Paying off loans

[htyotispharm]

I just want to know if there is anyone else out there who have or plan to pay off their loans in a 'very' short period of time, say 5 years or less. I have $70000 in loans and plan to pay them off in 36mths(3yrs). I know my payments will be ~$2000/mth but that will be less than half of my monthly income. I feel that I can live off of the rest since now as a student I live off of about ~$800/mth. Am I being too aggressive? I just don't want to waste a lot on interest since I am not going to consolidate by July 1st.

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[pinkyrx]

I think some people will tell you that you don't need to be in that big of a hurry to pay them off since student loans are technically not "bad" debt... well, at least thats what I've read on the subject.

BUT...

With that being said, I am going to pay mine off as quickly as I can. I'm also thinking around 3 years with a similar payment. We plan to continue living on my husbands salary alone like we do now and putting my checks towards paying off my loans as well as paying down our mortgage.

I just don't like having large debt, so the quicker I can get rid of it the better I will feel!

 

[Rfour]

I paid my loan off of about 90,000 relatively quickly (< 3 years I think). If you're not planning any big purchases (ie a house) I think its a good way to go. You may not need to pay off the loans that fast but you can't beat the peace of mind and having that monkey off your back.

 

[kwizard]

I just want to know if there is anyone else out there who have or plan to pay off their loans in a 'very' short period of time, say 5 years or less. I have $70000 in loans and plan to pay them off in 36mths(3yrs). I know my payments will be ~$2000/mth but that will be less than half of my monthly income. I feel that I can live off of the rest since now as a student I live off of about ~$800/mth. Am I being too aggressive? I just don't want to waste a lot on interest since I am not going to consolidate by July 1st.

Yeah I'm in the same boat. Yes it can be done. A part time job always helps w/ supplementing the income. On the other hand it is probably a little easier to take the 30yr plan and take your time paying it off; however, much like everyone else has already expressed I too am in a rush to pay the loans off. I'd rather beat myself up over the next 3yrs w/ work and have the whole thing done with than stretch small payments out forever. I actually did make the big purchase (i.e. a house) and have got to admit that it is kind of hard at times, but I'd still do it again as the security of owning a home is truly a joy, especially after all of those years renting while in undergrad, pharmacy school, and residency training.

 

[DownonthePharm]

I would rather work my tail off for a few years and pay my loans off quickly, and use the money I will save in intrest over 30 years as a downpayment on building my dream house....

 

[ZpackSux]

Let me start off by saying Student Loan Sux. But since I'm done with it.. I can say it's painful to pay it off but it feels good to have it paid off.

Weigh your options before you pay off the loans. Look at it this way, If you are in an area with a real estate explosion, it would have been wise to save the money on the down payment and buy a house which could have doubled in 3 to 4 years.. ie CA. Then you would have been better off putting the money towards the downpayment on the house.

How about... real estate interest rates are climbing.. how would you like to have paid off your student loan in 3 years only to have the real estate interest rate at 10% for your mortgage.

Student loan interests are tax deductible... then again so is the real estate interest...

If the market can give you a higher rate of return than the interest rate on your student loan, it may be wiser to put the money in the market..

So many different scenarios. Consult your financial advisor.

It won't hurt to get into a house if there is a potential for real estate appreciation.

Pharmacist friend of mine bought a house in Arcadia CA for $300,000 in 1998. He sold it for $500,000 in 2001. Then bought a house in Valencia CA for $700,000. Then sold it for $1.2 million in 2004.

Luck is being prepared when opportunity presents itself.

 

[sdn1977]

Years ago....student loans did not appear on a credit report as an outstanding loan....at least decades ago when we applied for a mortgage. If that's still the case....the amount you owe doesn't affect the amount you can borrow....as long as you can still repay all loans.

 

[SomeGuy]

It won't hurt to get into a house if there is a potential for real estate appreciation.

