There was a time I swore I’d never pay off student loan debt a second sooner than required. Why would I do something dumb like that? There were so many benefits to keeping it around until 2020.
By paying off my student loan, I’d avoid 2.625% of interest on the outstanding balance each year. That’s nothing. I know people who pay over 5.00% on their government loans. And don’t get me started on people with private student loan debt. I was miles ahead of them on the interest rate front. It felt real good knowing I had the foresight to graduate from college when interest rates were at historical lows.
I’d come out ahead just by banking the money I could’ve used to pay down debt. Not long ago, ING Direct was paying 4.50% – 4.75% on savings accounts. Since I didn’t have more than $100,000 (former FDIC insurance limits) on deposit, the risk of losing my money was nonexistent.
Then, get this. After four years of on time payments, Sallie Mae reduced my interest rate a full percentage point. Who would race to pay off a debt that only cost 1.625% in tax deductible interest? And on an installment loan too? Please. It’s one thing to pay off lines of credit or payday loans. But once you pay off your student loan, it’s paid. You can’t go back to the lender and ask for credit in the event of an emergency.
Did I mention that 1.625% was fixed? As long as I paid my bill on time, I’d never have to worry about the interest rate increasing.
With student loans (at least the government kind), you have more options when it comes to repayment. If you lose your job, you can postpone payments by placing your loans in deferment or forebearance. So even if I stumbled on temporary hard times, I could avoid making the payments without hurting my credit.
Yeah. Paying off student loan debt made absolutely no sense.
So why’d I do it?
Because freedom tastes good.
I don’t expect you to agree or disagree with me. Everyday another person makes the decision to extend the life of a student loan as long as possible. (I have no statistical evidence to support that statement.) What I’d like to know is the choice you made. If you have student loan debt, do you plan on paying it off early? Why?
|
{ 47 comments… read them below or add one }
← Previous Comments
I’m choosing to pay off my loans early because I have too many! I don’t want that monthly payment for the next 30 years, would have more financial freedom without the burden of such a high payment each month, and my loans aren’t exactly dirt cheap interest like yours )
Great post – I know how you feel! But I have to say, those are some really good terms there…… I'm taking the middle road and just paying off one of the smaller loans – just for the psychological value of knowing I have one of them paid off and that if I did fall on hard times, there'd be that much less I'd still have to pay in monthly payments. The value of psychological freedom should not be underestimated. At the same time, having those student loans there is also a great "stick" to keep you motivated and moving forward.
Freedom does taste good
Sweet, sweet freedom…
My loans were at 8%, so I had no choice but to attack them like a polar bear close to starvation.
@MoneyEnergy – Thanks for stopping by. I couldn't pass on the opportunity to gloat about those terms.
Who knows? After you pay off one student loan, you might get the urge to knock out the rest of them.
@Jason @ My Money Minute – 30 years?! That's a mortgage. I've been out of debt since December of last year. It's very freeing to know that the money you make is yours to keep. I wish you much success in getting out of debt.
@FabulouslyBroke – Nice. I'm sure you saved a ton by getting rid of them. I don't think many people can craft a logical argument for holding on to 8% student loans they can afford to pay off. Especially in this environment. Even "high-yield" savings accounts are paying around 1.5%. Pathetic.
Actually, both my wife & I went to law school. We like to say we have three mortgage payments, but only one house!
We’re attacking them though. Hopefully they’ll be gone in 6 or 7 years rather than 30.
My interest rate wasn’t as low as yours, but I paid mine off because I woke up one day and realized that it had been hanging around for forever and a day. Just a few months and a little bit of focus later and it was gone! I didn’t realize how much it was mentally weighing on me either until the weight was gone.
It certainly *does* make sense to pay off any loan in the current economic climate. 1.6% ROI would be incredible by today's standards – most money market accounts are paying considerably lower than that nowadays (CDs are a notch higher, but you lose the liquidity).
And, yes, freedom from debt has a certain emotional gratification that I wouldn't dispute.
I did the same thing for the same reason. My loans were older, though. So my interest rates were more like 5-9%. But it just felt good having that extra few hundred dollars in my monthly budget…to do other things with…like pay off credit cards and such.
I agree with @Jackie, debt feels like a weight. Freedom feels light and wonderful.
Debt-Free Land is a wonderful place. Been there twice. Hope to get there again next year.
Believe me, someone who has had student loan debt for many years, you did the right thing. I can't wait to get the thing paid off asap (it's third in line of my debt snowball).
@Jackie – It seems like once you get started paying down debt, money comes from everywhere. I actually think it's money you had all along, but you just weren't using it optimally.
@Jason – You're right. I sold a small amount of individual stock back in April 2008 to put towards a car loan I had at 6.5%. Considering how that stock is performing now, getting rid of it was a really good decision. Ten years from now I may regret selling it, but I seriously doubt it.
@Venus – Aah. Debt-Free Land. I want to live here forever. Wishing you well in your return.
