Advice for New Collegiate Mustachian

[hannah2418]

Hi all!

As the subject infers, I am a college student new to the Mustachian community.  I have been reading through posts, but I looking for some more tailored advice.

Here's my situation:

I have approx. 20k in school debt (with more on the way) and about 6k left on my car payment.  I have a spare 5k just hanging out in my bank account, and I want to put it to the best use possible.  I have a part time sort of income, so I will be able to feed myself when it is gone.  I also have enough in the account to live off of for a few months without it.  I am fairly certain that I should put the extra towards whichever debt has the highest interest, but MMM talks so much about investing, too, that I remain somewhat uncertain. 

Thoughts?  Tips?  Advice?

Thanks!

Hannah 

[isbjshaffer]

Welcome to the forums!

What is your current living situation? Are you living with your parents, in a dorm? What do your other expenses look like?

The car is the first scary thing I see - Mainly because I also made the recent mistake of having a car payment. I'm going to end up taking a loss on the car, but will be able to get most of what I put into it back out. It will leave me with enough to buy another decent vehicle (about 6-8k) or have some cash leftover. Could you do the same?

The student loans are also an issue I'm facing. Once I'm out of this car (should be this week) I'm going to be throwing every extra penny at them until they're gone so that I can free up more cashflow for investing. If you happen to have your own place and are responsible for your own expenses, I would suggest reading my most recent blog post (In my signature) where I have compiled a list of ways to save money, mostly taken from MMM's blog and some of my own experiences and put them all in one place.

[Cwadda]

Yeah, more information is needed. What are the interest rates for each debt? Is the loan federal? Is it subsidized or unsubsidized?

[hannah2418]

Thanks folks!  Thanks to you, isbjshaffer, for the link.  I feel that I am on track with many of those things, so that is reassuring!

Here's a bit more info:

I live in a family house, so my expenses are utilities (gas, electric, water) and internet.  A big expense for me each month is food.  I have Crohn's disease, but I have been able to eliminate my symptoms through my diet.  I eat meats, fruits, and vegetables, and..meats, fruits, and vegetables.  I don't spend much a month on gas, as I have a small, fuel efficient car.  I walk and bike a lot.  My other expenses include books for school, toiletries, and not much else, really.

School loans are a combination of federal subsidized and unsubsidized.  $10,500 at 3.5%, $3,000 at 4.25%, and $6,000 at 6.55%.  My car loan is baffling me at the moment, but the total left is about $6,700 over the next 53 months, taking out about $141 a month.

Thanks again!

[Cwadda]

Thanks folks!  Thanks to you, isbjshaffer, for the link.  I feel that I am on track with many of those things, so that is reassuring!

Here's a bit more info:

I live in a family house, so my expenses are utilities (gas, electric, water) and internet.  A big expense for me each month is food.  I have Crohn's disease, but I have been able to eliminate my symptoms through my diet.  I eat meats, fruits, and vegetables, and..meats, fruits, and vegetables.  I don't spend much a month on gas, as I have a small, fuel efficient car.  I walk and bike a lot.  My other expenses include books for school, toiletries, and not much else, really.

School loans are a combination of federal subsidized and unsubsidized.  $10,500 at 3.5%, $3,000 at 4.25%, and $6,000 at 6.55%.  My car loan is baffling me at the moment, but the total left is about $6,700 over the next 53 months, taking out about $141 a month.

Thanks again!

Unsubsidized loans will begin charging interest while you are in school. However, this interest will not accrue until after you are out of school. Subsidized loans won't charge interest while you are in school. However, once you are out of school interest will start.

So the first thing is don't pay off anything that's subsidized since you're not being charged interest on it. How long do you have until you graduate? I'm guessing the 6.55% one is unsubsidized. If you're IN SCHOOL and want to pay down an unsubsidized loan, don't pay down its interest, always pay down the balance! Because the interest doesn't accrue and paying down the balance will lower your interest.

Do you absolutely need your car? Can you find out the interest rate on it? You should really know that...Do you have any investments?

[hannah2418]

Well, I already graduated, was out of school for about six months, and now am back in school.  Clearly, I need to look further into what that means for my loans and their interest because I admit that I just don't know.

The car is, indeed, still necessary.  My work sometimes takes me distances that biking just wouldn't cut it.

In terms of investments, yes, I do have some.  One I have access to, and one that I will get when I turn 25.

Thanks, cwadda!

[flyfig]

Wanted to check in- are you asking if you should re-deploy your $5k in savings to pay down a loan or asking which of your school and car loans you should be paying down with the part time income (?k/mo).

What's the rate on the car loan? Could this be something you pay off as it is required and the right car for you?

Would agree with Cwadda- I paid down some of the principle on college loan when I was in grad school (scrapped together extra money) and it was being deferred. Each check felt like I was flipping off the lender. Was amazing to see the new balance and lower interest when I graduated and started work.

[Cwadda]

Well, I already graduated, was out of school for about six months, and now am back in school.  Clearly, I need to look further into what that means for my loans and their interest because I admit that I just don't know.

The car is, indeed, still necessary.  My work sometimes takes me distances that biking just wouldn't cut it.

In terms of investments, yes, I do have some.  One I have access to, and one that I will get when I turn 25.

Thanks, cwadda!

Just check in with the agency you're lending from. Give them a call; they'll tell you what exactly is going on with the loan(s). As long as interest isn't being accrued then you're fine.

I would look into each loan in detail and find out all the numbers. Then I would spread out the money based on the highest percentages. Depending how long you're in school, I would also consider making more investments if the investment has better percentages. For example, the stock market is sitting around 5% this year.

[mozar]

I think you should hold onto the 5k as an emergency fund and start paying off either your highest interest student loan or your car loan with extra money going forward. Whichever is your personal preference.