Advice on pay student loans

[ktcoups]

So my first student loan payment is right around the corner and I am in desperate need of some advice. I tend to over think and analyze situations and would really appreciate some help in being steered in the right direction here. I'm trying to figure out the best way for me to pay off my loans quickly but still save up money in the mean time. I have about 22,500 in student loans (subsidized and un-subsidized) that I now have to start paying back.

Subsidized- 13,463, Interest Rate: 4.251%
Un-Subsidized- 9,037, Interest Rate: 6.800%

I am 23 and recently became employed as an RN working 32 hours a week making about $1,500 bi-weekly. Currently I have a little over 11,000 saved up, live at home with my parents, and have no other forms of debt or expenses (no car payment, no credit card debt, etc). I have been very fortunate and my parents have helped me out quite a bit paying for my phone, insurance, etc. However, I would like to move out sometime over this summer. How do I best pay off my student loans while preparing to live on my own. I would like to get as much paid off as possible before I move out while still having a savings. I've thought of a couple ways of paying off the loans, but am not sure what the best avenue to take is. Any thoughts??

[disneysteve]

The first step is to come up with a reasonable estimate of what your monthly expenses will be when you move out including rent, food, utilities, insurance, transportation, car maintenance, clothing, entertainment, etc. Once you do that, make sure you maintain an emergency fund of at least 3 months worth of living expenses. That can come from your 11K already saved (congrats on that by the way). Also, don't forget one time expenses like a security deposit, moving costs, things you'll need to buy for that first apartment.

Then, direct spare money to the loan with the higher rate, the 6.8% one. Pay that off first before the lower rate loan.

Don't delay in beginning your retirement savings. If your job has a 401k or 403b, look into that. If not, open a Roth IRA. We can give more advice about that if you tell us what options you have available.

[bjl584]

So my first student loan payment is right around the corner and I am in desperate need of some advice. I tend to over think and analyze situations and would really appreciate some help in being steered in the right direction here. I'm trying to figure out the best way for me to pay off my loans quickly but still save up money in the mean time. I have about 22,500 in student loans (subsidized and un-subsidized) that I now have to start paying back.

Subsidized- 13,463, Interest Rate: 4.251%
Un-Subsidized- 9,037, Interest Rate: 6.800%

I am 23 and recently became employed as an RN working 32 hours a week making about $1,500 bi-weekly. Currently I have a little over 11,000 saved up, live at home with my parents, and have no other forms of debt or expenses (no car payment, no credit card debt, etc). I have been very fortunate and my parents have helped me out quite a bit paying for my phone, insurance, etc. However, I would like to move out sometime over this summer. How do I best pay off my student loans while preparing to live on my own. I would like to get as much paid off as possible before I move out while still having a savings. I've thought of a couple ways of paying off the loans, but am not sure what the best avenue to take is. Any thoughts??

So your payment will be around $200 a month, maybe a little less? That should be more than manageable given your income.

I agree with the advice given that you need to figure out an overall budget for when you move out. And to the advice that you should pay off the higher interest debt first.

[ktcoups]

I plan on living with another person, so lets say my expenses are 1500/month. Which is 9,000 for 6 months. Based on that, is the advice to save that 9,000 and put whatever I have left into my loans? I mean its definitely do-able. And I'd probably be able to pay them off in less than a year that way. It just seems scary to be putting about 3000 into student loans every month.

[snarkfinance]

ktcoups,

I am a little confused by your math... how could you afford to pay $3,000/month towards your student loans? If you make roughly $3,000/month (two pay periods) and your expenses are $1,5000... doesn't add up. Maybe you are referring to the period where you will be working and living at home? Putting every penny you make towards student loans sounds extreme. Maybe you could have a little fun? Go see a movie, go on a date?

You seem like a very, very responsible saver. Given that, I would set a budget (as has been mentioned) that maximizes your 401K match AND your Roth IRA ($5,500/year contribution limit as of 2013). You already have an emergency fund in your $11,000 (take about 4-6 months worth of expenses and save it, put the rest towards your highest rate loan). The rest is at your discretion. Honestly, you do not have an overwhelming amount of student loans and at decent rates. Pay them off quickly but don't be obsessed. You have the luxury of "multi-tasking" your finances between savings and debt reduction.

[esb3357]

Have you thought about just stay at home till you kock out those student loans. If you did that, you would roughly have the loans and an ef fully stocked by next year. Honestly thats what I would do.

[humandraydel]

It just seems scary to be putting about 3000 into student loans every month.

It's not scary. It's scarier to have $22k worth of debt and pay it off slowly for 10-15 years. If I were you I would absolutely pay them off ASAP. I didn't have that opportunity and I am still paying loans off (only 7 years later, but I have 8 more to go!).

[BMEPhDinCO]

Expenses with a roommate in a moderate city shouldn't be more than $1300 a month for very comfortable living. Add another $400 for RothIRA (plus $200 more one month to max). If your $3k a month is after taxes, this should mean you have $1,300 a month for savings and loan payments. if it's before taxes, assuming 25% for taxes gives you $550 a month for savings and loans. You would need $10k in your EF for 6 months.

If you aren't moving out until June, then my advice, assuming $3k net would be:

Dec: Take $1k from your savings, put that on the 6.8% loan. Take $2k from your paycheck and put that on the 6.8% loan. Keep the other $1k for expenses and to start your RothIRA (wait until Jan if you want it to be 2013, or do it in Dec for a 2012 contribution).

Jan-March: Take $2k from your paycheck and put it on the 6.8% loan. Keep the other $1k for expenses and RothIRA ($400). Congrats - after March, you are down to 1 loan!

April-May: Build up your other savings accounts to prepare to move: You need a:
House/Rent fund - for supplies, deposit, rent for 1st and last month - put at least $2k in here (April paycheck)
Misc Fund (for electronics, gifts, nice meals, whatever) - put $500 in here
Auto Fund (repairs, maintenance, next car, insurance, registration, etc) - put $500 in here

Keep the rest for buying furniture and other savings pots, for example: pet, medical, travel, business....

Hope that helps, good luck!

[ValQue]

Have you thought about just stay at home till you kock out those student loans. If you did that, you would roughly have the loans and an ef fully stocked by next year. Honestly thats what I would do.

My exact thought. If you pay off your loans first, you'll be able to move out whenever you want. There's no rush in moving out of your parent's house if they're letting you stay there. Parents always want to help in anyway they can. You should pay down your student loans and when you reach they end of your payments, begin looking for a place to move. I would also continue saving in the meantime,