Poll: Should I pay off my student loans?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills

Would you pay off the loans

Yes, I would pay off both loans
30
59%
I would pay off Loan 2 but not Loan 1
9
18%
No, I would invest in my taxable account instead
12
24%
 
Total votes: 51

sunnyday
Posts: 1679
Joined: Sat Jul 16, 2011 8:48 am

Poll: Should I pay off my student loans?

Postby sunnyday » Wed Jul 24, 2013 9:51 pm

I have two students loans left. I could either pay them off now or invest in my taxable account. The loans are:

Loan 1:
Principal balance: $5,229.45
Interest rate: 1.625%
Interest rate type: Fixed
Subsidized
$99.50 monthly payment

Loan 2
Principal balance: $1,170.87
Interest rate: 2.5%
Interest rate type: Variable
Unsubsidized
$50.32 monthly payment

What would you do -- pay them off for the peace of mind or invest, thinking that your portfolio will out perform the interest rate?

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hand
Posts: 682
Joined: Sun May 17, 2009 8:42 pm

Re: Poll: Should I pay off my student loans?

Postby hand » Wed Jul 24, 2013 10:00 pm

Too small to be material, pay them off and simplify your life.
Invest the improved cash flow.

User avatar
joe8d
Posts: 3795
Joined: Tue Feb 20, 2007 8:27 pm
Location: Buffalo,NY

Re: Poll: Should I pay off my student loans?

Postby joe8d » Wed Jul 24, 2013 10:02 pm

hand wrote:Too small to be material, pay them off and simplify your life.
Invest the improved cash flow.

+1
All the Best, | Joe

Quinn
Posts: 25
Joined: Thu Mar 01, 2012 12:11 am

Re: Poll: Should I pay off my student loans?

Postby Quinn » Wed Jul 24, 2013 10:06 pm

I'd say:
1) 401k to match
2) Pay off Loan 2
3) 401k max / Roth IRA
4) Roth IRA / 401k max
5) Beef up EF
6) Pay off Loan 1
7) Taxable Investing

$100 a month with that kind of interest rate doesn't seem too bad. You can use that initial $5k you'd otherwise use to pay off the loan to buffer you as you increase your tax-advantaged accounts.

TRC
Posts: 1445
Joined: Sat Dec 20, 2008 5:38 pm

Re: Poll: Should I pay off my student loans?

Postby TRC » Thu Jul 25, 2013 4:19 am

Hard to really say without knowing how old you are, how much you already have invested, how much you plan to invest this year, and how much other debt you have.

But, these numbers are really small. I'd pay them off just to be done with them.

RobInCT
Posts: 342
Joined: Sun Dec 09, 2012 2:58 pm

Re: Poll: Should I pay off my student loans?

Postby RobInCT » Thu Jul 25, 2013 7:52 am

If loans that small with interest rates that low are a "peace of mind" issue to you, then pay them off. If not, I'd let them linger, which is, statistically speaking, more likely to be the the mathematically correct answer.

That said, as others have pointed out, these amounts are so small that it doesn't really matter. An (expected) extra 2-3% return from investing in the market comes out to less than $200/year. Immaterial in the long run.

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SnapShots
Posts: 915
Joined: Wed May 09, 2012 12:39 pm

Re: Poll: Should I pay off my student loans?

Postby SnapShots » Thu Jul 25, 2013 9:09 am

joe8d wrote:
hand wrote:Too small to be material, pay them off and simplify your life.
Invest the improved cash flow.

+1

+2
the best decision many times is the hardest to do

wilked
Posts: 869
Joined: Thu Mar 24, 2011 1:50 pm

Re: Poll: Should I pay off my student loans?

Postby wilked » Thu Jul 25, 2013 9:11 am

hand wrote:Too small to be material, pay them off and simplify your life.
Invest the improved cash flow.

This

Juntistik
Posts: 32
Joined: Wed Jun 01, 2011 8:58 pm

Re: Poll: Should I pay off my student loans?

Postby Juntistik » Thu Jul 25, 2013 11:25 am

I wish my student loan balances were that low. Pay them off and get it over with! Why even turn this into a thing?

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Jake46
Posts: 742
Joined: Tue Feb 20, 2007 10:16 am
Location: Fort Collins, Colorado

Re: Poll: Should I pay off my student loans?

Postby Jake46 » Thu Jul 25, 2013 11:41 am

SnapShots wrote:
joe8d wrote:
hand wrote:Too small to be material, pay them off and simplify your life.
Invest the improved cash flow.

+1

+2


+3

User avatar
JupiterJones
Posts: 2010
Joined: Tue Aug 24, 2010 3:25 pm
Location: Nashville, TN

Re: Poll: Should I pay off my student loans?

Postby JupiterJones » Thu Jul 25, 2013 2:37 pm

Jake46 wrote:
SnapShots wrote:
joe8d wrote:
hand wrote:Too small to be material, pay them off and simplify your life.
Invest the improved cash flow.

+1

+2


+3


+(previous_count + 1)
Stay on target...

User avatar
Whit
Posts: 43
Joined: Thu Jun 27, 2013 10:25 pm
Location: North

Re: Poll: Should I pay off my student loans?

Postby Whit » Thu Jul 25, 2013 4:13 pm

JupiterJones wrote:
Jake46 wrote:
SnapShots wrote:
joe8d wrote:
hand wrote:Too small to be material, pay them off and simplify your life.
Invest the improved cash flow.

+1

+2

+3

+(previous_count + 1)


I agree. If you are not saving for retirement or had a tiny emergency fund, those should come first. But between maybe earning a few extra % in a taxable account and some more simplicity and peace of mind. Simplicity wins. :)

Default User BR
Posts: 7501
Joined: Mon Dec 17, 2007 7:32 pm

Re: Poll: Should I pay off my student loans?

Postby Default User BR » Thu Jul 25, 2013 5:41 pm

I would not pay them off early.


Brian

MoonOrb
Posts: 575
Joined: Thu Jan 24, 2013 6:58 pm

Re: Poll: Should I pay off my student loans?

Postby MoonOrb » Thu Jul 25, 2013 6:24 pm

I'd max out my tax advantaged space before paying off these small loans at their low interest rates.

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grabiner
Advisory Board
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Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Poll: Should I pay off my student loans?

Postby grabiner » Fri Jul 26, 2013 10:59 pm

Loan 2 is going away in two years anyway, so paying it off is as good as buying a portfolio of 24 CDs maturiting in 1 to 24 months at 2.5% interest. Since you can't earn 2.5% on short-term CDs, you get a much higher risk-free return by paying it off.

Similarly, loan 1 has five years to go, and at 1.625% fixed and tax-deductible with a duration of two and a half years, it's probably worth paying off as well.

Both rates are low enough that you should max out your retirement plans first.
David Grabiner


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