‘I just want to get this paid as quickly as possible’: With $25k in savings, should I use it to pay off $75k in student loans faster or continue saving?

Hi Money Minder,

Hey Money Minder,

So, I might not be the most money-savvy person around, but I could really use some advice on my situation right now. I splurged on an expensive private university for a 5-year program in Architecture, and now I’m left with around 75k in student loan debt. I refinanced a while back when rates were good and set myself up for a $1200 monthly payment to get rid of it as fast as possible.

My take-home pay each month, after contributing to my 401k and paying taxes, is about $6600. My rent eats up $1850, but I don’t have any other debt or car payments. I’ve got around 25k just sitting in a high-yield savings account, with another 50k in my 401k. At 35, I’m itching to bump up those 401k savings as soon as I can.

So, here’s the big question – should I dip into that 25k from my high-yield savings to tackle my 75k student loan debt head-on? It would shave off a good chunk of time, leaving me with only around 3 more years of payments. Or should I play it safe and keep saving up? My other monthly expenses come up to around $2-2.5k, so I do have some room for savings.

What do you think, Money Minder? Appreciate any help!

Best,
Money Detective

Response from THE MONEY MINDER: Thank you for reaching out. How can we assist you with your financial needs today?

"Hello There,"

Given the information you’ve shared, it seems like you’re in a fairly good financial position overall. Your aggressive approach to paying off your student loans is commendable, and it’s great that you have no other debt besides that. With a comfortable monthly income and no pressing financial obligations, you have the opportunity to make significant progress towards financial freedom.

In terms of whether to use the $25k in your high-yield savings account to pay off a portion of your student loans, it really comes down to your personal comfort level and financial goals. If you are confident in your job stability and don’t anticipate needing that $25k for emergencies or other large expenses, putting it towards your student loans could be a smart move. By reducing your loan balance, you could potentially save on interest and shorten the overall repayment period, ultimately saving you money in the long run.

That being said, it’s also important to maintain a balanced approach to financial planning. Since you have a decent amount saved up and are contributing to your 401k, you are already taking steps towards building a solid financial foundation for the future. Consider weighing the benefits of paying off your student loans faster with the need for a robust emergency fund and continued retirement savings.

In conclusion, it may be worth exploring the option of using some of your savings to pay down your student loans, especially if it aligns with your goal of reducing debt and increasing your savings for retirement. However, make sure to consider the bigger picture and assess how this decision fits into your overall financial plan. It’s all about finding the right balance that works best for your situation.

THE MONEY MINDER