Author Topic: Student loans - wait for repayment options or pay today?  (Read 1085 times)

kimmarg

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Student loans - wait for repayment options or pay today?
« on: May 16, 2017, 08:37:23 AM »
Here's the deal. We have $50,000 in student loans.  We have $7,000 in cash which could pay off one of the loans today. (Loans are at 5.6% and 6.25% interest) There are also a number of payoff programs and potential employers which could contribute to or payoff the loans. (e.g. $8000/year employer contribution, $15k signing bonus, pay half after 10 years, 25% after 5 years are all possible options) None of these options are guaranteed, but any that are available will probably be determined in the next 6 months or so.

Should we hold off paying the $7k we have today in hopes of getting into one of these programs? Or should we pay it all off as aggressively and as soon as possible?

Proud Foot

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Re: Student loans - wait for repayment options or pay today?
« Reply #1 on: May 16, 2017, 09:35:00 AM »
The wording of potential employers and payoff programs has me leaning towards pushing to pay them off.  Are these payoff programs only available through specific employers?  If it will all be determined in the next 6 months or I would use the $7k and then wait until the 6 months or so to see if you get into one of the programs or not.

Cwadda

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Re: Student loans - wait for repayment options or pay today?
« Reply #2 on: May 16, 2017, 10:03:49 AM »
Have you looked into SoFi to refinance the loans? A lot of people around MMM forums recommend it.

Lady SA

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Re: Student loans - wait for repayment options or pay today?
« Reply #3 on: May 16, 2017, 10:45:16 AM »
how much interest is the loan that you could pay off now? If its that 6%+ one, you will probably get a better "return" on your money by paying it off now instead of letting interest accrue for 5+ years.

Personally, I wouldn't be super interested in the SL payoff assistance after x years of working. I would want the freedom to change employers every few years and not feel stuck with a company because of the SL thing. You might actually come out better off moving companies and getting those big raises and using the raises (no lifestyle inflation!!) to pay them off. I would likely use the signing bonuses to knock out a big chunk of the SLs, but I'm kinda meh about the SL payoff perk.

If you stay at one company, you can expect regular inflation raises every year and maybe a few promotions, to the tune of maybe 3-4% raises every year if you're lucky. However, my DH has changed jobs twice within 5 years and each time got a 30%+ raise. He has more than doubled his salary by changing companies. Those raises compounded over time are MUCH more valuable than the amount we have tied up in our SL debt. And we have a lot more than you :) With those raises we are easily paying off the $80k we still have left AND saving significant amounts in investments.

However, that advice is dependent on your career field. Are you in the tech sector? That's where we are and it is super easy to move jobs and no one bats an eye. If you are in a more traditional field, moving and getting huge raises like that may not be as common. Without more information I can't give better advice.

kimmarg

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Re: Student loans - wait for repayment options or pay today?
« Reply #4 on: May 16, 2017, 11:47:09 AM »
The wording of potential employers and payoff programs has me leaning towards pushing to pay them off.  Are these payoff programs only available through specific employers?  If it will all be determined in the next 6 months or I would use the $7k and then wait until the 6 months or so to see if you get into one of the programs or not.

One program is through the state (Health care is a high need field in this area) so not an employer just stay in state.  The others would be with the employer. I feel like why pay my $7k now if someone will give me $7k later. On the other hand why accrue interest when we could pay some of it off now.

I can't see major raises by switching employers. Health care doesn't have that big a spread and people tend to view it unfavorably if you switch too often.