[Finance] Should we pay off student loans with money from savings?

I'd pay it off. It means no rainy day fund, so you have to be feeling secure that nothing bad is going to happen to you in the short-term, but that's a gamble I would take. Once the loans are paid off, that frees up money to rebuild the fund quickly. It's not without risk, but if I were you I would do it.

 

So is the rule now on emergency fund 3 mos? I thought it was at least 6 mos and preferably 12.

 

That is still decreasing the real interest rate, and shouldn't be ignored.

 

Pay it off from savings.

You said you were 'doubling up' on the payments so that it would be paid off faster? Obviously you can afford to have that as 'discretionary' money, so commit right now (with your wife) to put THAT money into savings as a regular deposit for the original length of the loan repayments.

Effectively you've loaned yourself the money. If the worst case scenario happens, and you need some savings in the short term, then take a personal loan (or re-mortgage) . But don't sit on an emergency fund, and pay 6.25%, when instead you could be putting the money aside for yourself and earning x%.

 

Pshh! Just saw this!

You already have an emergency fund.

Pay

it

off

But make sure you 'loan yourself' the money from savings, and you'll have a bigger house deposit in 5-10 years than you would otherwise have had (or do your sums on mortgage repayments, and see how long you need to save before the amount you're putting to saving >> the loan payment)

 

Dont confuse good/bad debt with credit strategy. And spending a dollar to save a dime is silly. A tax write off is a perk, not a reason to keep it. And many people will not qualify to use it as a tax write off.

Everyones situation is different. Personally, I do not believe in keeping debt around, at least w/out the cash reserves to pay it off immediately. For example, I keep my (privately owned) student debt for credit history. Its at 3% and the loan is small.

Student loan debt is an albatross. The biggest reason why I always encourage people to pay it off is because you can't default on it. If something terrible happens in your life and you can't pay on it, it will always be there incurring interest until its paid off.

 

Be a true American and make sure to die with plenty of debt. In other words make minimum payments and take your sweet time.

 

If you are looking to buy a house.

I say, save enough to put 20% down on your house, set aside 12 months emergency fund to include your mortgage, then pay off your student loans as fast as you want to.

 

Pay it off.

If I offered you an investment opportunity with a guaranteed return of 6.5%, would you take it? That's what you are getting by paying your loan off. You go from making -6.5% to 0.

Why wouldn't you do it?

It's anecdotal and probably just psychological, but our net worth really started taking off once we got rid of all of our debt including the house note. Until you do that, you are really fighting yourself in my book.

 

You need to factor in what the money he is not using to pay off the loan is making. Based on his previous comments it doesn't appear it is earning a lot, but theoretically, it could be earning more than what he is paying.

 

Judging from the information provided in the posts in this thread, he has it in a bank saving account and is earning basically nothing on it. If that is the case, and it almost certainly is, he should pay off the loans asap.

 

Pay it off. You can always crank up debt elsewhere that you can wipe clean by filing for bankruptcy.

 

Worst. Advice. Ever.