Thread: Advice Needed: $100k+ of student loans...

My girlfriend has just finished school for her PHD in Neuropsychology, and has accumulated over $100k in student loans over the past 7 years reaching this goal. She has practicum & internship still to complete (Probably about another 2 years worth), along with her dissertation to write -- and then she can unlock her true earning potential of $120-150k+... But in the meantime she's working as a social worker, making $40k a year for a local retirement community.

She likes to pay extra on her student loans, because I think it gives her some comfort that maybe some day they will get paid off, as opposed to just being overwhelmed by them. I'm currently taking issue with this strategy, and thinking that the minimum payments may be a better way to go here....

Since the $100k is financed at a low interest rate, and that interest is tax deductable -- should she really be in any hurry to pay off these loans? Especially before she's started working as a Neuropsychologist? She has $60k of equity in a house (Currently rented with break even cashflow) that could be sold to erase over half of them, if she wanted to -- And that is something we are currently considering. Holding it for a few more years until there is $100k in there is another great option I think may work...

Let's hear your advice / strategies on how you would address these student loans... I know Kiyosaki and others preach that student debt is not "bad debt", but actually "good debt" since it's in investment in your future earning potential. She will obviously be in the "S" quadrant when she's done, and our long term strategy for her to get into the "B" quadrant may be for her to open her own nursing homes at some point down the road (Specializing in Alzheimers and Dimentia type patients, etc).

Should she even worry much about these loans? I know the # is huge, but everything is relative, right?

Cheers,

- Hakrjak

Originally Posted by AroundTheWorld

I look at student loans from strictly an interest rate standpoint.... that is the cheapest money you will every borrow!!!

I make minimum payments. Anything extra can be invested at a higher return.

However - - - this is also a "relationship" issue. Her money - her debt - her comfort level - her choice?

We are looking to get married next year, and we live together currently -- so she approached me for help on a plan that would provide the best possible outcome for "us" in the long run -- knowing I'm one of these personal finance guys ... And thus I brought it here for my colleagues to help discuss.

Cheers,

- Hakrjak

I had a much smaller student loan
(not tax deductable)
and I hated debt when I had it
but I didn't pay it back until I was rock solid in my job
(in her case, making her $120k plus).

Why?

Because I couldn't guarantee I'd always get such a favorable loan.
Until I knew all my big expenses were behind me
(at that time, professional dues almost crippled me,
not to mention first and last rent),
I left my little nest egg for those emergencies.

Thanks for the in depth response -- Speed +++

-Hakrjak

Yep, I was thinking about something similar --

Buy a piece of discounted land or property for $25k, and sell it for $50k with 12.9% owner financing. Payment coming in each month would be $549 -- and if they ever miss a payment, you can take the property right back and sell it again, so there is a good chance you'll make much more over the long haul.

Cheers,

- Hakrjak

LOL



- Hakrjak

Originally Posted by AroundTheWorld

Did you guys ever come to a conclusion on this?

Also - I seem to remember a thread on RD about the 2 houses. Where are you on that?

Yep -- She's not going to pay extra on the loans right now... Going to wait until she's at max earning potential to start trying to pay these off.

Re: The 2 houses -- Hers is currently rented and cashflowing about $50 a month. Nothing spectacular, but atleast it got her into my house without any additional costs. Market is too soft to try and sell right now, but when it perks up a bit -- She's thinking that she'll probably dump it and combine funds with me so we can move into a bigger house. We really need something 4,000+ sq ft with a 3-4 car garage to meet our needs... What can I say? We're a couple of pack rats and we're busting at the seams in a 3300 sq ft'er with 2 car garage.

- Hakrjak