Student Loans Sadness
Question... How do you not get overwhelmed by student loans? I currently have around £18,000 in SL down from the original £22,500 and my calculations are telling me that's going to take me 24 YEARS to pay off (at the current rate). If I start throwing an extra £100 a month at it, it chops it down to just over 9 years. This probably doesn't sound like a lot of money to most people on this site, but how do you stay positive about these things? I guess I just have to hope that my budgeting will go well and i can throw more money at it, but years of pinching the budget feels like a lot T_T. My bf is currently ignoring his as the interest rate is so low (1.5%) he reckons it's better to save the money for a house and forget about it. Any tips?
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Any other debt, what's the interest rate and current payment?
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Flyin'Brian No other debt, interest rate is 1.5%, current payment 75 that comes out of my salary before i get it. :)
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Gray Pony Personal choice, if you take the money and do something with it that gets you better than 1.5% return or save it for something that avoids future debt with an interest rate greater than 1.5%, then mathematically you come out ahead. But if it really bothers you that it exists or you end up spending the money on pizza and beer, you're better off paying the extra.
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At 1.5% I agree with your boyfriend. You can likely get a better return on your money through other methods.
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nolesrule You're both probably right. I guess mentally it's hard to not want to be rid of it. Perhaps I could always throw a little 50 or 100 quid in per month and forget about it and pile the rest up for more house payment (between us we already have 20% down). That way I could still chip slowly away at it for my own satisfaction, but without putting my life on hold to kill it for not much benefit?
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Gray Pony Definitely in this case, make that down payment as big as you can get it.
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Flyin'Brian Thank you for your advice!
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I feel like I must be an anomaly because I never cared about having student loans because they were a tool to get me the education that I wanted so I could get the job I wanted. Which I did. I got out of grad school with $37K in student loans (the maximum federal Stafford subsidized plus unsubsidized you could get at the time). And I just paid it and didn't worry about it. I took the 6 month grace period, because why not. When I first started paying, the interest rate was at the max that they could be, but about a year later I consolidated them down to about 2%. It was just another expense, like rent - of course you had to pay it because what else are you going to do about it. It wasn't until my late 30s (I finished school when I was 24), when I was living overseas and therefore had most of my income be tax exempt that it even occurred to me to pay them off early.
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jenmas yes! I completely understand that point of view! Everyone keeps telling me, "just think of it as a small tax you pay every month for having the job you love and a decent paycheck". I just get really into reading all these debt free stories and feel like I should be pushing it more. But reality check, there's better things to be doing with £18,500 than getting £75 back at the end of the month.
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There were times that I just kind of had to ignore the total balance on various debts outstanding and just focus on getting this month's payment done. I did manage to knock out my last student loan about 7 months early which was great. Just keep plugging away and pay it off sooner rather than later.
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I frankly ignore my federal student loans and just pay them like any other bill and don't worry that I'll be paying them for 30 years. I have one private student loan with variable rates that I took right at the end of my education in desperation because my school (whom I'm still pissed at about this) said, "Oh, we forgot to tell you, there are all these thousands of dollars you have to pay right at the end or you're screwed and can't get a job and we realize it's our bad that we didn't warn you so we found this student loan company to give all of you an extra loan since we know you weren't expecting this." Right now we're in the middle of refinancing and I am rolling that private student loan into our mortgage along with a high interest credit card we maxed out when SHTF. But my federal loans? I could pull my kids out of their activities, stop buying fresh fruits and veggies, cancel Netflix and Audible (we don't have a television so these are our entertainment budget), and pay extra on the student loans...but why? I want my kids to grow up with activities, fruits and veggies, and Netflix/Audible. As our income improves, I will throw extra at our mortgage. But I will also throw more at quality of life such as getting kittens, taking the kids to cultural events that cost money, not just the free ones, etc.
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Most folks here will tell you that the low interest rate on your loans means you can probably do better with your money long term by putting it toward something with a better rate of return. However, they're overlooking the emotional impact of being in debt.
My wife's student loans totaled to just under $90,000.00. It was soul-crushing, every month when the statement came. It was STRESSFUL. It caused fights. And we elected to ignore the low interest rate, and get that soul-crushing debt off our plate.
Point is: you have to do what works for you. Numbers are all well and good, but with personal finance, there's an emotional side to it too.
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Doomspark Yes thank you for your reply! I completely understand what you mean. Although it shouldn't seem like a burden because of the low interest rate, it's still money I owe, which I don't like. I think i'm going to stick to paying off a little every month extra, so I greatly reduce the loan term (even though financially i really don't need to care) so that emotionally I can feel good about getting it paid off sooner rather than later. cheers!
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MyCupOfTea I don't feel like doing the math. What's your payment now? On our mortgage, which I'm not in a hurry to pay off, I still round up the payment to the next $50 increment so it feels like I'm doing something.
So maybe round up your payment either to the next 10, 25 or 50 increment. You'll feel like you're doing something without throwing too much at it.
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nolesrule I'm currently putting £50 extra a month towards it, I think it means i'll pay it off in nine years or something
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Are these British student loans? I'm assuming so.
At the moment you can get up to 5% interest from the best current accounts/regular savers. I'd recommend you take the amount you'd be using to overpay your loan, and instead of sending it to the loan, stick it into one of the interest-bearing current accounts or a regular saver.
At the end of a year, you'll have earned 5% on that money, whilst the equivalent amount of loan will have grown by 1.5%. If you want to, you can take the money and the 5% interest and use it to pay off a larger chunk of the loan than you would have paid off by overpaying throughout the year. Of course if the interest rate on your loan goes up, or if you can't get a good interest rate on a current/savings account, then the maths will differ, but at present it's in your financial interests to hold onto that extra money. Budget it to a Student Loan Overpayment category by all means if that's what you want to do with it, but game the interest rates so that you can pay off more.
Personally I'm not bothering to overpay my student loans. I think so far I've paid back a grand total of £50, although I'm hoping that I'll eventually earn enough to tip me over the repayment threshold! Then I'll just let it be deducted from my salary like any other tax or NI contribution.
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I assume these are British loans? I have never paid anything extra than the amount that is automatically taken from my salary. I pretty much ignore the loans, its the cheapest loan we'll ever have and the repayments are deducted automatically. I think I have about £20K left to repay. I pretty much only think about it twice a year -once when I receive the annual statement and the second time when I receive my annual bonus and I notice a higher payment to student loans
