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    Pay off student loans while still in college?

    I have a question: would it be smart/better to start paying off my student loans now while I'm in college? I know I still have that 6 months grace period after graduation before I start having to pay off my loans. But to minimize the debt and easier on myself, should I just take whatever extra money I have and start having it go to my loans while I'm still in school for about five more months?

    #2
    Originally posted by moneyignorant111 View Post
    I have a question: would it be smart/better to start paying off my student loans now while I'm in college? I know I still have that 6 months grace period after graduation before I start having to pay off my loans. But to minimize the debt and easier on myself, should I just take whatever extra money I have and start having it go to my loans while I'm still in school for about five more months?
    It's never a bad idea to pay down your debts. The answer of "better" lies in the interest rates. How much are the loans charging in interest? If you invest that money elsewhere, will you make a better (after-tax) return than by paying down your loans? If you can more or less reliably make more than your loans cost you in interest, then don't worry about the loans for now...besides, 11 months really isn't that long. However, if your loans are charging higher interest than you can make elsewhere, paying down the student loans could be smart for you.

    Also look at the big picture -- do you have an emergency fund in place? Do you have savings sufficient to cover your moving/moving in/job-searching costs once you're out of college?
    "Praestantia per minutus" ... "Acta non verba"

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      #3
      The best answer...it depends.

      What kinds of loans do you have? If they are subsidized (meaning the government is paying the interest while you are in school), then no, put the money in the bank earning something, then pay them off at 5 months after graduation (ie, before interest kicks in).

      If they are not subsidized, then yes pay at least the interest charges now if you can.

      You should check the list of loans you have, who you owe, how much the amount is, what the interest is, whether they are subsidized, what the grace period is, etc and then figure out the best way to go.

      I would also build up a $500 emergency fund before doing anything else - don't use it for books, supplies, fun stuff, etc but have it ready for when you graduate.

      good luck!

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        #4
        Don't pay off your loans early unless you have plenty of money to spare. When you graduate you will want a good amount of money for things like final university fees, moving expenses, and possibly unemployment. Flexibility in the months after college is worth the couple hundred dollars in interest.

        Additionally, many student loans are triggered by an initial payment to drop subsidies and deferments. Don't lose your flexibility.

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          #5
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          Last edited by disneysteve; 02-20-2012, 04:22 AM.

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            #6
            You should complete a current assessment to understand your total assets and liabilities. From there, estimate how much money you'll need to support yourself in the next 6-12 months. If you already have a job lined up, that amount could be less than if you have no job lined up. Don't forget to add in moving costs, deposits, new clothes, furniture, etc.

            If you have enough to cover all of those expenses, I'd go ahead and pay off the student loans so you can start off debt free. I don't agree with borrowing money to invest in the stock market, and savings rates are so low it's not worth it.
            Current Status: Traveling North American in our 1966 Airstream. Check out the remodel here.

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              #7
              Originally posted by moneyignorant111 View Post
              I have a question: would it be smart/better to start paying off my student loans now while I'm in college? I know I still have that 6 months grace period after graduation before I start having to pay off my loans. But to minimize the debt and easier on myself, should I just take whatever extra money I have and start having it go to my loans while I'm still in school for about five more months?
              Its always nice to start off your professional career with a clean slate of zero debt.
              Having a solid budget in place lets you know how much money you have available to spend, how much you need to save and how much of your loans you can pay each month.

              In my opinion its always good to pay off loan as soon as possible.
              You can also pay it back if you are saving money.

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                #8
                Yes, pay off your student loans asap, but make sure you have an adequate amount after paying them down to live off of obviously. Even if they're not collecting interest yet, they will as soon as that grace period is over. However, unless you have only subsidized government loans, they will be collecting interest, and then each month the interest is accumulated and THAT interest collects interest. Look at your current student loan situation, but I'd suggest even for ease of mind to pay them off, or at least start paying them off based on your current budget.

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                  #9
                  You have a great future ahead of you. I can truly say. You are very responsible on how you manage you finances. It is good that at younger age, we take responsibility of settling our student's loans to avoid any hassles and stress in the near future.

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