · 08-14-2011, 05:30 PM

Are you still a student? How much do you have in savings? Do you support yourself?

**scintor** · 08-14-2011, 05:35 PM

I have about $15k in my saving, and currently living at my parent's place. I plan to move out.

**Petunia 100** · 08-14-2011, 06:47 PM

Have you finished your education? Do you have a full time job?

Make a budget before you pay a big chunk of money on your student loans. At 7%, I think prepaying is a good idea. But you shouldn't prepay with money you need to pay living expenses. And you don't want to run short, then need to rely on credit to cover unplanned expenses.

**scintor** · 08-14-2011, 07:01 PM

I just figured my budget. I'm working full time; I make $3k a month after tax. So, I break down my monthly expenses as follow. This budget assumes that I pay off $20k of student loan.

Gas+Water 100
Internet+phone+TV 75
Cell Phone 100
Electricity 70
Car Gas 150
Car Payment 217
Student Loan 400
Essentials(Food, Clothes,etc..) 350
Rent 800
Buffer 200
Saving 538

**Petunia 100** · 08-14-2011, 09:38 PM

Don't forget about funding your retirement.

What is the interest rate on your car loan?

**danieldroga** · 08-15-2011, 01:10 AM

It is good that as early as now, you start allotting budget for your future expenses. Make some investments and learn how to earn a lot of money so that in times when you need money, you will be able to cover everything up.

**Banimal** · 08-15-2011, 07:31 AM

I remember when i first finished school and went to grad school, i made a budget similar to yours. One thing I forgot to put in was immediate large expenses like a furniture (i forgot i needed a bed to sleep on). Since you haven't moved out yet to your new place make sure you make a list of stuff that you have to buy and use cash for it. Don't get more debt by spending your savings to prepay your student loans and then having to use a credit card to pay for the other necessities.

**Eric80** · 08-22-2011, 11:53 AM

Should I accelerate my payment of student loan?

In theory it would be great to put that large chunk into the student loan, but I am a prudent person. Depending on your situation and depending on what best for yourself but I would put 75% into the loans and keep a $5k for a rainy day. You never know when you will need it. but that is just me.

**snshijuptr** · 08-22-2011, 12:40 PM

Personally, I would keep you $20K for the first 3-6 months after you start working and move out (if both happen in different months, count from which ever happens later). When I graduated college I had a large amount of savings and planned to pay cash for a car. My parents talked me out of it, and I'm glad. I needed the money to pay security deposits (apartment, cell phone, utilities all want one), buy furniture, survive until my first paycheck (oh yeah you have to work before you get paid!), pay insurance premiums, start paying for my wedding, and I wanted to start an emergency fund. I accelerated my payments, but I kept my lump sum.

This is a personal decision based on your own circumstances. Put the money where it is difficult to get (such as a savings account at another bank). Then wait for your life to stabilize. When you have a handle on your real income (i.e. you 2+ full pay stubs) and your real expenses (i.e. 2+ months of expenses without large purchases). Once you know this, you will be able to make a clear decision about paying a lump sum. A couple months interest will cost you around $230 which is much less than if you have to put this on a credit card.

**ez1** · 08-22-2011, 04:31 PM

I have a huge chunk of student loans that are canceled upon my death, while others would still have to be paid from my estate. I've decided to do forbearance on the ones that die with me so that I can focus on the ones that actually affect what I leave behind. In my case, it's the Direct Loans that die with me. Once I've paid off the other ones, I'll start paying down the Direct Loans. This also works well because the Direct Loans have the lowest rates, even though the rate goes up 0.25% because of the forbearance.

**Fredy Atwater** · 09-04-2011, 08:59 PM

Scintor

Put 15K towards your student loan and keep 5K for emergency expenses. Don't get into more debt. Save if you can and pay that loan as soon as possible. Don't forget to be a careful buyer. That's where we can make mistakes.

You have got a good plan.

Should I accelerate my payment of student loan?