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.
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I know it may be a bit early to be asking these questions, but I just want to be prepared to have these conversations once we get engaged so I can get people to see my side. My boyfriend has gone back and forth on big or small wedding. We could save the money ourselves, too. But saving that much money for a wedding as opposed to a house is not in line with our priorities. How would you handle this potential situation?
The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.
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You do not have to have any sort of “large, glamorous wedding.” If it does not fit with the values that you and your boyfriend share – and it sure sounds like it doesn’t – don’t have one.
The nature of your wedding is no one’s decision but your own. Have the event in a park and make it a potluck dinner. Go with your parents and a few close friends and talk to a justice of the peace or your preferred religious leader. Get married privately, then have one small reception-type event with your husband-to-be’s family and another one the next weekend near your family (or vice versa) to save everyone travel costs.
Who cares if someone’s extended family is “disappointed” by your big day? Their thoughts about your wedding can take a long walk off of a short pier.
Create a day that reflects who you are and who your husband-to-be is. If his extended family doesn’t like it, that’s their problem, not yours. Don’t spend a second of your life or a dime of your money trying to live up to such nonsensical expectations.
Q6: Handling student loan repayment progress
So here’s my situation: 31 year old female, bought first home last year with long term domestic partner (we hope to be married in the next year or so). Total mortgage payment $1000 which we split equally, so I pay $500. We have a shared checking account that we use to pay all common expenses (bills, dog food, trips etc). We each keep separate checking accounts.
I owe $10,740.84 in student loans broken down as follows (graduated in ’08 with a BS):
acct 1: 6.8% variable owe $3,991.53
acct 2: 4.399% mixed owe $4,331.04
acct 3: 1.36% variable owe $2,457.89
I pay $500 a month total towards this debt. I think my actual payments are supposed to be around $250 but I chose to start paying $500 at the beginning of this year so I could be debt free in 2 years (inspired by your blog!).
What I want to know about my student loan situation is how should I pay this debt off? Should I divide the $500 payment equally among the accounts or pay off the one I owe the most on first? I’ve been putting $200 into each of the first two and $100 into the third as it has the lower interest rate.
Make minimum payments on all three, then take the remainder of that $500 and throw it toward the highest interest rate debt. This will eliminate that set of debts the quickest.
At the rate you’re paying, you’ll probably have a lot of this paid off before there’s a rate adjustment. These interest rates are relatively low, as are the balances.
Kathy asked a follow-up question about her car.
Q7: Used car decisions
I save $260 per month that I put into a separate savings account for car/house insurance and taxes. I also have been saving about 20% of my paychecks for the last year or so into another savings account as an emergency fund. These two accounts total ~$11,500. I have no credit cards. I have no car payment.
Per one of your recent posts, I just started a 401k at 12% (since I’m not debt free I chose a lower percentage) which my company matches up to 7%. Retirement savings has my mind totally boggled but I opened the account and keep reading about so I figure I’ll eventually get a grasp on it.