The Stack Overflow podcast is back! Listen to an interview with our new CEO.
122

While it's common to think of it that way - pay off the interest first, then the principal - that's not actually how your payments work over time. It's true of any one payment, though. Interest is earned over time. It might be added on daily, weekly, monthly, or any other frequency. For simplicity's sake, let's assume it is added 1/12*(apr) once per ...


92

But what should I be expecting? How much trouble am I in? If you graduated with $134,181 in loans at a rate of 9.3% you'd expect a repayment amount of $1,722/month for 10 years. If you make $70,000/year you'd have ~$2,617 after your loan payments each month, and if the $1,800 monthly living expense you mention is sustainable during loan repayment then you'...


88

First off, your commitment to paying down debt and apparent strong relationship with your brother is admirable. However, I think you are overcomplicating your situation and potentially endangering your relationship by attempting to combine debts in this way. You could consider a simple example where you have interest bearing at 5% and your brother has ...


79

IMHO, you made a very poor choice with school selection. When we make poor choices as adults we have to write checks to solve those problems. Yours is one that will cost you well over 140K, and quite possibly more. For the price of your last year, you could have attended a state university for 4 years and made a very similar salary. When one does not ...


75

(This answer is based on the article you linked in the comment, but could probably apply in general as well) What re-payment detail are people overlooking? There are not many specifics in the article, but here are some possibilities: Some interest had accrued while in school, so the amount owed after graduation was significantly more than the original "...


68

Congratulations on your engagement, and on your desire to begin your marriage debt free. Your fiancée can give you up to $14,000 per year as a gift without having to pay any gift tax. Above that, there are lifetime gift/estate tax exclusions that apply. You, as the recipient of the gift, do not pay any tax on it. (It is not considered income for you.) ...


61

college is valuable even if we don't get a high income Absolutely! Any education is valuable in some way. Not all are valuable economically, though. A degree in sociology that enables you to work in social services where you can impact peoples' lives for the better is invaluable, though it may not pay enough to pay back tens of thousands of dollars of ...


60

You've been tricked into an inappropriate lifestyle And the student loan companies did it. Their motivation is the positively insane interest rates for loans which cannot be discharged in bankruptcy. You are their cash cow. You are doing exactly what they want. Money is distributive. Money spent on something else is not spent on tuition, which ...


54

In the UK, supposing that this student debt is the government backed type debt and not private debt, then it will never be reported on your credit report and will not affect your chances of getting credit. The student loan system in the UK is massively misunderstood by the general population and this lack of understanding is used for political aims by the ...


52

Personally, I avoid making business deals with friends and relatives. There's just too much of a possibility that things can go wrong. Let's assume that you're honest people and you have no intention of cheating your mother-in-law. Still, all sorts of things could happen that could make it difficult for you to repay the loan. You could lose your job. You ...


52

In the US, the main tax consequences are: The interest she receives will be income and have to be declared as such The interest you pay would no longer be deductible since loans from relatives are not eligible student loans If she charges you interest less than the "market rate" (roughly 2-3% right now depending on the term of the loan), the difference in ...


49

The UK Student Loan system is best thought of not as a loan, but as a tax on future earnings. You are correct, the majority of people will never clear their debt, a substantial portion won't even repay the base sum they borrowed. This is all costed into the whole student loan system of funding, and the focus is to (broadly) break even, as opposed to ...


48

For most people the answer is a strong No, you should not pay more than the minimum repayments. UK student loans are a special type of debt with two big differences to a normal loan: You are not required to make repayments while your earnings are low. Many students will never repay their loan in full, instead the government will write off the remainder of ...


47

According to the OSAP website you will not be charged interest until 6 months after you graduate for the Ontario portion of your loans (Canada portion accrues interest immediately after graduation). The loans are interest and payment free while enrolled full-time. That means for the next year you could earn interest on your savings and have extra cushion at ...


46

The student loans are gone, all lenders see is a 2nd mortgage. Since the mortgage is secured by the home you'd likely have a hard time getting a better rate on an unsecured loan, but it doesn't hurt to go chat with some lenders and see what options exist. I imagine the best chance for a lower rate would be a re-finance on the first mortgage (assuming there'...


