Questions about student loans and saving for a house

Ok here is my story. I have three different student loans totaling $67,000. One is a private loan of just under $35,000. One more is a federal stafford loan for $just under $17,000. The last one is a federal consolidation loan of just above $15,000. The private loan is split into three different ones of $14,500 (7.3%), $6,000 (9.9%), and $14,000 (9.9%). the stafford loan has a rate of 6.8%, and the consolidation loan has a rate of 3.625%.

I do have some other debt a ATV loan ($3,300, 5.75%) which is planned to be paid off by end of the year. I also have to other debts totaling $11,700, which are only on my credit because I did a favor for my dad and my brother. I know bad idea and I will not do it again, but they are paying those bills. I know credit reporters don't care about that.

I am 24 almost 25 and live with my parents. I make about $29,000 a year, but hopefully will be getting a promotion soon. Since I live with my parents I have little living expenses (Gas, cell phone, car insurance). I do put money into a 401k and have for eight years now. Right now I pay $346.93 a month for the private loans and the other two are in deferment, but they should start sending bills on those starting next year.

I have a few questions. One should I be setting aside money for emergencies? Second Should I consolidate any or all my loans? Third should I put all extra money I have after monthly bills towards my student loans? Fourth should I save my tax refund for emergency money or put it all on my student loans?

As far as my consolidating my private loan I looked at Chase and they have good rates but I am not sure if I can get the best. My credit score is 707.

Any advice is much appreciated.

Thank you,
John

Ok here is my story. I have three different student loans totaling $67,000. One is a private loan of just under $35,000. One more is a federal stafford loan for $just under $17,000. The last one is a federal consolidation loan of just above $15,000. The private loan is split into three different ones of $14,500 (7.3%), $6,000 (9.9%), and $14,000 (9.9%). the stafford loan has a rate of 6.8%, and the consolidation loan has a rate of 3.625%.

I do have some other debt a ATV loan ($3,300, 5.75%)
I hope that thing is fun to ride....

which is planned to be paid off by end of the year. I also have to other debts totaling $11,700, which are only on my credit because I did a favor for my dad and my brother. I know bad idea and I will not do it again, but they are paying those bills. I know credit reporters don't care about that.

I am 24 almost 25 and live with my parents. I make about $29,000 a year, but hopefully will be getting a promotion soon. Since I live with my parents I have little living expenses (Gas, cell phone, car insurance). I do put money into a 401k and have for eight years now. Right now I pay $346.93 a month for the private loans and the other two are in deferment, but they should start sending bills on those starting next year.

I have a few questions. One should I be setting aside money for emergencies?
The emergency fund is a great idea, Unless you do not have emergencies.
Set a target of $1,000 as your emergency fund, and do that quickly.

Then you can slow that process a bit, putting more on your loans. You should have about 3 to 6 months of living expenses in your emergency fund.

Second Should I consolidate any or all my loans?

I like the loan consolidation. It makes it easier to make one payment vs several. You may be able to get a better rate too so more of your money goes to the principal and less to the lender.


Third should I put all extra money I have after monthly bills towards my student loans?

No. Someday you will need a different vehicle, start saving for that now so when that time comes, you may not need to take a car loan.

Fourth should I save my tax refund for emergency money or put it all on my student loans?

Why are you getting a tax refund? That is money that you are lending interest free to the governments. I am sure they will send you a thank you note for that loan.

Change your w-4 withholding exemptions so you will owe income tax. This is an OK thing to do. There are 3 safe harbors to avoid any penalties by having a smaller amount withheld:
1) Your withholding plus tax credits will be within $999 of your tax bill.
2) Your withholding plus tax credits will be 90% of your tax.
3) Your withholding plus tax credits will be equal to your previous year tax.

Meet any one of these and you have enough withholding to avoid a penalty.
While you may owe some tax when you file, that is better than receiving a big refund due to over withholding.


