Should I pay off this student loan now or just stick to schedule?

[Anonymous]

I have a student loan that, for a bunch of years, has been paid by my employer. Like they just made the monthly payment on my behalf, as a perk of my job. To qualify for the program, they specified the repayment plan you had to be in. The payment is about $230/mo.

I basically have not paid attention to this loan for years because of this set up. I don't have a ton of debt and it has a low interest rate (under 3%) and I wasn't even making the payment, so I just ignored it. It doesn't harm my credit, and I had bigger fish to fry financially.

Well I'm moving into management at work which means I'm no longer eligible for this program. That's fine, I'm also making more money. But now I need to figure out whether I should just pay the balance on the loan (21k), keep making the monthly payment ($230/mo for 11 more years), pay above the minimum payment (if I added $100 to every payment that shaves repayment down to 7 years), or maybe pay it off in chunks? Like do an extra payment of 1k once a quarter or something?

I have the money to just pay it off now if I wanted, but I could also just stick that money in the market or even just in CDs or something almost certainly make more that the loan is costing me in interest, especially given how deep into principal I am now. But the psychological benefit of just being done with student loans sounds good too? It seems dumb to keep paying interest on a loan I could repay immediately for another decade, even though I understand conceptually why it may not make sense to pay off a loan with such a low rate early.

WWYD?

[Anonymous]

I was in that situation.

I just paid off the loan in full, and was careful to keep the release paperwork that said the loan was paid off in full. It was a huge relief to be debt free and one less thing to have to track and manage each month.

[Anonymous]

Just pay it off. First, it will simplify your life. Second, it will give you peace of mind. Third, student loans are separate property, so if you get divorced, they remain yours and don't factor into the marital estate when it's divided. So if you had $1m in marital property and a $100,000 student loan debt, you'd each get $500k, plus you'd be stuck with your student loan debt.

[Anonymous]

My husband has one last loan that is roughly $17k and $200 a month, I think a similar interest rate to OP. I have told him a hundred times we could just pay it off but he is just going to stick to the repayment schedule, it earns more in interest sitting in a HYSA. It's not my issue at the end of the day so I don't care either way, but just offering an alternative take.

[Anonymous]

I would put the 21K in a HYSA and the second the interest on the savings account dips below the interest rate, pay it off!

[Anonymous]

I can never understand why people insist on dangling these loans around like they are actually disciplined enough to put the difference in a higher yield account. You can make more but are you actually making more? Or are you just spending the money?

For what it’s worth, I paid off my loans well before savings rates reached their more recent highs. For most of my debt repayment period, I’d be lucky to get 2-3% in online savings, and I didn’t qualify for any loan interest deductions. I invested in the market some, but those weren’t the kind of years that made you want to go all in. (Hindsight is 20/20 but past performance is no guarantee of future returns and all that). Paying off my loans gave me long term peace of mind and guaranteed returns even if I did not maximize every cent.

Id say throw whatever amount at it you wouldn’t miss and put a little extra in here and there until it’s paid off.

[Anonymous]

And you are in management now.
Pay it off in one year, because it bothers you.

[Anonymous]

Anonymous wrote:I can never understand why people insist on dangling these loans around like they are actually disciplined enough to put the difference in a higher yield account. You can make more but are you actually making more? Or are you just spending the money?

For what it’s worth, I paid off my loans well before savings rates reached their more recent highs. For most of my debt repayment period, I’d be lucky to get 2-3% in online savings, and I didn’t qualify for any loan interest deductions. I invested in the market some, but those weren’t the kind of years that made you want to go all in. (Hindsight is 20/20 but past performance is no guarantee of future returns and all that). Paying off my loans gave me long term peace of mind and guaranteed returns even if I did not maximize every cent.

Id say throw whatever amount at it you wouldn’t miss and put a little extra in here and there until it’s paid off.

OP here. It's not a question of discipline. I literally just have 21k sitting in a HYSA and I have nothing else to do with it. So it's just a question of whether it makes more sense to take that money and pay off the loan (saving me about 2k in interest over the next 11 years), or leave it in the HYSA (or shift it to a Vanguard fund, or put it in CDs, or some combination). Or I could pay off some of the loan now and invest the balance. Or I could just increase the monthly payment and keep the vast majority money saved/invested but save a bit in interest on the loan while making more in interest on the money.

The money won't be spent on anything else if I don't use it to pay off the loan -- I have plenty of other savings and my income is more than enough to cover my expenses.

[Anonymous]

Anonymous wrote:I can never understand why people insist on dangling these loans around like they are actually disciplined enough to put the difference in a higher yield account. You can make more but are you actually making more? Or are you just spending the money?

For what it’s worth, I paid off my loans well before savings rates reached their more recent highs. For most of my debt repayment period, I’d be lucky to get 2-3% in online savings, and I didn’t qualify for any loan interest deductions. I invested in the market some, but those weren’t the kind of years that made you want to go all in. (Hindsight is 20/20 but past performance is no guarantee of future returns and all that). Paying off my loans gave me long term peace of mind and guaranteed returns even if I did not maximize every cent.

Id say throw whatever amount at it you wouldn’t miss and put a little extra in here and there until it’s paid off.

Dang, aggressive much?

[Anonymous]

I’d just pay it off. Mostly because the idea of paying any interest would annoy me. Then I’d move on.

[Anonymous]

Anonymous wrote:Just pay it off. First, it will simplify your life. Second, it will give you peace of mind. Third, student loans are separate property, so if you get divorced, they remain yours and don't factor into the marital estate when it's divided. So if you had $1m in marital property and a $100,000 student loan debt, you'd each get $500k, plus you'd be stuck with your student loan debt.

Why is OP getting divorced? I don't understand the tangent.

[Anonymous]

My DD took out loans that I agreed to pay.

I had the funds to pay them off but her and I thought it would look good on her limited credit file to show consistent long term timely payments.

That all worked fine until we hit covid and all the changing policies. They several times put the loan on 'time out', forbearance perhaps it was called. I kept trying to keep the regular payments going. It was a time wasting hassle being on the phone for hours to get it all fixed. After further research, it became obvious to me that student loans are a racket. There is zero transparency in the process. I got so fed up, I paid them off. I highly suggest you do the same.

[Anonymous]

Same issue here. When work stopped paying we paid it off in full. Our interest rate was like 7% though which we thought was scammy because interest rates were only like 3% then.

[Anonymous]

Anonymous wrote:My DD took out loans that I agreed to pay.

I had the funds to pay them off but her and I thought it would look good on her limited credit file to show consistent long term timely payments.

That all worked fine until we hit covid and all the changing policies. They several times put the loan on 'time out', forbearance perhaps it was called. I kept trying to keep the regular payments going. It was a time wasting hassle being on the phone for hours to get it all fixed. After further research, it became obvious to me that student loans are a racket. There is zero transparency in the process. I got so fed up, I paid them off. I highly suggest you do the same.

Ugh ours kept getting put into forbearance and recalculated each semester. Except work was paying on it and every time they recalculated a lower rate, I got less from work. It was so frustrating.

[Anonymous]

If you are paying 3 percent, go ask ChatGPT about paying it off. My gut is, take what you can get per year in a HYSA or whatever. Then take off the state and local income taxes on the interest. Let's say tha is 25 percent.
So 6% becomes 4.5%. So for 1.5% a year on your $21K how much more are you willing to pay to pay it off over years and years?
Plug in numbers and see what they say.