Saving for a house... or paying down student loans?

[panda_bear3]

Hi everyone... brand new here, hoping you have some advice for me!

I'm currently 23, graduated from college in May 2012. I am employed in my field (since October 2012) making decent money for someone who's just starting out (I'm an RN). I live at home with my parents, so no rent payments. My question is - would it be better to pay off some of my student loans before saving for a down payment on a condo/house?


Current Income:
Varies.. at a minimum, $650/week after deductions for insurances and taxes come out. Staying late some shifts or picking up extra days could bring it to $800+

Current Expenses:
*Car $333.15/month (I round up to make it $350.. continuing this I will have it all paid off by Aug. 2017, 4 months early)
*Car Insurance ~$92/month. Policy does not expire til November, will probably look for a different company at that time.
*Student loans $250/month...have been using money that I had saved for these payments... still have $1250 left (5 months of payments) so that I'm technically not using any of my earned income towards this until September.
*Gas I run around $50/week
*Misc. personal expenses $40/week including food outside of what my parents buy at home, clothes, my portion of the cell phone bill, etc.

Current Savings:
*Emergency Fund - working on it .. currently has $5,000; goal is $10,000 by June 1st
*Car - any expenses I may incur related to car upkeep, maintenance, repair etc. ~ 1,250
*Medical/Dental (I do have insurance, and my employer reimburses a fair portion (75%) of the deductible however I am responsible for putting up the money upfront) ~ 1,300
*Misc Savings (I use this for next year's Xmas gifts, things I need to renew like my nursing license, membership dues etc) ~1,250
*House down payment ~ 3,000 .. once my E-fund is where I'm comfortable, all my "extra" money would start going to this account.

My student loans are broken down as follows:
1) 5,365 @ 4.25%
2) 5,352 @ 3.15%
3) 4,398 @ 5.35%
4) 3,432 @ 5.75%

Currently paying $250/month with est pay off July/August 2020


Should i use the $3k in my house down payment pool to pay almost all of the smallest loan w/ the highest interest rate? My only concern here is that my monthly payment would stay the same, but the term of the loan would decrease (don't get me wrong, that is awesome, but it also means delaying the moving out/condo/house thing).

I also have about $3,000 in savings bonds that have matured and could be cashed out. Was planning to use those towards my down payment as well.


I'm just so confused.. not sure where this money should be going. I don't like the idea of student loan debt, but at the same time I don't want to pay off all of it then be at square one with saving for a home... HELP!

[edg126]

It's no fun paying student loans and a mortgage. We sort of live in a hcol area and when we were paying $700 a month in student loans knew that knocked down how much we could afford.
When you are deciding, it helped me to go on bankrates mortgage amortization calculator, which works for any loan. When I saw I could save $5000 worth of interest payments I was super incentivized to pay it off.

[siggy_freud]

What is the interest rate on your car? If it's higher than the student loans pay it off first.

[mgkimsal]

Couple weeks late replying, but wanted to chime in.

I'm adding up that you've got about $18k of student loans, and about ... $14k of available cash. You didn't say what's left on the car, but... with $600/week coming in, and being able to live rent free for a little while longer with your folks, I'd get *real* serious about those student loans. Living tight, you could have enough cash to pay them off completely in less than 6 months, and be done with them. You've still got the car, but you'll have ~$2500 to throw at whatever you need to - rebuilding your emergency fund to current levels in 3-5 months after that. In less than a year, you'd have a huge chunk of debt paid off, with a decent income ready to be focused at the next stage - home fund, paying off car early, whatever.

This approach may not be for everyone, but if you think you could do it, ask for their support - they will be footing some of your bill with the 'rent free' aspect, but they may be very willing to see you get serious about attacking your debt and being done with it so early. I graduated almost 20 years ago, and had 'only' $5k in student loans (but foolishly some other cc debt too), but I managed to keep that student loan debt around for more than 5 years, always gnawing away at the balance sheet, and my state of mind. Some people can rest easy (or, perhaps, think they can) having a lot of miscellaneous debts hanging around - I'm not one of them any more.

[panda_bear3]

Thanks for the input from all - I actually already took the $3k from my "house" account and paid down the majority of my smallest student loan (the one at 5.75%) leaving me with 3 smaller loans, totalling ~14k, varying interest rates. My car is just over $17k left on the loan at 3.5 ... I'm focusing my efforts on paying off the car
1) interest on that can't be claimed on taxes next year
2) once it's paid off, that's $350 extra in my pocket to snowball towards the student loans / build up a bigger efund / whatever.

If I'm able to stay on track with that I should have it paid off in less than a year! (probably Feb-March 2014)

Thanks again for all your advice lots of different sides I hadn't been considering the first time around!

[mgkimsal]

Great to hear! I wish you continued success over the next year paying things off quickly, and much success in building wealth over the coming years1

[Tree0164]

I would focus on your student loans right now. You got 5k in your EF which is good for while living at home. I would aggressively focus on those. Once you have those paid off save for the house.