General Question

Rememberme's avatar

Should I payback my student loan?

Asked by Rememberme (661points) November 18th, 2011 from iPhone

I have a student loan for about $11000 I pay about $116 a month. Right now I have a wonderful job where I make about $500/w and my spouse makes about $450/w. We are interested in buying a house in the next year or so. We have no other debt. What would be better, paying off my debt than saving up for a downpayment on a house? Or continuing to pay $116/m? Btw we are not interested in buying an expensive house probably under $80,000 (we have looked at some decent houses currently in that price range)

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21 Answers

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JLeslie's avatar

I am always in favor of paying off date. What I would do is save save save save. Continue to pay the $116, and then when you have $20K+ in the bank, pay off the loan (It will be lower by then) and start looking for a house while you continue saving.

@johnpowell What are you talking about?

Lightlyseared's avatar

If you stop paying the student loan in the US isnt that bad? Don’t the sell the debt to private and unscrupulous debt collection companies.

Response moderated (Unhelpful)
Response moderated (Unhelpful)
Adirondackwannabe's avatar

I would pay the $116 a month and save everything else you can. It builds your credit record and the interest rates are usually reasonable. Paying off the loan early doesn’t do much to improve your credit score.

jrpowell's avatar

Yes I read the question wrong. I thought they wanted to stop paying. That being said, student loans are about the lowest interest rates you will find so I would save as much as you can for a down payment and just pay the minimum on the student loan.

Blackberry's avatar

@JLeslie Hahah. Sorry. I would just keep paying monthly. Sorry OP!

YoBob's avatar

It really depends on the interest you are paying on your student loan.

Depending on what kind of deal you can get on a home, you might be able to work out a deal with your finance company to roll the balance of your student loan into your mortgage.

LostInParadise's avatar

It is a simple matter of arithmetic. If the mortgage rate for your house is higher than the loan interest rate then hold onto the loan and apply it toward your house payment. Otherwise pay off the student loan.

anartist's avatar

You can always choose to pay additional capital on the student loan while the money is good without biting the whole bullet; that looks good to potential creditors and accelerates the payback while effectively decreasing your interest rate.

WestRiverrat's avatar

Pay off the debt. While student loans are cheap, they are one of the few debts that cannot be discharged by bankruptcy. Even the IRS doesn’t have that priveledge yet.

That means even if you declare bankruptcy you will still be stuck with the student loan.

@anartist has a good point, if you make double payments, you will reduce the student loan debt and should still let you save a little towards a down payment.

flutherother's avatar

I don’t like debt and my instincts are to pay it off as quickly as possible. In these circumstances however I would feel the priority was to get a home so I would keep the debt and concentrate on buying a good house. Student loans are safe debts to have and at this rate it will be paid off long before your mortgage is.

JLeslie's avatar

@flutherother Why is the priority to get a house?

flutherother's avatar

It is just my suggestion but everybody needs somewhere to live and prices are low just now. Once you get a house of your own you can start planning your life. I wouldn’t let the student debt hold me back in this situation.

john65pennington's avatar

Solution: one of you work part-time in addition to your regular job and pay the student loan off in a hurry.

You can do this. I worked a part-time job for 20 years.

WestRiverrat's avatar

What are the chances of you moving in the next 5 years? If you are not planning to stay in the house more than 5 years, it is probably better to rent. With the housing market like it is, you may not make enough to cover the mortgage on the house if you move for your jobs and have to sell it.

reijinni's avatar

If you have the money to paid it off, do it. Otherwise, continue to do it monthly. As far as the house, open a savings account and use that money to buy that house.

pageiv's avatar

Paying $116 is going to take you a long, long, time to pay off. Besides that debt will be counted against you when you seek a mortgage.

perspicacious's avatar

Are you a college graduate? “Payback” makes me ask. If you borrowed money you should pay it back. PERIOD.

WestRiverrat's avatar

@perspicacious the OP want to know if they should pay it off at a higher rate or keep paying just the minimum requirements.

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