Student Loans

[sporky_rat]

Hello, all!

I'm trying to whittle down my student loans as much as I can as well as the credit card statement that I use during the work-lean summers to help pay for groceries (those withdrawal pains are killer, I hear).

My question is, however, should I keep throwing as much money (On Time) at my loans and statement that I can afford or should I just keep at the minimum payment due? Now, I can't always pay more than the minimum but when I can, should I?

On the plus side, I've been able to save up a good bit in my savings account in the credit union!

Comments

[highlyeccentric]

Hmm. I lean toward saying yes, pay as much off as you can. BUT. If your employment is seasonal, perhaps stash up money to pay for food over summer first?

[sporky_rat]

It's not seasonal so much as I work for a university's food services and summer hours, while there, are sometimes lean some weeks.

But I am stashing money for the summer!

[vass]

Good on you for building some savings!

Do you have enough in your savings account to cover the summers without grocery money? That sounds like a good goal to aim for.

How much interest are you paying on the student loans and the credit card statement? What's the highest one? If it was me, I'd throw as much money at the highest interest one as I could afford, because when you've slain that one you'll be paying less interest and you'll have freed up that money for other things (like the other loans, or savings, or food and toilet paper.)

Alternatively, what's the smallest loan, the one you can pay off fastest? Some people get a really big boost from getting a win as soon as possible, so they'll pay that one off first.

[sporky_rat]

I'm paying 11% combined on the two student loans and about 20% on the credit card.

The smallest is one of the student loans and the highest one is the credit card.

I might see about paying off the small student loan first just to get it off my back.

[crystalpyramid]

I think you also get a small credit score boost when you pay something off.

[sporky_rat]

I think you do too. And my poor credit score could use some boosting. Not that I've been abusing it or anything, it's just....I don't have much credit history to get a score from.

[crystalpyramid]

Yeah, that's about where I was right out of college. We ended up having to put up an extra month's rent on an apartment because of it. The student loans eventually help, but it's a slow and expensive process. You used to be able to game your credit score by taking out small short-term loans and then paying them back gradually (I have friends who did this before buying a house), but I think it's harder to get those loans in the first place now.

[batrachian]

'nother one here on the 'not much of a credit history' (well, okay, not so much me, but trombonish definitely). Our credit union has a nifty program where they give you a... I don't remember their wording, but it's a 'training wheels' credit card. I mean, it's an actual credit card, but they bypass the 'good history' bit by setting the initial limit to A Chunk Of Your Savings Account (determined by you; K started with $500, which isn't enough to buy anything huge but is at least some points on the radar, as it were.)

[zana16]

You absolutely, no question, should. Interest is a bitch, especially long-term interest, and it makes things so much more expensive over the long run.

Student loans are generally lower-interest than credit cards, so I'd concentrate my efforts on the credit cards.

[sporky_rat]

That seems to be the consensus! I do want to cut that sucker down as quickly as possible, but at the same time I think I need to get rid of my smallest student loan so I can put that money towards either savings or the credit card.

[crystalpyramid]

I would agree with people saying it depends a bit on relative interest rates, but paying down loans is important. I know that in my own case, my credit card's interest rate is something like 15%, while my student loans' interest rate is less than half of that, so the financially smart choice is technically to prioritize not using the credit card before prioritizing throwing everything at student loans. So having a financial cushion to avoid relying on the credit card is important, especially if the financial cushion is also earning interest.

[sporky_rat]

I haven't been using the card except for paying the monthly Netflix bill that I had to move to it when my debit card got stolen and had to be canceled. Until that sucker comes in the mail, I know there'll be at least a $9 charge on it.

The savings is slowly climbing up, but it's hard because I'm the only one saving for the summer.

[jamethiel]

I would say do two things. Definitely pay the minimum, but if you have any extra, split it in two and put half in a savings account that you can't/won't touch except for emergencies. That will stop you adding to your debt.

Then throw everything you've got either at the highest interest rate, or the smallest amount. (Whichever gives you the psychological boost for having paid it off sooner, or saving more money on interest.)

[indywind]

Seconded.

[beatrice_otter]

I agree with what everyone else says, but also: can you get a second job over the summers to tide you over? That might help a lot, firstly in that you would rack up less debt and secondly in that you might be able to keep paying down your loans. There are seasonal jobs, anything from hiring on with a landscaping crew to walking dogs. And there are websites out there that can help people find odd jobs:
https://www.taskrabbit.com/
http://www.thumbtack.com/
http://zaask.com/landing/
http://www.oddjobnation.com/
I've never used any of these, but I've heard good things.

[kareila]

Another difference between the two debts that I haven't seen anyone else mention is the fact that on your federal taxes and in some states, college loan interest payments are tax deductible, while credit card interest payments are not. So that's another incentive to pay off the credit card debt first. That said, I totally understand the psychological boost from paying something off completely, and the flexibility of having fewer minimum payments to deal with.

Definitely pay more than the minimum on the credit card whenever possible. Even a little extra can take several years off the repayment time, depending on how high your outstanding balance is. And the amount of interest you're being charged on the credit card is almost certainly much higher than what you are earning by putting that money in the credit union.

[lassarina]

^^^ this!

Also, student loans look better on your credit report than credit cards; they give you far more points for paying them regularly.