As far as my consolidating my private loan I looked at Chase and they have good rates but I am not sure if I can get the best. My credit score is 707.
Ask Chase what rate they can give you. Shop around too. Are you a member of a Credit Union? Sometimes the CU can offer a better rate.

Any advice is much appreciated.

Thank you,
John[/QUOTE]

Ok here is my story. I have three different student loans totaling $67,000. One is a private loan of just under $35,000. One more is a federal stafford loan for $just under $17,000. The last one is a federal consolidation loan of just above $15,000. The private loan is split into three different ones of $14,500 (7.3%), $6,000 (9.9%), and $14,000 (9.9%). the stafford loan has a rate of 6.8%, and the consolidation loan has a rate of 3.625%.

I would look at this as 15k at 3.6% and 52k at 7% or higher.

I do have some other debt a ATV loan ($3,300, 5.75%) which is planned to be paid off by end of the year. I also have to other debts totaling $11,700, which are only on my credit because I did a favor for my dad and my brother. I know bad idea and I will not do it again, but they are paying those bills. I know credit reporters don't care about that.


ATV loan is short term, I expect that to be removed from cash flow/budget soon.


I am 24 almost 25 and live with my parents. I make about $29,000 a year, but hopefully will be getting a promotion soon. Since I live with my parents I have little living expenses (Gas, cell phone, car insurance). I do put money into a 401k and have for eight years now. Right now I pay $346.93 a month for the private loans and the other two are in deferment, but they should start sending bills on those starting next year.


Make sure you set aside 20% of gross pay for financial independance. That is $5800/year or close to $500/month. If you cannot set aside $500/month you need to reduce expenses.

I would put 15% towards 401k now. Defer taxes on income and get money working for you towards financial independance. 15% of 29k is $4350/year which is close to $363/month. My advice is 15% to 401k starting now. Or send $363 to a Roth IRA- but 15% of gross pay needs to be going towards long term financial independance.

5% of gross pay should be applied to short term financial issues. This is $1450/year or $120/month.

You need to live on 80% of gross pay- which is probably close to 60-70% of net pay once taxes are factored in. The loan payments for the student loans and ATV come out of the 80%. I would suggest rounding up the loan payments to nearest $100- it will make a HUGE difference (if payment is $110, send $200; if payment is $195, send $200).

Take the $120/month and set aside close to $1000 in a savings account for emergencies.
Then apply the $120 towards the loan you want to disappear soonest (add this to the rounding up figure above).
When that loan is paid off, take the monthly loan payment, the $120 and apply it to other loan. I think you will be debt free soon.




I have a few questions. One should I be setting aside money for emergencies? Second Should I consolidate any or all my loans? Third should I put all extra money I have after monthly bills towards my student loans? Fourth should I save my tax refund for emergency money or put it all on my student loans?

There is another option- stop receiving the tax return and increase exemptions to decrease withholding and take home more cash month to month. More than likely if you follow my 20% savings advice, you will want the extra pay in take home. Just a guess though.

Don't give the government a free loan.




As far as my consolidating my private loan I looked at Chase and they have good rates but I am not sure if I can get the best. My credit score is 707.

Any advice is much appreciated.

Thank you,
John

In general I would analyze monthly cash flow and see how much of it is going to debt payments. Your goal should be to save raises for a short time and make sure you spend less than you earn. Next time you want a toy (car, ATV, other) pay cash for it. Do not finance to acquire more goods.

Pay cash for large expenses- if you have not set aside the cash, you need to wait until the $120/month has accumulated enough to purchase object in question.

so here is a update. I sold my quad finally and also got my private student loans consolidated for a longer time 30 years so lower payment. So what should I focus on next?

Reread jIM_Ohio's post (above) and focus on the paragraph regarding saving for retirement. Since you are already funding your 401(k), I suggest maxing out your Roth IRA, if you qualify, and funding an emergency savings account (3-6 months worth of net income.