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Author: Makatak One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308669  
Subject: Re: Large School Loan Balance Date: 9/22/2000 11:37 AM
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Congratulations on the CC debt elimination! After paying down nasty debt like CC's, it's almost refreshing to see school loan interest rates from 5 to 9 percent. I say "almost" because school loans are usually for a large amount, unfortunately. My wife and I have around $40k in SL's.

I would recommend a balanced approach to your remaining debt: don't over-extend yourself to pay off the school loans early and jeopardize your retirement. If you can afford $500 a month for around six years and still save for retirement, I'd go for it. Otherwise, I'd set a more reasonable goal of around $350 for ten years and put some aside in a 401k or IRA. Stretching out payments for a longer time period will definitely mean more interest you'll have to pay, but you'll need to balance that against your need to save. I'm sure that you know about compromise after your battle with CC debt. I'm fighting a war on two fronts, SL's and CC's :)

Here's another few reasons why you might want to do take a balance approach on saving vs. school loans:

1) If your employer offers a 401k program with matching contributions, you can't beat free money that's tax deferred until you need it. You still have a good amount of time to save for retirement.
2) A school loan is not considered a "bad" debt on your credit rating. It is an installment, rather than a revolving, account. You were smart to pay the CC's first.
3) While you're young to obsess about things like this, your school loans will not burden your family if you were to die. Most school loans are paid for upon the death of the borrower.
4) Your loan promissory note might list several ways to cancel your debt. You've probably read these already. They tend to include lifestyle changes, like becoming a police officer, joining the armed services, etc.
5) If you're in your first 5 years of repayment, you might qualify for an income tax deduction.

Good luck to you and congrats again. :)
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