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Student Loan and Credit Card Payments When Money is Tight

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BBKT
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Student Loan and Credit Card Payments When Money is Tight  Reply with quote  

Hello,
I have several government and private student loans that are about $90,000 total right now (I went to school for five year total for my masters and didn't get much in the way of grants). Here's how the loans break down:

Private #1: $26,500 at 4.35% variable. $175 minimum monthly payment, 18.5 years left of repayment.

Private #2: $7,800 at 4.94% variable. $35 minimum monthly payment, 17.75 years left of repayment.

Private #3: $28,600 at 4.94% variable. $226 minimum monthly payment, 15.25 years left of repayment.

Gov't Loan #1: $18,100 at 5.618% variable. $221 minimum monthly payment, I think there's 9.5 years left on this loan maximum.

Gov't Loan #2: $8,200 at 3.625% fixed. $76 minimum monthly payment, I think there's 11 years left on this loan maximum.

Although the minimum payments are $733, we've been paying extra on each loan, totaling $850-900 depending on how much extra we have.

We also have a credit card balance of $8,000 at 0% interest that we will have paid off in just under a year. All extra money and our tax return is going to this credit card so it will be paid off by the time we start trying to get pregnant. Once the credit card is paid off, all extra money will be going into our savings to prepare for my loss of income while on maternity leave. I estimate we'll need $5,000 additional cash saved up by the time we have the baby, about two years from now. This will cover all my part of the expenses for 6 months, plus a little extra just in case.

My question is whether we should continue paying the extra on the student loans every month, or if I should just pay the minimums from now on and stock the rest in savings. I know it's better to put the money on the higher interest to get the debt paid down, which would be the student loans as I'm only getting 1.1% interest in my savings account right now. However, I figure even if I pay the extra on the student loans, they will not be paid off by the time I need the money for the maternity leave. I'm putting away $100 a month right now, and have $3,000 in liquid savings. I'd like to add $5,000 to that, and have $8,000 total by the time I'm ready to take maternity leave in approximately two years. I will get extra income when my husband deploys in a few months and I'm planning on getting a second job soon. All extra money will go the the credit card and then into savings.

So what is the smartest thing to do? Save the money faster first, or continue to pay extra on the debt so it will be paid off sooner in the long run? Or something else entirely?

Thanks!
Post Fri Jul 30, 2010 1:58 am
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coaster
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You sound like a very astute individual, financially speaking. I'd suggest you up your target for your cash to entirely replace your lost income (net of taxes, of course) PLUS another six months. The interest rates on all your loans are very low; there's no sense paying them down early. I think the conclusion is clear. Smile

~Tim~
Post Fri Jul 30, 2010 3:10 pm
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oldguy
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You don't want to prepay <5%, 20 year loans - instead, put you income to higher and better use. Start your wealth building plans where you invest in 30 or 40 yr investments that earn about 10%. The long term compounding effect of borrowing at <5% and earning 10% is a surprise to most people.

But there is a problem - most of your loans a variable - can you consolidate and get a fixed rate loan? It would be worth an extra 1/2% or 1% to have FR loans, it protects you against rate hikes for the 20 yrs, think of the 1/2% as 'hike insurance'.
Post Fri Jul 30, 2010 3:41 pm
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whitebeach
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its the nice information sharing bu thread poster
Post Mon Aug 02, 2010 5:21 pm
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mukeshkkashyap
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You sound like a very astute individual, financially speaking.
Post Wed Aug 25, 2010 10:56 am
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littleroc02us
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Congrats on the pregnancy! What I always say is to protect the home first. Pay minimum on the school loans and credit cards. I would stock away a lot of money for baby expenses and lost of wages. Take care of your family first and when it is time you can bang out these loans and cc's.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Wed Aug 25, 2010 2:23 pm
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davidbkeegan
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I would say pay the minimums and save up. In a baby's first year you can easily spend up to $9000-$11000 dollars. Diapers alone cost $1600-$2300 by the time they're potty-trained. Save as much as you can!
Post Thu Aug 26, 2010 9:13 pm
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Adria.John
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quote:
Originally posted by davidbkeegan
I would say pay the minimums and save up. In a baby's first year you can easily spend up to $9000-$11000 dollars. Diapers alone cost $1600-$2300 by the time they're potty-trained. Save as much as you can!


I agree with this. Savings can help you in long way.

Loan Expert!
Post Fri Aug 27, 2010 12:59 pm
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mukeshkkashyap
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i agree with you
Post Fri Aug 27, 2010 1:39 pm
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teal1066
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If you are a student you can not take loans.If you want to repay your loans you should have a job.
Post Mon Aug 30, 2010 1:12 pm
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Adria.John
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quote:
Originally posted by teal1066
If you are a student you can not take loans.If you want to repay your loans you should have a job.


I think, you have not heard about student loans.

The objective of student loans is to help students in paying their fees during education. They differ in countries but the main types are private student loans, college student loans, educational loans, undergraduate loan. Theses are made available by the government and they come with lower interest rates when we compare them to other and regular loans.

Loan Expert!
Post Tue Aug 31, 2010 10:33 am
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BBKT
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Update on My Situation  Reply with quote  

Here's an update on my situation:

We are squeezing every dime out of our budget that we can, while paying more on the student loans and putting all extra money into savings. We are currently savings between $300-500 a month, plus any "extra" bonus income I get from selling things around the house that we don't need anymore (bird cages, beanie babies, old wedding supplies, books, etc). We currently have $5,500 in liquid savings. We are still paying way above the minimums on the student loans and if we keep it up, we are on track to pay them off in 8-12 years. We will have our credit card paid off by June 2011. When my husband deploys, I expect I'll be able to put away around $600 a month in savings. I also make tips from my job (around $150 a month) that I plan on putting away in either savings or starting a retirement account.
Post Mon Oct 25, 2010 7:03 pm
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coaster
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Those who wish to post a response to the above post should do so here:

http://www.money-talk.org/msg69510.html#69510

~Tim~
Post Mon Oct 25, 2010 10:41 pm
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Benstoke
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This will cover all my part of the expenses for 6 months, plus a little extra just in case. NS0-160 exam dumps
Post Wed Apr 17, 2019 9:49 am
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ranjith422
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I agree with this. Savings can help you in better way.

observations and solutions for cable companies
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