Phuz

Hey guys, I'm a regional pilot and I'm wondering if its smarter to pay off student loan debt or make minimum payments while saving for something like a down payment on a home.

I'll make ~$27,000 this year. (I'm looking for part-time work too)
I have ~$50,000 in student loan debt. Here's a breakdown:
$5000 @ 4.5%
$7000 @ 9.21%
$16000 @ 8.65%
$22000 @ 7.2%
No kids - no savings.

Any advice? Thanks.

vagabond

Well, it's been a long time since I made $27,000 a year, but we all have to start somewhere. Back when that was all I made, I also did not have a house, so my rather conservative brain forced me to pay off debt. If I were in your shoes again, I would pay off first that debt with the highest interest rate. 9.21% is un-American and immoral!! But that's just me.

There is a thread on the forums on buying vs renting. The housing market is down right now and looks like it's going to be that way for a while longer. You have time to save up the down payment. Depending on where you live or want to buy a house, it is not difficult to save up the 10 to 20%. And don't forget that the IRS allows you to deduct the home mortgage insurance premiums now.

Good luck!

Estee

First, I'm no financial guru...
That being said, ideally, you should have 3 months of savings for a rainy day. You also need to pay off the loans. Start with the highest interest one and assuming you can pay it off early, pay more than required. I doubt you will be able to find a place to put your savings that will make more than your top three interest loans. When you get one paid loan off, you can use the money you would have paid to that loan to max the payment on the next highest interest loan...ripple effect.

Live cheap, create a savings, pay off your loans, and then pay yourself. Finally, since you will have learned to live paying XX amount of dollars a month to your loans, when they are paid off continue to pay XX amount automatically to an account/mutual fund.
You will also need to balance enjoying life...
Good luck

ArmyRC12Dude

I would encourage you to check out Dave Ramsey - radio, books, podcast, what ever you can, and take the advice to heart. He breaks things down into simple steps and will really set you up for life if you stick to it. I am living proof - from over $40K of debt 3 years ago to all the way through step 5 of the Dave plan.

Search the forums here - I know he has been mentioned before....or check out his web site - www.daveramsey.com

Cubdriver

I would pay down ALL the loans first. If you lose your job and there is a hiccup in your income you are gonna lose your house, destroy your credit rating, quite possibly have a ton of loans still staring you in the face, and insult to injury you are still going to be required to pay the interest on the loans while you fall to financial ruin. Don't forget that house loans are interest accruing, also. You will be paying that interest on top of what little equity you accrue in the house in 2 or 3 years, plus, mortgages require insurance and other concurrent costs that renters do not pay. People who support the house buying idea say it's tax deductible, but I would say not very.

My advice is get free from debt as job one. Then at least you are not paying money out with no tangible benefit. After the loans are paid off or down in a few years, then buy the house. I graduated aerospace school with $62k for school loans a year and a half ago. Since then I have cut the sum in half. I live kinda small and rent. But in another two years at most I will be free to buy golf clubs, house, and puppies or whatever without bleeding hard earned money away in the form of interest.

sqwkvfr

I would think that the interest rate that you'd receive on a mortgage would be greatly reduced if you didn't have that $50k of unsecured debt.

Then again, a lot of people have been able to ride themselves of debts like that by pulling equity out of their home after a few years...but that might be quite a risk in this housing market.

cfii2007

Pay it off. I got rid of all my flying debt in about a year.

Best decision I ever made!

mcartier713

lol vaga, you think 9.21 is un-american, my current flying loan is at 18.99% gotta love it....

but yeah, I'd go with the rest of the troops here and say go ahead and pay off the debt, the easiest money you'll ever make is the money you'll save from not paying interest. the Dave Ramsey thing was also a great suggestion, look for "Total Money Makeover" and give it a read, great book.

schwanm

Did you put it all on your credit card?

But yeah, as everybody else has been saying. Always pay off the highest interest first, working to the lowest interest last

mcartier713

lol no, it's a line of credit from Bank of America through AOPA. I'm only 21 (734 credit score tho ), i only make $500/month, and my dad refuses to co-sign. so that equals 18.99%.