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The Simple Dollar

Student loans: paying off loans with different interest rates

Student loans can come with different interest rates. Is it better to pay off students loans that you owe the most on, or that have the highest rate first? Look to question No. 6 of the reader mailbag.

By Guest blogger / August 11, 2011

In this May 9, 2011 photo, graduates of the School of Theology celebrate during Emory University's commencement ceremony, in Atlanta. For some graduates, the next test is figuring out how to repay student loans.

David Goldman / AP / File

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What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.

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Recent posts

1. Guilt for every little purchase
2. Handling partner without money skills
3. Auto insurance challenges
4. Handling elderly relative in decline
5. Preparing for a growing relationship
6. Handling student loan repayment progress
7. Used car decisions
8. Partner with terrible credit
9. Housing choices in expensive area
10. Gencon thoughts

For once, I’m going to break my stance against politics and offer up a few thoughts about the debt ceiling issue.

After watching the debt ceiling debacle of the past month and doing some research of my own, I’ve come to the conclusion that virtually everyone involved with the negotiation is much more interested in furthering their political ambitions than solving America’s problems. This goes for Obama, Boehner, Reid, McConnell, and virtually everyone else involved with it.

The root of the problem is pretty obvious if you look at our federal budget. Our entitlement programs – Medicare, Medicaid, and Social Security – are simply unsustainable. If we continue them as-is, our nation will go bankrupt.

Social Security created a “retirement age” of 65 at a time when the life expectancy of the average American was 63. Today, the life expectancy of the average American is approaching 80. Even worse, each generation now is smaller than the one before it, whereas back then generations were growing larger.

Programs like Pell grants are tiny in comparison to things like Social Security. When you’re speaking about the budget and spending more than a word or two about Pell grants, you’re missing the boat on solving our nation’s real problems.

The solution is also pretty obvious, but it takes a lot of political courage to do it. They simply have to restrict these programs. In simplest terms, this means raising the age requirement for Medicare and Social Security and lowering the income requirement for Medicaid.

We don’t have to do this all at once. It can be graduated in slowly, as they did in the 1980s when they raised the entrance age for Social Security a bit. Someone who is 60 today won’t have the carpet pulled out from under them – they may just have to wait until 63 for the first level of Social Security and 68 for the highest level of Social Security. For someone in their early 30s (like me), it might mean waiting until age 75 for the first level of Social Security and 82 for the highest level of Social Security – or even higher. I am absolutely fine with this if it means getting our nation’s financial house in order. When you start running numbers like that, Social Security quickly becomes sustainable and our budget concerns look far less scary.