Post by: jkowalsk23 on November 02, 2018, 02:01:39 PM
I have a small amount of student loans from college--I graduated in 2005 and was able to consolidate my loans with a 1.625% interest rate. I lucked out and continue to be grateful for this (and for the fact that I was able to cover grad school with fellowships). My loans were in deferment until about 2014, when I completed my PhD and began working. At this time, I owe about $12,000. I have no other debt and don't yet own a home.
I'm currently paying the loans off on a 10 year schedule--$125/month. My partner and I have finally reached a point where we're able to start socking away significant chunks of our income, and our "emergency" savings just sailed past the total dollar amount of my loans. I'm wondering, given the low interest rate, if it makes sense to take that money and just end the loans, once and for all. On the other hand, we could put that money in an index fund, or IRA, or other investment vehicle; we'll be buying a home in the next year or so, so this could also go towards the down payment or improvements to make our home more energy efficient. With such a low interest rate, does it make sense to pay off the loans ahead of schedule? My understanding is that the interest rate is lower than inflation's been over the past few years. I should also add that we're both late to starting to save for retirement, early or otherwise, due to our long ride on the higher education train.
Thanks, Mustachians!
Post by: RWD on November 02, 2018, 02:19:18 PM
Post by: DS on November 02, 2018, 02:23:26 PM
Wow, that is an incredibly good rate. Bonds or even some savings accounts would likely be a better investment that paying extra on that. See the investment order post (https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153).
Second for checking out investment order!
That rate is so low! A no-minimum savings account at Ally is 1.90%. Can't think of a good reason to pay off early.
Post by: Lady SA on November 02, 2018, 03:05:02 PM
Post by: Dicey on November 02, 2018, 03:05:45 PM
Post by: yourusernamehere on November 02, 2018, 03:20:44 PM
If you've got other debt to pay down or it would keep you from meeting your investing goals to pay it off, then sure, optimize. But if everything else is dialed in and you just want to pay it off to get it over with? This is not going to make or break you
Post by: Telecaster on November 02, 2018, 03:25:31 PM
Post by: dodojojo on November 02, 2018, 05:02:23 PM
Ok, checked in with my loan company and when I consolidated the terms were changed to 240 payments, 20 years. Still at the 1.875 rate, it's still worth keeping, right? I did lose one benefit in the most recent years--my income is too high for me to claim student loan interest paid.
Post by: Brother Esau on November 02, 2018, 05:19:59 PM
Post by: dodojojo on November 02, 2018, 05:29:44 PM
Wow, that is an incredibly good rate. Bonds or even some savings accounts would likely be a better investment that paying extra on that. See the investment order post (https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153).
Second for checking out investment order!
That rate is so low! A no-minimum savings account at Ally is 1.90%. Can't think of a good reason to pay off early.
Woah, I obviously haven't been keeping up. I've been with Capital One forever and I'm at .75%.
Post by: Classical_Liberal on November 03, 2018, 02:23:29 AM
On a separate note, Capital One's MM actually pays 1.85 APY at the moment, you just need a 10K balance. One year CD's are competitive as well, around 2.5