Comments on: Seeking guidance with financial planning (loans, down payment, more)

Question: Seeking guidance with financial planning (loans, down payment, more)

mintchip — Sun, 20 Apr 2008 16:55:09 -0800

Seeking guidance with financial planning (loans, down payment, more)

I've searched through the questions already asked but didn't see anything quite like this. My situation:

1. I am graduating with a very large student loan debt (more than 50k, less than 100k).
2. I have excellent credit.
3. I have no other debt or loans.
4. I have some retirement savings.
5. I don't expect to have a huge salary.
6. I am considering going back for another degree in a year or two--probably one that would result in a significantly higher salary

I'm going to move home for a year or two. I am considering using my cost savings to pay off a large portion of my loans. This appeals to me, except for a few reasons:

1. If I do go back to school (and this is by no means a definite), will having a large debt be to my advantage as far as getting need-based grants and other aid from my school?
2. It seems like housing prices are going to keep going down. Many of the people I know who are financially well off got that way by buying their home when real estate values were low. I could potentially save a large down payment (>20%) in a short amount of time. Also, although my loans are burdensome, the rates aren't horrible (they are all federal loans) and with inflation they will get a little less painful over time (in other words, a fixed monthly payment of $xx will feel like a lot less a few years into the future when money has less value).
3. Although unlikely, is it possible that the government would offer debt relief opportunities for people saddled down by student loans--let's say if the economy gets even worse?

I could also pay off a big chunk of the loans (but not all) and then start saving for a down payment.

(Is it worth it to see a financial planner?)

By: krautland

krautland — Sun, 20 Apr 2008 17:02:09 -0800

yes, it is worth seeing a financial planner but it sounds like in order to keep up-to-date on your financial picture you should sign up with a website like mint.com and post this question to the (often cranky) penny pinchers in the fat wallet forum.

By: netbros

netbros — Sun, 20 Apr 2008 17:02:55 -0800

Depending upon how much in demand you are for your career field, some employers will include a signing bonus just to attract you. They will specifically target this bonus to help draw down student loans. Something to consider during the interview process.

By: saradarlin

saradarlin — Sun, 20 Apr 2008 17:40:55 -0800

A few thoughts about your above reasons:

1. Large debt should not make a huge diference as current income and savings are the major factors when they offer grants.

2. House prices are down but may not be at their bottom and owning a home almost always means that you cannot receive a need-based grant regardless of your income. Additionally if you are carrying $75k in debt on a small salary when you have been working for less than 6 months, even with a decent downpayment, a bank might not give you a mortgage.

3. About as likely as a lottery win.

Being debt free is a great feeling. You might be able to make some money by investing your cash on hand at a higher interest rate than you are paying in loans but depending on the amounts involved, it may not be worthwhile.

My vote, pay your debt down as soon as possible then start saving for that downpayment. You will be in a much better position to get the best possible mortgage terms.

By: toomuchpete

toomuchpete — Sun, 20 Apr 2008 17:50:41 -0800

"Many of the people I know who are financially well off got that way by buying their home when real estate values were low."

Sounds like a bit of a post hoc fallacy here. Are they really well off because they bought a house?

What would probably be better, financially, would be to cut back on your housing costs (rent an apartment instead of buying a house) and then, once you've paid off your loan debt, run the rent/buy calculus again. Your interest rate may not be bad, but it's still unnecessary interest. Buying a house just means MORE interest.

Also keep in mind that if you plan to go back to school soon, buying a house would probably limit your options as far as how far away you can go for school.

By: cmh0150

cmh0150 — Mon, 21 Apr 2008 04:17:34 -0800

before you do anything, you should check out the Motley Fool's discussion boards - they are free and have some of the best financial advice out there...