Comments on: Should I Pay Off Student Debt or Save Money?

By: Charles

Charles — Sun, 22 Nov 2009 16:27:05 +0000

First off, ignore Dave Ramsey. His advise is not very good. Saving the $1000 emergency fund is a great idea, but stopping there and concentrating only on debt is a recipe for disaster. a) If you have any emergency greater than $1000 you are going into debt. b) You will have no funds for anything you may want to spend on yourself. This idea of “no life until the debt is gone” is an addictive behavior that will fail for many people. Save up to at least $5000, which is what most people would consider a reasonable credit limit. Then anything you need comes from savings instead of a credit card.

Second, why has no one mentioned that the interest on student loan debt is deductible, and above the line at that? It may be costing you less than you think.

Make a plan to save and pay a good chuck. This small of a debt is something you can plan out to pay over a year or so and get done, while still having money for a reasonable lifestyle, money to help your girlfriend with expenses, and money to give you peace of mind should something happen.

By: Curious Cat Investing Blog

Curious Cat Investing Blog — Sat, 25 Apr 2009 15:13:20 +0000

I would be significantly biased toward building up an emergency fund in your situation. I might put about 20% toward the debt and 80% toward savings.

Only if the interest rate were very high (over 9% say) would I be swayed to focus on paying it down. I would still want to build up the emergency fund but I would do so more slowly in order to pay down a high interest rate date (certainly at rates over 15% I would do so at the expense of any significant emergency fund savings).

By: DDFD at DivorcedDadFrugalDad

DDFD at DivorcedDadFrugalDad — Wed, 22 Apr 2009 08:41:28 +0000

Split the money– part to debt and part to savings.

If the savings becomes large enough, crush the debt balance in one shot . . .

By: MoneyEnergy

MoneyEnergy — Wed, 22 Apr 2009 03:43:25 +0000

Wow, it’s a tough question to answer. Mostly I agree with Pinyo, Plonkee Monkey and the others. Save a small emergency fund first, then get rid of debt. Or do both at once by allocating percentages to each. I don’t know the rest of your situation, or your GF’s situation, so perhaps it isn’t as unequal as it seems to be just reading your question. But if you’re able to leverage the situation to get rid of debt, and the two of you are still together long-term, well, getting rid of debt will help you both.

By: Manshu

Manshu — Wed, 22 Apr 2009 01:56:45 +0000

Personally, having cash to last an year is worth much more psychologically than saving up on interest payments. But, that’s just me.

By: Abigail

Abigail — Tue, 21 Apr 2009 21:00:52 +0000

Given how tenuous almost everyone’s jobs are right now, I would split the difference between saving and student loans. Sure, you’re saving money in interest if you pay down that debt. But if you get laid off in the near future, you can’t get that money back. So I would make a larger payment than you have to, but also sock away extra funds if you can. (And this is coming from someone who has a knee-jerk, pay-down-debt-first-and-always reaction to loans etc.)

By: tom

tom — Tue, 21 Apr 2009 14:44:31 +0000

Leaving the rent payment to your GF may or may not be a good idea, it depends on what happens 6 months down the road when you are debt free, will you be comfortable with pulling your own weight again?

Will your GF get annoyed for supporting you for that time while you pay off debt?

To be on the safe side and not risk the relationship, you should keep paying rent and bills while saving and paying off debt. You essentially may need to live under a rock for a while until the debt is paid off.
I mean you made the jump into moving out with poor planning, at least that is how I see it, and now is not the time to slack off and let your GF pay your bills.

Don’t be surprised if a few months down the road, she tries to sue you or something because she gave you a “loan” to pay off your debt and now wants it back, cases like this have happened before.

By: Alan @ Saving For Serenity

Alan @ Saving For Serenity — Tue, 21 Apr 2009 13:50:45 +0000

Why not run the math and see if the extra interest would be worth the peace of mind of having an emergency fund first?

Every month you don’t touch that student loan debt, you are paying approximately $30 in interest. How comfortable are you with your situation? If something unexpected comes up (job falls through, car breaks down), do you have a support network to rely on, or is it just you and your girlfriend?

Only you can answer for your own situation. If you would rather pay off the debt as soon as possible, and feel comfortable doing that, then go for it. If you’d rather save a small emergency fund first ($1000 or so) then understand that you’re only paying about $30 a month in interest, so that might be worth it to you.