Pharmacist friend of mine bought a house in Arcadia CA for $300,000 in 1998. He sold it for $500,000 in 2001. Then bought a house in Valencia CA for $700,000. Then sold it for $1.2 million in 2004.

Luck is being prepared when opportunity presents itself.

Such gains can only be realized if you're willing to move into a smaller house or into an area with a lower cost of living. Something that a lot of people are not willing to do, and therefore not a very good thing to bring up. Don't forget about capital gains taxes either, something that sucks if your house happens to appreciate a lot and you want to move into even a similarly valued house (not exactly sure how it works where you are, no capital gains taxes on primary residences in Canada).

The story would've sounded better if he had bought a house for $700k, sold it for $1200k, and then moved into the $500k house, but you didn't finish the story.

 

[rxprincess]

Speaking of loans, what is the average amount of debt/loans most pharmacy students come out with? Everyone that posted something seems to be under $100k. I will be going to a private pharmacy school in Cali and will be receiving no financial assistance from my parents, so I'm looking at somewhere in the $160-$170k range. Is that unusually high?

 

[Jeddevil]

I just want to know if there is anyone else out there who have or plan to pay off their loans in a 'very' short period of time, say 5 years or less. I have $70000 in loans and plan to pay them off in 36mths(3yrs). I know my payments will be ~$2000/mth but that will be less than half of my monthly income. I feel that I can live off of the rest since now as a student I live off of about ~$800/mth. Am I being too aggressive? I just don't want to waste a lot on interest since I am not going to consolidate by July 1st.

I look forward to saving some money and paying down debt, but want to fully fund my 401K and any other tax shelters I can use first. Looking at your 2000/month figure, I want to pay my little 300/month loan debt (consolidated loans last year @ 2.7 and this year @ 4.8, put on 30 year plan and combined payment will be about $300/month), and save the rest first in tax sheltered instruments to take advantage of the extra years of compounding that will help me down the road. I feel that fully funding my retirement instruments first, at a younger age, outweighs the rush to pay of some school debt.

Putting off saving for retirement will probably be detrimental to paying off your debt faster. I would recommend you find a place that will allow you to put the full federal 15K in the 401K, then worry about paying off your debt. So it might take you 6-8 years instead, which is still quick. You will be much better off in 30 years at retirement for not putting off saving in the 401K. IMHO.

 

[BiOGoly]

Student loan interests are tax deductible... then again so is the real estate interest...

Unfortunately, under current rules student loan interest is only tax deductable if you make under $50k/year.

 

[ZpackSux]

Such gains can only be realized if you're willing to move into a smaller house or into an area with a lower cost of living. Something that a lot of people are not willing to do, and therefore not a very good thing to bring up. Don't forget about capital gains taxes either, something that sucks if your house happens to appreciate a lot and you want to move into even a similarly valued house (not exactly sure how it works where you are, no capital gains taxes on primary residences in Canada).

The story would've sounded better if he had bought a house for $700k, sold it for $1200k, and then moved into the $500k house, but you didn't finish the story.

He bought a $900,000 house in Northern Cal.
There are ways to get around capital gains taxes... by being in a house for more than 2 years or moving due to a job etc.

Then again, I'll gladly pay 50% capital gains tax if my house appreciated $500K. Still a huge chunk of change considering he started with $30,000 downpayment in 1998.

 

[twester]

Years ago....student loans did not appear on a credit report as an outstanding loan....at least decades ago when we applied for a mortgage. If that's still the case....the amount you owe doesn't affect the amount you can borrow....as long as you can still repay all loans.

Having done a review of my credit reports recently... Student loans are listed as outstanding loans - even government loans. Student loan payments are considered when debt-income ratios are calculated.

 

[Phantom_Eclipse]

Slightly out of topic:

Can I only consolidate when I enter repayment?

 

[KARM12]

Slightly out of topic:

Can I only consolidate when I enter repayment?

