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Personal Finances / Paying Back Student Loans


Subject:  Re: A reason to payback student loans early Date:  10/7/2014  9:25 AM
Author:  jeffbrig Number:  4816 of 4848

Good post, AJ

DW and I are about 11 years into a 30 year payback on her loans (combo of undergrad and law school debt). We were able to consolidate and lock in a fixed rate of 3.5% when her loans entered repayment. We pay $350/month, compared to the $800/month it would have been on a 10 year schedule. With dual incomes, we very quickly hit the deduction phaseout, then lost the deduction entirely. Still, no complaints here. 10 years later, the payment is roughly 3% of our monthly net income, so I'm more than happy to let it ride out its full term.

One big advantage, as far as I see it, is that money loses value over time. Through the cumulative effects of inflation, $350 is worth less in year 29 than it is in year 9. Also, as AJ noted, paying a lesser monthly payment has made it easier for us to max out 401k contributions and other savings. Our net worth today is more than 10X the current loan balance.

Another seldom mentioned benefit of (federal) student loan debt is that if the recipient dies, the student loan debt dies with them. The estate/spouse/etc is not required to repay the loan.
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