Q: Should I use all of my extra money on paying back my student loans as quickly as possible, or should I be putting some of this money into savings and paying down other debt?
A: When it comes to allocating extra monthly income towards paying down debt, there are a few different schools of thought on how to approach each type of debt, with pros and cons to each method. The decision on how to pay back or pay down student loan debt is personal, however when determining rather to pay back your student loan debt as quickly as possible take these few tips into account:
Consider paying off the student loan debt as quickly as possible if:
-You have a high paying job and can afford to double up on payments, or pay extra without it negatively impacting your savings account or other monthly bills.
-You have extremely high interest private student loans
-You have non-tax deductable interest on your student loans.
Consider allocating your extra income elsewhere if:
-You do not have any money in savings. Most financial experts recommend that you have months worth of living expenses in savings before you start doubling up on debt payments.
-You have a locked and low student loan interest rate
-You’re able to deduct the student loan interest from your taxes
-You have more urgent debt, such as credit card debt.
Conduct a full evaluation of all your current debt to determine what interest rates are the highest before you commit a large sum of money to your student loan debt, and if you still have doubts, seek the opinion of a professional financial advisor in your area, who can best who can best address your financial situation with you one-on-one.