I've been reading a lot about the importance of a ~6 month emergency fund AND the importance of paying off student loans as soon as possible. I have ~$14k (6% interest currently in grace period) in student loans and near ZERO in an emergency fund. I'm a new graduate and I'm currently looking for a full time position but I do work part time on and off right now.

So my question is how should I be balancing the little money I'm making now between these two accounts? Will this change when I have a full time and higher paying position?

  • When does the grace period end?
    – RohitJ
    Commented Jun 18, 2014 at 21:26
  • @RohitJ Jan 2015.
    – T. Thomas
    Commented Jun 18, 2014 at 21:50

3 Answers 3


Your priorities should be:

  1. Pay the minimum on the loan to prevent it from going into default.
  2. Build an emergency fund.
  3. Pay extra on the loan to reduce the debt.

If you end up with additional debt from, say, credit cards, you should probably try to get rid of that first, as it's almost certainly at a higher interest rate than a subsidized student loan.

Because you actually have a grace period, I assume these are Federally subsidized loans. Note that there are alternative payment plans available if you are unemployed/underemployed that you should take advantage of, if need be. See Income-based Repayment and related pages for details.


Without a full time job you are in an emergency. Hopefully it won't last long, but my opinion is to give the emergency fund priority while you just might need it soon.

  • Paying off your student loan doesn't save you much now, especially in the grace period. Whereas an unexpected expenditure, or even a few weeks of not being able to get a job, can force you to borrow at unfavourable (i.e. very high) interest rates. Commented Jun 18, 2014 at 22:08

This is assuming your student loans are Federal Stafford Loans

Don't pay off your student loans as soon as possible. They're very low interest and paying them monthly will help your credit.

What you will want to do is as soon as the grace period expires, call up whoever is handling your account and ask them to reduce the monthly since you're not making much.

Then just pay the minimum amount, pay your living expenses, bank some of it, and if you have a month where you came out ahead consider putting the difference towards the student loan. Can also drop any tax return you get into the student loan debt.

The whole pay off your student loans fast is important. When you have the extra put it towards it, but the extra. Its also much, much more important if you made the mistake of taking out Private Loans or have 50k, 80k, 120k in student loan debt. Since you only have a ~14k I'm going with it being a Stafford Loan. Reduce the monthly, pay on time, live within/below your means... and you'll be just fine.

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