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No Rush To Pay Off My Student Loans

Published 10/8/07 (Modified 3/9/11)
By MoneyBlueBook

This is my first entry about my student loans. For starters, I think I am very lucky compared to some people. As of today, I only have about $30,000 in student loans left from my college and graduate school days. Aside from the prestige or other benefits of attending more expensive private schools, I feel fortunate to have stuck with more affordable state schools for my undergraduate and graduate education. As a result, I'm not living a life of student loan servitude like many of the people I am reading about in the news, and personally am in no particular rush or hurry to quickly pay off my student loans.

Student Loan Debt Is A Massive Burden To Many

Student loans never go away and can't even be discharged through bankruptcy. The student loan creditors will essentially come after you until you eventually pay it off, a sobering reality that many students don't fully comprehend or realize until they've graduated. I truly sympathize with their burden and know how much of a shackle it can be. I have friends who graduated from law school and medical school carrying tremendous six figure student loans. Even with their advanced degree education, in today's market, there is no easy guarantee that they will have a breezy way of paying it off.

But I Am Taking My Time Paying Off My Loans Thanks To Low Interest Consolidation

I am fortunate to have consolidated my student loans at the lowest rate seen in the last decade or so. I finished graduate school in 2003 with a combination of variable and fixed rate student loans, which were at a relatively low 3.42% at the time. In May 2004, I consolidated my Sallie Mae loans into a very low fixed rate and since then, I've taken advantage of every borrower benefit available to lower my rate.

I applied for Sallie Mae's Smart Loan Direct Repay, which drops your interest rate by a .25% discount if you make your monthly loan payments through automatic debit. I also later qualified for the SLMA Consolidation Savings Options, which provides you a further 1.00% interest rate discount if you make your scheduled monthly payments consistently for 3 years straight.

Currently my total student loans are consolidated at a very low fixed interest rate of 2.25%. I am definitely going to take my time in paying off my loans. Because I was able to consolidate at such a low rate, I am better off keeping my money in an interest bearing account earning more than 5.00% than I am in quickly paying off the loan. If there's any type of debt that can be considered "good debt" this one is it. Not only can I get more money by not paying off the low interest loan in full right away, I can also qualify for a tax deduction for the student loan interest that I pay.

Maybe it's also a psychological cushion factor, but I would much rather have $30,000 in the bank and be $30,000 in debt, than I would having $0 in the bank with no debt.

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8 Responses to “No Rush To Pay Off My Student Loans” 

  1. Patrick says:

    In your situation I would leave the debt as long as possible. At least, as long as interest for savings accounts remains at least 1-1.5% higher than your loans. After that, it won't make too much difference. I also agree that having the extra money in the bank not only feels good, it is smart. It gives you an emergency fund and flexibility.

  2. L says:

    unfortunately, some of us do have that high debt... in that case, this was not necessarily an encouraging article. but all of us can only do the best we can.

  3. KBoosh says:

    Does anyone know how to consolidate student loans for a lower interest at Sallie Mae now... my interest rate is $8.5%!!!

  4. Jim555 says:

    I graduated in 2004 and immediately consolidated my $45,000 in debt to a low 2.85% interest rate. I paid it for years until my company went bankrupt last September (Yes September 2008, nearly 7 months ago.) I STILL have not been able to find another job even close to what I was earning... I'm currently in deferment and not making any payments due to my unemployment situation.

    Interest on student loans is Tax Deductible so the more interest you pay the more you get back at tax time.

    I love your point about how it's better to have $30K in the bank and OWE $30K than to owe nothing and have nothing... I wish someone would give me a $30K loan at like 4% and I would sign the papers tomorrow and use the $30K to make the payments till I found a new job!!

    This is what Obama should do... Give everyone in America a Federal Credit Card with a 4% APR and a $30K line of credit... EVERYONE would go out and spend $$$ if they did this. You could use it to go to school, buy a car, etc. Whatever you need but you would HAVE to pay it back as a FEDERAL LOAN.

  5. Matthew says:

    I graduated in 1999 with my masters after finishing my undergrad degree in 1997. I had 42,000 in loans. I am teacher and the first couple of years I could not pay my loans and survive at the same time and went into deferment. Now I have had my wages garnished and all tax returns sent toward my student loan which has not touched the 42,000 I owe. They penalized me and now I owe over 70,000 dollars. How can I stop this viscious cycle? I cannot afford to pay over $400 a month and hate the fact that no matter how much money they bleed me, I am not loosing this debt. Is there anyone who knows any method to stop this bleeding of me and my family? SOS!

  6. jake says:

    I agree that it's important to have savings while paying off debt, but don't get me wrong, 30k in debt makes me a little uneasy. And unless you have (roughly) more than $10k in the bank earning 4%+ interest, you're not really saving any money. 2% interest on 30k will cost you more money long term than you're earning on an account with 10k earning 4% interest. It's been 5 years since this post so hopefully this person has learned this by now!!!

  7. Jeremy says:


    Join the Ameri-corps or Teach for America. Have someone else pay off your loans.

  8. GovTuition says:

    Why? Seems little out of the ordinary to me.

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