44

My recommendation would be to pay off your student loan debt as soon as possible. You mention that the difference between your student loan and the historical, long-term return on the stock market is one-half percent. The problem is, the 7% return that you are counting on from the stock market is not guaranteed. You might get 7% over the next few years, ...


43

In my opinion, you should pay off the student loans as soon as possible, before you start saving for the house downpayment. $26k is a big number, but you have a great salary. (Nice!) Up until now, you have been a poor college student, accustomed to a relatively low standard of living. Your $800 per month plan would have you pay off the loan in 3 years, ...


42

The set of circumstances that 401k loans make sense, are very small. As you would expect yours is not one of them. You make 70K per year and need 6500. Interest rate is not your problem, budgeting is the problem. Pay this off in three months not the 48 you are proposing. Why is borrowing from your 401K a bad idea, especially in this case? You have no ...


41

Here are the risks involved with student loans: They are very difficult to get discharged in a bankruptcy - the only way you can get rid of them is through death or disability (there are forgiveness programs but they are designed for people that can't pay them back, which means you shouldn't have taken a loan in the first place) They encourage you to spend ...


40

Ponder this. Suppose that a reputable company or government were to come out and say hey, we are going to issue some 10 year bonds at 6.4%. Anyone interested in buying some? Assume that the company or government is financially solid and there is zero chance that they will go bankrupt. Think those bonds would sell? Would you be interested in buying such a ...


39

No, I don’t believe this is illegal. I think you’ve already highlighted the reasons this is done: As a service to the borrower, it allows them to lower their payment if they choose. If the borrower does start making smaller payments, it means more interest charges for the lender. The minimum payment is called “minimum” for a reason. Feel free to ignore ...


39

Attend a less expensive school The biggest pitfall to avoid is attending a school at you cannot afford. If you can get a need-based scholarship to Harvard, by all means attend an expensive university, but don't go to a school that costs $30K/year if you have to go into debt for it. There are plenty of cheaper alternatives like attending a community college ...


36

My biggest concern with this plan is that there's no going back should you decide that it is not going to work, either due to the strain on the relationship or for some other reason. If you were borrowing from a relative in place of a mortgage or a car loan, you can always refinance, and might just pay a little more interest or closing costs from a bank. ...


35

Same thing as for any debt: bank sues you, you lose, you are in an even deeper hole because you now owe them for the cost of the court case, your credit rating goes into the toilet, you may even have trouble retaining/finding a job. Being stupid is always more expensive.


32

You've already done everything I would suggest: Contact the collections agency, being careful in what personal information you provide. Check all three of your credit reports, for any trace of incorrect information. At this point, since you've confirmed that the social security number that the collections agency has does not match yours, and you've ...


32

Keep 3-6 months (or more if you need to, for me the number is 9 months) worth of expenses in an emergency fund. Put the rest against the student loan. The length of time depends on your situation. I have family, and work in IT. Changing jobs takes me longer, because ... reasons. Having less than 6-9 months of buffer means that I have to rush and ...


32

Both your aversion to debt and your aversion to living paycheck-to-paycheck are admirable. Many people live in both of those states. Fortunately, if I am reading your question correctly, you can avoid both. You currently have $18k in your savings, and your tuition for the upcoming year is only $13k. This means that if you pay cash for your tuition, you will ...


31

As you noticed, there are diminishing returns on the interest savings as you get closer to paying off the loan. Certainly, the quicker you pay off the loan, the more interest you save. However, the total interest under the normal 10 year terms is fixed at $9178, and you can't save more interest than that. Therefore, the rate of increase of the interest ...


31

The future interest is not yet a part of the balance you see, it will be added every month. So next month, less interest will be added to the balance (compared to not paying that larger amount). What you see in the balance is all principal. Every month, the interest gets added, you payment gets deducted (hopefully it is larger than the interest), and you ...


31

This is primarily opinion based but will answer some factual parts of your question. Aren't there always risks with debt/spending money? Of course. People plan all types of contingencies but there is always the "black swan" that they did not see coming. It is/was foolish for home buyers to fall for the mantra of "buy as much house as you can based on ...


Only top voted, non community-wiki answers of a minimum length are eligible