I used to calculate the amount of money freed up by paying off debt at least once a week. Because I'm out of debt, I can reasonably save about 1/2 my net income. I may not always choose to do so, but I like having the option.
@Bucksome Boomer – Are you a Dave Ramsey listener?! Listened to that guy almost every weekday during the journey out of debt. Are you going to call in and scream "I'm debt free!!!"
Yes, like Enemy of Debt I plan to scream "I'm debt free!" some day. I became a Dave Ramsey fan via his Financial Peace University course through my church.
Funny post with good points, I liked it a lot. Just want to let others know that if you do have to take out private student loans be absolutely sure to do your homework and research rates before you take on any sort of debt. Sites like SimpleTuition.com have great comparison tools that let you sort lenders by interest rate, monthly payments, total cost etc. so that you can make a smart decision about funding your college education.
I also have my govt loan @ 1.625% with 12 years to go. Other than a small 2nd mortgage which will be paid off next year, we have a 20yr fixed mortgage. I would love to have the student loan paid off, but I have a hard time justifying spending the cash other than for psychological reasons.
Paying off my student loans will complete my debt snowball. I’m extremely ecstatic about December 2017. People think I’m crazy because I’m single, thirty, driving a hupty and delaying home ownership (i.e living with my sister, her husband and my 2 yr old nephew) to pay off Uncle SAM. It’s definitely a mind thing. I don’t like the idea that my student loans will be taking a quarter of my monthly net salary for two decades. That just doesn’t sit right with me. The sooner I can get this over with the better.
I would like to comment about the value of a college degree. Most students go about this the wrong way instead of going to college and specializing in some kind of tech field or something else and than go out and get a decent job in their field of expertise that pays far more than wallgreens for example you do not have to have a four year degree to get a really good job that is if you go into the right field. Than use the generous benifits package that the company offers and this most likly includes paying for part of your continuing education. Also never count out wallgreens or kmart or really any large company because they may have a job in the field you are in even wallgreens has personal involved in web design or computer science.. Also if you start working in the speciality field before you leave college you will be in the sweet spot compared to your counter parts that are not.
Ahhh my interest rate will be over 6% when I take out loans for law school. I'm so jealous of the rate you had. I would also like to pay it off as soon as possible though.
My partner and I stumbled over here coming from a
different website and thought I may as well check things out.
I like what I see so now i’m following you. Look forward to checking out your web page for a second time.
direct line public liability insurance recently posted..direct line public liability insurance
It is a pain having to pay monthly obligations, and always thinking how to pay for the coming months. I love living my life “debt free”, no obligations.
Cristina recently posted..How to Pay Off Credit Cards: 6 Fast Steps
It’s an awesome post in support of all the web visitors; they will obtain advantage from it I am sure.
website recently posted..website
You’re so interesting! I don’t believe I’ve
truly read through something like that before.
So wonderful to discover somebody with original thoughts on this topic.
Really.. many thanks for starting this up. This site is something
that is needed on the web, someone with a little originality!
exterminators infected mushroom tour dates recently posted..exterminators infected mushroom tour dates
This post will help the internet visitors for setting up new web site or even a blog
from start to end.
Kellye recently posted..Kellye
If some one wishes to be updated with newest technologies
afterward he must be pay a visit this web page and be up to date all the
time.
fagforening recently posted..fagforening
I’m impressed, I have to admit. Rarely do I encounter a
blog that’s equally educative and amusing, and let me tell you, you have hit the nail
on the head. The problem is something which too few people are speaking intelligently about.
I am very happy that I came across this in my search
for something regarding this.
mobilabonnement priser recently posted..mobilabonnement priser
I’m impressed, I must say. Seldom do I come across a
blog that’s both equally educative and entertaining, and let me tell
you, you have hit the nail on the head. The problem
is something which too few men and women are speaking intelligently about.
Now i’m very happy that I found this during my hunt for something
relating to this.
Marguerite recently posted..Marguerite
This paragraph woll help the internet visitors for setting uup new webpage or even a blog ffrom
stat to end.
acne scars pictures recently posted..acne scars pictures
So does links from social media activity now count for search engine optimisation?
I was told they help after the Penguin algorithm refresh
Added to StumbleUpon, they would find this interesting
gzervosmd.com recently posted..gzervosmd.com
A property may also need to be appraised if it
is a subject of litigation, such as in Probate or Divorce Court.
Certain words sound better and are more appealing to potential
buyers. Because,real estate investing executed with correct evaluation of
the property (and its true value), can result
in good earnings.
real estate asheville recently posted..real estate asheville
Hi there mates, how is everything, and what you wish for to say on the topic of this paragraph, in my view its genuinely
remarkable in support of me.
best movie quotes recently posted..best movie quotes
I’m not sure why but this website is loading very slow for me.
Is anyone else having this problem or is it a issue on my end?
