We all know that paying off debt as quickly as possible is always a good idea. But is paying off student loans early a good idea?
Paying interest on any debt is like flushing cash down the toilet. You get nothing for the interest payments that you make, and they’re only making someone else richer.
However, there are times when you don’t want to go hog wild and pay as much as you can on your student loans. Sometimes making the minimum payment is ideal, and those are the situations we’re going to talk about here.
You must keep in mind that we aren’t saying not to pay your student loan debt, what we are saying is that sometimes making the smallest payment possible is the best route to go.
3. If You Have a High Amount of Credit Card Debt
There are all kinds of reasons why you might have acquired a high amount of credit card debt. You may have used credit cards during college to live off of. It’s a bad idea, but for many students, it’s the only way you can survive.
Also, some college students go back to school later in life and they rely on their credit cards as a means of funding their education. Some people have a difficult time working fulltime and studying at the same time.
You may also find yourself not in the best situation financially after graduating and needing to live off of your credit cards. No matter the reason behind your credit card debt, you must take paying it off seriously.
If you don’t, then you will end up paying far more in interest than it’s worth. Credit cards come with much higher interest rates than credit cards, and that’s why you want to pay them off as quickly as possible.
There’s nothing wrong with allowing your student loan debt to sit there as you’re paying off your credit cards. However, you do want to make sure that you are still making the minimum payment on your student loan that way nothing bad happens to your credit score.
2. If You Don’t Have an Emergency Fund Set Up
There’s a big debate on how much you should have set up in your emergency fund. If you’ve only been out of college for a year or two, you’re not going to be able to build up a huge emergency fund.
As the name implies, you should only use this money in an emergency. You don’t do anything with it, and it’s a good thing if you never need to spend it. The money is there to cover any cost that you might have during an emergency.
Did something just blow on your car and you need to replace it ASAP so you can get back and forth to work? If something like that happens, don’t sweat it, take the money from your emergency fund and repair your car.
It’s a good idea to have at least $500 in your emergency fund. Some are going to say that you should have six months to a years’ worth of income in the bank. People who have recently graduated from college aren’t going to be able to save that kind of money right away.
If you can somehow squirrel back a couple of thousand dollars, that should be enough in the beginning. If you don’t have at least $500 in the bank for emergencies, then set some money aside until you do.
You don’t want to put yourself in a situation where you have to rely on costly credit cards to cover your next emergency.
1. If You Don’t Have Health Insurance
You’re young, healthy, and don’t think you need health insurance. Why not skip getting health insurance from your employer and put that money towards repaying your student loan debt? That’s a bad idea because what if something happens to you?
You might think it’s a bad idea to get health insurance because you’re not sick, but that’s the wrong way to think about it. Health insurance is an investment in yourself and your future. You go to the doctor twice a year to make sure there is nothing wrong with you.
Sometimes health situations arise that you aren’t aware of. A person can feel healthy as a horse but have something wrong with them on the inside.
If you are thinking about going without health insurance, don’t entertain that thought for a single second. Go talk to your employer immediately and ask them about their health insurance plans.
You might be able to skirt by without having the most expensive plan on the books, but don’t go without health insurance. You went to college because you know the best investment is always in yourself.
Health insurance is an investment in you, and it’s something that every person needs. Your health is far too important to put it at risk by paying more on your student loan. Get health insurance and put yourself on the right path to living a long productive life.
Not All Debt Is Created Equal
Debt from student loans isn’t as bad as many would like to believe. It’s one of the best types of debt you can get yourself into. It might seem like it now, but the best decision you ever made was to go in debt to further your education.
If you can only make the minimum payments for the first few years, don’t worry about it. Set yourself up financially so that you’re ready to face the challenges ahead. You’ve got a lot of things coming your way, and the loan you took out is the least of your concerns.
Sure, it’s hanging over your head like a black cloud, but it’s not as bad as you think it is. Student debt is a part of life, and you’ll get used to it after a while. Settle into your new life as a college graduate and try your best to enjoy as much of your early adulthood as possible.
Debt shouldn’t get you down, but you do need to realize the importance of paying it back as well.