Should I use a chunk of my savings for student loans?

[stache9434]

I am 23 with no dependents. My total student loan debt is 18,930.00 and I am on the standard repayment plan…

Fed loan 1 @ 4.29%: 690.00
Fed loan 2 @ 4.29%: 2,655.00
Fed loan 3 @ 4.66%: 5,300.00
Fed loan 4 @ 4.66%: 1,710.00
Fed loan 5 @ 3.86%: 4,340.00
Fed loan 6 @ 3.86%: 875.00
Fed loan 7 @ 3.4%: 3,360.00

My monthly budget:

Roth 401K: ~320
HSA: 100
Take home pay: ~2,020

Rent: 750
Utilities: 50
Groceries, eating out, and general household supplies: 250-300
Gas: 60
Car insurance: 70
Student loans: ~200
Internet: 25
Other expenses/entertainment: ~200
Leftover: ~415.00

Savings: 9,500

I would like to have 10,000 in the savings account partly because I like the idea of a 5 figure bank account but also because I am going to have several expenses in the next 2 or so years (car repairs/new car, vacation(s), maybe a dog, etc.). I also have a plan to seriously increase my income in the next 6 or so years. I know it's financially better to hold onto low interest debt, but I feel like my interest rates are on the border of low vs high, hence the question.

Thanks in advance!

[Zaga]

I disagree, that savings account is preventing high interest debt.  The lack of interest earned on it is the price you pay for that insurance.

I know there are lots of differing opinions on this, but having an emergency fund is in my opinion the way to go.

Now, if you *also* had taxable investments, then the cash emergency fund would be less important, but it doesn't look like you are at that stage.

[chris316]

This is a good question and one I've been dealing with myself...

Remember you get to deduct the intrest off your gross income and helps you with taxes... unfortunately debt is debt and it need to be taken care of.

Having an emergency fund is priority #1. You need liquid cash incase you get hurt,  car craps out, ect.... helps deal with unexpected expenses to keep you moving.

From this you don't want to hold onto more than 3-6 months of living...
So for you it looks like... $1500x3-6....   so.... 4500-9k....

I would save that much with what your comfortable with and then pay off fed loan 3, 4, 2, 1 in that order
And direct your leftover $415 to those....

Then I would follow the investing order under the "ask a mustachian" thread....  but it's up to you. ..

Just remember the more that sits in your savings the more gets eaten up by inflation...


At the very least I would pay more than the minimum....