I’ll check back later and see if the problem still exists.
https://facebook.com/GoodgameEmpireHackCheats recently posted..https://facebook.com/GoodgameEmpireHackCheats
It’s impressive that you are getting thoughts from this
paragraph as well as from our dialogue made at this place.
http://www.rebelmouse.com recently posted..http://www.rebelmouse.com
hello!,I like your writing so a lot! percentage we be in contact more about your post on AOL?
I require an expert in this space to unravel my problem. May be that
is you! Taking a look ahead to look you.
metal slug defense hack download recently posted..metal slug defense hack download
Though laser hair removal is a costly solution but still a significant number of women are adopting this methodology to remove their hair permanently.
m beginning to sound like an informercial but the claims are that there really are things you can do that can help get
that youthful jawline and line free forehead back. Two speeds and pressure control,
plus a body contouring head that follows the contours of your body, makes the process easier and more efficient, so you can shave in one stroke and not have to go back over and
over an area (that’s when it starts to get annoying with other epillators).
Dillon recently posted..Dillon
What’s up everyone, it’s my first pay a quick visit at this
web page, and article is genuinely fruitful in favor of me, keep up posting such articles.
telephone answering companies Little Rock AR. recently posted..telephone answering companies Little Rock AR.
My family all the time say that I am killing my time here
at net, however I know I am getting know-how every day by reading thes fastidious content.
official instagram website recently posted..official instagram website
Thanks designed for sharing such a nice thinking, piece
of writing is good, thats why i have read it completely
Leanne recently posted..Leanne
Hi I am so grateful I found your blog, I really found you by mistake, while I was looking
on Google for something else, Nonetheless I am here now and would just like to say thanks a lot for a remarkable post and a all round thrilling blog (I also love the theme/design),
I don’t have time to read it all at the minute but I have
book-marked it and also added your RSS feeds, so when I have time I
will be back to read much more, Please do keep up the awesome
work.
emergency roof repair North Vancouver recently posted..emergency roof repair North Vancouver
Quality posts is the important to invite the users to pay a quick visit the web page, that’s what this web site is providing.
non chexsystems banks in kansas city mo recently posted..non chexsystems banks in kansas city mo
Hello there I am so grateful I found your weblog, I really found you
by mistake, while I was searching on Askjeeve for something else, Regardless I am here now and would just like to say thanks a lot for a remarkable post and a all round exciting blog (I also love the theme/design), I don’t have time to read
it all at the moment but I have book-marked it and also included
your RSS feeds, so when I have time I will be back to read much more, Please do keep up the great work.
Das Perfekte Laptop Business – Urlaub Der Niemals Endet recently posted..Das Perfekte Laptop Business – Urlaub Der Niemals Endet
Hello to every body, it’s my first pay a visit
of this blog; this webpage consists of amazing and genuinely excellent stuff for visitors.
childrens magician in NY recently posted..childrens magician in NY
Saravia & Quispe (2000) asevera que la dosis de
Baculovirus phthorimaea de 50 larvas infestadas en un litro
de agua, presentó una eficiencia de 56. 41 para el control biológico de Eurysacca quinoae,
aumentando esta eficiencia en la medida que se incrementa la
concentración de aspersiones.
http://www.forusers.in recently posted..http://www.forusers.in
Thanks for sharing your thoughts about debt. Regards
das perfekte Laptop Business – der beste Nebenjob recently posted..das perfekte Laptop Business – der beste Nebenjob
Consequently, a commercial cleaning companies
service may well be the ideal way to make sure that your work
area is up to the standards expected by the company.
This decision to hire professional cleaners is one
of the best ones a company can make. Importantly if you do not want your office to
be a breeding place for germs and do not want your employees to
get sick, hiring Office Cleaners Newcastle is the most convenient and affordable option.
Janitorial Service Chandler recently posted..Janitorial Service Chandler
It ought to possess high-compression rate and most importantly should be user-friendly.
* Avoid the temptation to offer your opinion or advice. You should not only stick with one supplier because there will be other suppliers who might be
selling the same video games but with much cheaper rates and probably longer credit terms.
transport tycoon deluxe download windows 7 recently posted..transport tycoon deluxe download windows 7
I am really grateful to the holder of this web page who has shared this
fantastic piece of writing at at this time.
ask recently posted..ask
Cheap Senators Mark Stone Ԝhite Jerseys Cheap Penguins Marc-Andre Fleury Black Jerseys
Cheap Senators Mark Stone White Jerseys recently posted..Cheap Senators Mark Stone White Jerseys
What’s up to every one, it’s truly a good for me to pay a
visit this website, it contains valuable Information.
ISPs recently posted..ISPs
I used to be suggested this blog by way of my cousin. I am
now not certain whether thhis publish is written by way of him as nobody else recognise
such exact about my problem. You’re incredible! Thank you!
gambling Tips recently posted..gambling Tips
{ 6 trackbacks }