No, I have consolidated my 1st and 2nd year loans already. The loans will automatically go into defferment until you graduate.

 

[BiOGoly]

He bought a $900,000 house in Northern Cal.
There are ways to get around capital gains taxes... by being in a house for more than 2 years or moving due to a job etc.

Then again, I'll gladly pay 50% capital gains tax if my house appreciated $500K. Still a huge chunk of change considering he started with $30,000 downpayment in 1998.

Zero tax on up to $500k (married couple) worth of appreciation on your primary residence after at least two years of continuous habitation. Ka-ching!

 

[dgroulx]

I consolidated at 2.75% last year. This will leave me with 2 years of loans of less than 40K when I graduate. I won't reconsolidate because I don't want to lose the low rate on the bulk of my loan. I'm going with the 10 year payment plan. If I chose 30 years, I'd have student loan payments when I was 80 years old.

Anyway, I can invest my money and make more than 2.75%.

 

[museabuse]

Speaking of loans, what is the average amount of debt/loans most pharmacy students come out with? Everyone that posted something seems to be under $100k. I will be going to a private pharmacy school in Cali and will be receiving no financial assistance from my parents, so I'm looking at somewhere in the $160-$170k range. Is that unusually high?

I will be 135K in debt. 101334 stafford loans
34000 pvt loans

I plan on paying off pvt loan ASAP, but take my time with stafford. I look at it this way... If I work my ass off for 5 years and pay off ALL my debt, I can possibly die the 6th year. Then I will be pissed at myself for not enjoying life with the money I made those 5 years. So I will be working my ass off but enjoying life with vactions and travel and what not, during those five years. I will pay into my 401K incase I don't die and buy a house.

 

[BiOGoly]

I will be 135K in debt. 101334 stafford loans
34000 pvt loans

I plan on paying off pvt loan ASAP, but take my time with stafford. I look at it this way... If I work my ass off for 5 years and pay off ALL my debt, I can possibly die the 6th year. Then I will be pissed at myself for not enjoying life with the money I made those 5 years. So I will be working my ass off but enjoying life with vactions and travel and what not, during those five years. I will pay into my 401K incase I don't die and buy a house.

That's exactly the right attitude to have. No one should bust their ass to pay off student loans to the detriment of their enjoyment of life. Sure you might save a few thousand dollars in loan payments, but you are literally sacrificing your quality of life. No matter how rich you become you can't buy back your youth, not at ANY price!

I'm probably going to go with the 30 year plan and make multiple payments to kill it off in ten years (the smaller required monthly payment for 30y loans significantly raises your eligible debt ceiling for mortgage loan payments). I try to think of student loans not so much as debt, but as "leverage" for a better life.

 

[dr of rx]

oops..

 

[dr of rx]

I look forward to saving some money and paying down debt, but want to fully fund my 401K and any other tax shelters I can use first. Looking at your 2000/month figure, I want to pay my little 300/month loan debt (consolidated loans last year @ 2.7 and this year @ 4.8, put on 30 year plan and combined payment will be about $300/month), and save the rest first in tax sheltered instruments to take advantage of the extra years of compounding that will help me down the road. I feel that fully funding my retirement instruments first, at a younger age, outweighs the rush to pay of some school debt.

Putting off saving for retirement will probably be detrimental to paying off your debt faster. I would recommend you find a place that will allow you to put the full federal 15K in the 401K, then worry about paying off your debt. So it might take you 6-8 years instead, which is still quick. You will be much better off in 30 years at retirement for not putting off saving in the 401K. IMHO.

almost exactly what I was thinking. With all loans consolidated at 4%, I pay the min. each month. I max out the 401K and still have plenty left over for the house payment (34K appreciation since last year) and other investments.

don't kill yourself to pay them off. invest NOW. the rule to live by is to invest 20% of pre-tax income.

also, don't forget to have fun.

