Korean Job Discussion Forums

[VirginIslander]

Currently I have about $16,000 (US) in loans left. My loans are locked
at 3.5%.

After my first year here, I will have about that much money saved.

Should I:

1. Pay off the loans in total and start saving again (there goes my vacation/study time in Central America)

2. Pay off about $6,000 and then make monthly payments of $100, and also pay the 3.5% on the remaing $10,000 over the next 10 years.

3. Continue paying $100=$150 a month over the next 12 years.


At 3.5% I am not to inclined to it all back.

What do you think?

Thanks in advance.

[leebumlik69]

[VirginIslander]

For every month I stay in Central America, I loose a thousand dollars here in Korea.


My purpose for going there is to study spanish. With flight, medical insurance, five hours a day of one-on-one instruction, housing with a family and three free meals a day, I can study for 10 weeks for $3000. (Room/board/tuition is only $1,500)


However, my friend is in Mexico right now teaching English With sleep and school, 2/3 of her day is spent using English.

[bixlerscott]

At such a low interest rate like 3.5%, you'd be better off putting your money to work elsewhere with a higher rate of return while actually still having it in your name as well as building credit with it. Also, with student loans, you pay the same amount of interest whether you pay all today or leave it for tomarrow years, besides no one is going to suffur over you taking your sweet time. It is on an amortization schedule that is locked it just as a fixed interest rate is.

I owe $38,000 at 5.25% fixed to Uncle Sam, but if I had $38,000 to my name, I would not pay it off today, I would put it into a mutual fund or financial market tracked index fund or simply a savings account just to feel secure having that cash around. In fact, a savings account in the US is all I am planning to use during the next year. It is better to simply save in an interest bearing account while making minimum payments on student loans, rather than paying low interest student loan debt off early. Besides if you save it, you have that money available for whatever you may need it for.

It is not cheaper to payoff the student loan early, but the same $ amoutn if you take the full 10 years. Also, that loan depreciates in value due to inflation (a $ dollar in 10 years is much value than today) so the farther in the future you pay, the less you actually pay. And if you do not have it paid off in 25 years, it is written off and you only pay tax on it as if it were income!!!

[Wisconsinite]

Here is the lowdown I got from a financial planner.

Put your savings into a high yield account and pay a little more than the minimum on student loans every month to eat a way a bit at the interest. Pay them off over the course of the next 12 years but probably earlier with the little extra every month and here is why:

1. Interest rate at 3.5% is very low. You can put your savings into a high yield savings and earn 5% returns.

2. Interest (if you are American) is tax deductable. So you get it back anyways.

3. In 12 years, that amount of money will be a lot less due to inflation. $16,000 today and $16,000 in ten years looks different.

4. Any f inancial planner will tell you to have a nest egg of at least 6 months salary before paying off student loans, if something should happen, that money will not help you locked up in student loans.

Paying them off is good for some people because having that monkey off their back is all that matters, and they should pay it off but you seem like you are asking about possiblities, this is one.

[jazblanc77]

Pay them off as quickly as possible. The minimum payments just barely cover the interest that you are paying on a large sum. The faster you pay them, the cheaper it is for you. This is why lots of car loans and mortgages have have set payment periods built into the terms of the agreement, so that the bank can make some money from the interest that will accrue.

Paying your loan down and put off your plans for another year would be the best plan in the longterm, IMO. I had enough money to pay more than half of my loans off, a couple of years ago, and ended up spending that money on a nice vacation instead. In hindsight, I wish I had paid off some debt.

[kat2]

I am kind of in the same positio nas you. I could pay off my loans, but I am not going to. I have less than 3% interest (thank you recession!) locked in, so its much more beneficial to me to save my money to buy a hosue when I move back. 3% is so low that it doesn't make sense to pay it off early. I do pay twice the minimum payment (which is $50) every month, just so that I can get ahead a bit now (I have the option of moving my payments up two months every time I pay twice the minimum). Wait it out and save the money for something else.

[twg]

Up your current payment to $300 - $400 a month. Unless you have dependents here, you can easily afford it. when you feel you have enough saved up... assuming you don't blow it all on booze like everyone else... pay a couple of big chunks at the end of the year.

[VirginIslander]

Thanks for the constructive posts. I really am disinclined to give away $15,000 at once. Who knows? I could get kidnapped in Guatemala and I might need some ransom money.

[saeemon]

Having worked in finacial planning I have to agree with some of what has been said. 3.5% is good, but it still adds up over the years. You are wise to pay it all off to avoid interest if you can.

That said, investing in something stable with a modest rate or return is a great idea if you can't bear too give all that hard earned money away just yet. you can easily find something with no risk that involves at a minimun 8% return, compounded yearly.

As you are appear to be from the US, i'm not sure what the ramifications are as far as your taxes are concerned, I only know about the canadian tax system. You might wanna look into that though, as in Canada interest and some loan payments are tax deductible.

[matthews_world]

[Ilsanman]

I wanted to get married and invest in some property. I can't very well do that with outstanding debt. Well I can, but it's not really a good idea. I worked hard and paid it all off as fast as I could. After about 2 years in Korea.

It always felt like a dark cloud over my head. Also, it was a way I could build up a credit rating. I paid off a 5 year term loan in less than 3.

[VirginIslander]

Ilsanman wrote:

[paytonfan86]

[wylies99]