I want financial advice.

[Aethian]

But how long do you have to make interest on any money? It really is better to pay now while you have no interest accruing.

The student loan as a pet thing is something stated by Dave Ramsey.

I don't know your balances or interest amounts so this is just going to be guesstimates (I will use my old student loan interest rate)...

Ex 1
Paying down the loan before interest accrues.
Original Loan Amount: 55,000
Amount to pay per month: 400.
Time before Interest accrues: 12 months
Amount of Loan when Interest starts: 50200
Total Amount Paid (after interest) if interest is 7.2%, Monthly payment is 400: 93,504 19 years 6 months

Ex 2
Not Paying down the loan before interest accrues.
Original Loan Amount: 55,000
Amount of Loan when Interest starts: 55,000
Total Amount Paid if interest is 7.2%, Monthly payment is 400: 116,546 24 years, 5 months

Ex3
Investing 400 for 12 months, 4% interest: 4905
Original Loan Amount: 55,000
Amount of Loan with full invested payoff: 50067
Total Amount Paid (after interest) if interest is 7.2%, Monthly payment is 400: 93,709 19 years, 5 months

Hopefully this makes sense...

[gremcint]

or I make a lump sum payment right before interest accrues using the gathered interest from investments.

[Tama]

Or do half and half on that -- but do pay something on the loans. Maybe put some money away each month and make a big payment with that.

[Aethian]

or I make a lump sum payment right before interest accrues using the gathered interest from investments.

That's what ex 3 was.

[Sapphire Silk]

I agree with the advice to see a professional. They can really help you set something up that will do you the most good. Just be careful of fees, and if they start pushing products on you. Get a second opinion in that case.

You do need to both have a rainy day fund and to pay off the student loan asap. Figure out how much you can afford to put into savings, and the max you can afford to put towards the loan each month; hopefully more than the minimum monthly payment. Putting money aside for the loan now is a good idea; the faster you pay it down, the less interest you pay. It'll hurt in the short run because you'll have less discretionary spending, but pay off once the debt is gone because you'll 1) have a better credit score, and 2) have more money to save.

Start thinking about how you are going to save for retirement. My regret is not getting on it until I was in my mid 40's. I'm 20 years behind and struggling to catch up. Start now, and it will hurt less and you'll get in the habit of aggressive saving. That's a recipe for a better lifestyle when you hit middle age.

[protege]

I was lucky when it came to my student loans. 2 weeks after college graduation, I landed my current job. At the time, I was living with my parents, and didn't have any bills. My car was paid for, and anything I made...was carefully squirreled away. Not long after, the loans became due, and I had to start making payments. I don't remember what the payments were--maybe $300 a month?

That might be bit high, but I forget what the amount really was. Since I didn't have any bills, at least not until I had to replace my car in 2000 (some idiot hit me on the way to work), I put most of my money into CDs and similar investments. The rest, went to paying on the loan. Then the accident happened, and I had to get a new car. Two loans to mess with. Yay

That's when I decided to send in larger payments on the school loan, and just make the minimum payments on the car. I'd send in multiple-months' payments at a time. There were several months that I'd technically owe nothing. I'd send in a payment or two anyway so I could get further ahead.

Then it was time that the loan was paid off--several years early! I then did the same thing with the car. As money came in, the monthly payments got larger. I was able to pay off both loans several years early.

One other thing that I'm glad I did...was set up an IRA not long after I started working. At the time, my employer didn't offer 401(k) plans, and rather than let my money sit and get the minimal interest rate at the bank, I chose to look into some investment funds through USAA. If you can, put some money away towards your retirement--the longer you wait, the further behind you'll end up.

[Seshat]

In the long term, look into renting vs house-purchase. The benefits and costs vary greatly depending on where you are, and what the long term (and I mean multi-decade long term) housing market is in your part of the world.

For this one, definitely seek professional advice. However, in my own family's case:
* we have a very low income.
* we don't intend to move (unless circumstances change dramatically).
* our housing needs are stable.
* being able to modify the house for disability is damn useful to us.
* rent costs were approx equal to minimum monthly mortgage payment at the time we took out the loan.
* over the long term, the minimum monthly payment is likely to remain stable in absolute dollars, while our income will gradually rise with inflation. So as a percentage of our income, the mortgage payment will reduce; and eventually become nil. (We'll still have costs such as repairs and rates, of course.)


Because of all of that, for us it was worth buying: in a couple of decades, we'll have about a quarter of our income available to spend on things we currently can't afford.

HOWEVER: the decision between owning and renting has to be made based on your specific circumstances, and the housing market where you are. AND on your financial circumstances at the time.