 

[soul21]

almost exactly what I was thinking. With all loans consolidated at 4%, I pay the min. each month. I max out the 401K and still have plenty left over for the house payment (34K appreciation since last year) and other investments.

don't kill yourself to pay them off. invest NOW. the rule to live by is to invest 20% of pre-tax income.

also, don't forget to have fun.

Are you considering you mortgage payments as part of the 20% salary invested, or does the 20% go to other investments?

 

[dr of rx]

Are you considering you mortgage payments as part of the 20% salary invested, or does the 20% go to other investments?

no, the mortgage is not part of the 20%.

pay yourself first. get into a habit of putting money away. the earlier the better. if you wait until you are 40 its too late.

don't think you can't put that much away. 20% (pre tax) sounds like a lot, but by the time you max out your 401 you are half way there.

 

[Phantom_Eclipse]

So, the general consensus is, take the 30y repayment option in consolidation and invest in real estate? Anyone know the real interest rate in DFW area? It's one of the places in my shortlist to move after I graduate.

 

[pharmdgto]

If you were one of the ones who was able to lock in a low APR on your student loans then I wouldn't worry about paying them off until your house is paid for and your cars are paid off. I don't know many people that can get a mortgage for less than 3% APR or a car loan for that or less as well. I don't understand the hurry to pay off consolidated student loans unless you already own your home (actually paid off) and you have paid off your cars in full as well. It's a completely different story if you are stuck at a 6-8% fixed student loan ARP though.

I would double pay a mortgage or car payment before sending in more than a minimum student loan payment.

 

[Phantom_Eclipse]

No, I haven't even started pharmacy school yet. But, I do like to look for what's ahead. I'll most likely get stuck with a 7-8% fixed APR when I graduate. When I calculated my estimated loan amount, I'd be better off paying it in 10y. The 30y plan wouldnt have been that much flexible in repayment.

With that said, is it still a good idea to get a house? Or, should I opt for renting instead?

 

[Jeddevil]

So, the general consensus is, take the 30y repayment option in consolidation and invest in real estate? Anyone know the real interest rate in DFW area? It's one of the places in my shortlist to move after I graduate.

It appears that the 30 yr is the consensus, but I don't know about real estate.

Paying off your student loans needs to depend on what rate you get them at. Those of us with them at low rates, it is smart for me to pay them off over a longer period of time and invest my extra money elsewhere. Those that are getting them at the new 6.8% fixed rates that will be that way until congress changes it again, if they do, should probably think about paying them off earlier as it isn't the easiest thing to guarantee a higher rate of return than that. I can lock in FDIC rates higher than my 2.7% loans right now, so why pay them off. 6.8%, I would try to pay those off.

As far as real estate, get a primary residence, yes. Investing in additional real estate outside of that, depends on where you live. I am in the phoenix metro area. Houses are now sitting on the market for 6 months (I have plenty of examples of that right in my own neighborhood). There is no way I would invest in additional real estate here at this time because things are still going to come down. New builders are now slashing prices 50-80K in certain parts of the metro area because they have high inventories and need to move them. This hurts the avg guy trying to sell his house even more (great story in AZ republic last week about a guy trying to sell his 1400 sq ft place for 230K to move into a 2200 sq ft 300K house that he signed papers for and is supposed to move into. Funny thing is that new house would now cost him 215K after KB homes slashed prices but the idiot we too worried about losing his 5K he put down on the new house to walk away. I guess he couldn't see that losing 5K to save 85K on house price is the thing to do in his situation- Idiot).

I am not going to get into a big debate about real estate here, but I will say one thing. People don't believe that it can ever come down, and it does and is. When it does, it isn't like stocks where you can always hit the bid and sale to someone. Many of the houses that are sitting on the market here are from idiots who had good appreciation, so then they refinanced, took money out to buy the boat or monster truck that people think you have to have here. So now they don't have anything to show but added debt from the price appreciation here and they can't sell for a market price. Idiots were buying houses for ridiculous prices here a year ago, and the houses sitting on the market are still priced there. The ones moving in my neighborhood are 40K off the highs of a year ago. You can make great money in real estate, just don't buy into these inflated bubbles, and the bubble hasn't burst yet.

Diversify: Get a house (the only real investment that the majority of americans will ever get besides a 1% savings account because people don't learn in school or from spend happy parents how to keep their money), fully fund your 401K, put away 3-6 months living expenses in cash accounts for that problem in life that seems to always hit people when not expected.

END OF RANT

 

[kwizard]

No, I haven't even started pharmacy school yet. But, I do like to look for what's ahead. I'll most likely get stuck with a 7-8% fixed APR when I graduate. When I calculated my estimated loan amount, I'd be better off paying it in 10y. The 30y plan wouldnt have been that much flexible in repayment.

With that said, is it still a good idea to get a house? Or, should I opt for renting instead?

It depends on where you live. In a lot of places, the cost of rent is very close (if not more) than the cost of a mortgage. The issue w/ buying the house is being able to come w/ down payment (~5% of sale price) or getting sellers assist depending on how bad they want to sell and potential profit seller is making. Other additional costs is the extra ~$2000 necessary to cover closing costs and any extra cash you may need to fix little things upon moving in (new appliances, carpet, etc.) or if you can figure ways to get the seller to cover lot of that, maybe. You've got a ways to go to figure all of this out, but if you can get a similar kind of quality of life buy buying vs renting (same kind of neighborhood, safety) and figure that you would be stable enough to stay in the same area long enough to collect some equity (at least 3yrs) then buying may be ideal. Fanniemae and Coldwell banker have some fleixibile mortgage programs. It is really kind of hard to see what the future may hold as your interests and other life issues may change dramatically over the next 4 yrs.

 

[rxlynn]

No, I haven't even started pharmacy school yet. But, I do like to look for what's ahead. I'll most likely get stuck with a 7-8% fixed APR when I graduate. When I calculated my estimated loan amount, I'd be better off paying it in 10y. The 30y plan wouldnt have been that much flexible in repayment.

With that said, is it still a good idea to get a house? Or, should I opt for renting instead?

Well, I think generally it is a good idea to buy a primary residence once you are somewhere you want to stay for awhile. However, I personally would be extremely uncomfortable with any loan (short of a house loan) that was going to last 30 years. I like your 10 year plan - do you really want to be still paying for your education when you hit 50 or 60 years old? My best advice (which my husband and I have followed) is to purchase enough house to be comfortable, in the best school district that you can find (whether or not you have children). Do not buy to the limit of your available credit - then you will have flexibility in the event that your life circumstances change, real estate bottoms in your area, etc.

 

[Phantom_Eclipse]

Thanx for the advice guys. It's alot to think about even though I'm still miles away from reaching that point.

 

[Jeddevil]

Phantom: By the way, I think buying in DFW is a great idea, as it is one of those towns that never took off and appears to be a hell of a bargain. Amazing what you can buy in DFW for little money. Texas seems to be a bargain all over. If I could handle living with Texans I would move there myself. (Easy texans, my wife is from texas, I just have to get the dig in)

 

[MoXiEguRl]

I was deciding on buying a house or renting.. so i looked into renting and it was going to be close to 700-800 bucks a month so i figured why the hell not make it a little bit more and get a house!!?

Then my friend sent me this.. http://money.cnn.com/2006/05/12/real_estate/reguide_moneymag_albuquerque_0606/index.htm


That is when i decided to get a house... I close on it Aug 5th.. i can't wait! Now on to pharmacy school.. Nothing like starting out at a new school.. new debt.. and a new house!

I think it is a great idea, if you can manage it and are able to buy in a good area. Like the guy said above about phx.. it was booming like no other a year or so ago.. now you can easily find a house that is going for less.. sucks for the home owners.. but rocks for the people who need a home and can't afford 400k.

I say do it. Good luck to you.