Payoff student loans or save for house?

**GirlBoyGirl** · 12-01-2011, 08:15 AM

Hello everyone! I am trying to figure out which I should do. I am going back to work soon and it will be much needed money. We would like to move from this house by the time my kids are in school because we are not in a good district now. It will be 3-4 years from now when my oldest two (twins) go to school (depending on when I enroll them because of their birthday). So I would like to save as much money as possible to have a large downpayment and cash for closing, etc. But I also have about $45,000 in federal student loan debt. So should I focus on paying as much as possible to that or to saving for a new house? Which would you do? Thanks!

**227melissa** · 12-01-2011, 08:23 AM

better check the fine print on your student loans, most of them you can not pay off early. I would pay them off if possible, if not just save and if a great deal comes up on a house go for it.

**justpeachy92** · 12-01-2011, 08:29 AM

It might depend on whomever finances your mortgage, when my sister-in-law and her husband bought there house the mortgage company required them to pay off student loans first. When we bought a house our student loans weren't an issue.

**Telephus44** · 12-01-2011, 08:39 AM

I have never heard of not being allowed to pay off student loans early.

I think for me it would depend on how much you can save and how much you need for a house. If you can save $2000 a month and are only buying a $50,000 house that's different than if you can only save $100 a month and are buying a $200,000 house. Not sure where you are, cost of living varies widely.

**FrabjousDay** · 12-01-2011, 09:55 AM

Originally Posted by Telephus44

I have never heard of not being allowed to pay off student loans early.

Me either. We paid off several of ours early with no problems.

**GirlBoyGirl** · 12-01-2011, 02:03 PM

Mine are federal student loans and I don't think they care if you pay early, lol! I will check tho, thanks!

Our cost of living is moderate. Houses are on the higher end but taxes and other expenses are low....

I think I will save as much as I can for a house and then go gazelle on student loans..

Thanks!

**my4littlebuffaloes** · 12-01-2011, 02:37 PM

I think you need to look at the total amount you have to work with long term. You have 3 young children - will you have to pay for child care? Also there will be other expenses from working. Sooo, figure out what you will likely make working and subtract any expenses. This will tell you the amount you will have to work with each month - I would estimate on the low side.

So in the course of the next 3 years will you be bringing in $50,000 or $150,000? that is a big difference. If you could pay off the student loans in a year or so then I would do that and then go gazelle on house savings. If you can't then I think I would pay a set extra payment on the loans each month with the rest of your paycheck going to house savings. Good luck!

**khaski** · 12-01-2011, 03:06 PM

My first instinct is to tell you to knock out those student loans- $45k, that is NOT dischargable in bankruptcy, is a large amount esp. when you speak of adding in a new mortgage! Do you have enough 'wiggle room' to work on both, say 50/50 or 75 loans/25 house savings? That way the loan balance would start going down and you'd feel you were making progress on the house.

But first and foremost, before worrying about buying a house- how's your emergency fund these days?

**BertineC** · 12-03-2011, 09:15 AM

What is your interest rate on the student loans?

$45K isnt that bad ( and I say this with a best friend with $100K+ in loans and know someone who came out with that much for undergrad), but I know the feeling of wanting it gone. Is there a level you would feel more comfortable with (say, $30K), so that you could perhaps pay the debt down to that level and then focus on the house?

**mndtrp** · 12-03-2011, 06:38 PM

I would start by determining how much you think you'll need for a down payment. There's no sense in saving $50,000 if you only need $30,000. If it was me, I would probably pay off the student loans first, simply because I would rather have the cash flow.

**tmffv** · 12-04-2011, 04:53 PM

I would pay the student loans down first and then worry about the new home. You say you are not in a good district, but how so? Underfunded/low performing school systems in an otherwise "ok" area or are you in a neighborhood where you don't feel safe sending your kids to school? You can supplement your children's education at home with whatever you believe they are missing out at a low performing school until you are financially ready to move. A dangerous, high crime area is one where I would want to get out fast though and would maybe focus on relocating first.

**GirlBoyGirl** · 12-05-2011, 07:50 AM

Originally Posted by tmffv

I would pay the student loans down first and then worry about the new home. You say you are not in a good district, but how so? Underfunded/low performing school systems in an otherwise "ok" area or are you in a neighborhood where you don't feel safe sending your kids to school? You can supplement your children's education at home with whatever you believe they are missing out at a low performing school until you are financially ready to move. A dangerous, high crime area is one where I would want to get out fast though and would maybe focus on relocating first.

Yes it is dangerous, high crime, super scary kids- even in elementary school! It only gets worse from there. I know because I used to teach in this district. Oh yea, and graduated from it. The academics are actually okay to pretty good, but that doesn't matter considering all the other issues. I would rather homeschool, which I have thought about doing and would actually LOVE to do, but I worry about the cost of it (since it would mean me not working).

Originally Posted by mndtrp

I would start by determining how much you think you'll need for a down payment. There's no sense in saving $50,000 if you only need $30,000. If it was me, I would probably pay off the student loans first, simply because I would rather have the cash flow.

That is a good thought, thanks!

Originally Posted by BertineC

What is your interest rate on the student loans?

$45K isnt that bad ( and I say this with a best friend with $100K+ in loans and know someone who came out with that much for undergrad), but I know the feeling of wanting it gone. Is there a level you would feel more comfortable with (say, $30K), so that you could perhaps pay the debt down to that level and then focus on the house?

The interest rate is pretty good and yes, you are right, the total amount isn't that much considering it is for both my undergraduate and graduate school degrees! And that is a good point to pay it down to a more manageable amount, I like that thought because how it is now sounds kinda scary but if it were down to $30k, that wouldn't seem as bad!

Originally Posted by khaski

My first instinct is to tell you to knock out those student loans- $45k, that is NOT dischargable in bankruptcy, is a large amount esp. when you speak of adding in a new mortgage! Do you have enough 'wiggle room' to work on both, say 50/50 or 75 loans/25 house savings? That way the loan balance would start going down and you'd feel you were making progress on the house.

Yes you are right, student loans are not dismissible in bankruptcy. I like that idea of both paying down the student loan and saving for a house, it doesn't have to be an all or nothing!

Originally Posted by my4littlebuffaloes

I think you need to look at the total amount you have to work with long term. You have 3 young children - will you have to pay for child care? Also there will be other expenses from working. Sooo, figure out what you will likely make working and subtract any expenses. This will tell you the amount you will have to work with each month - I would estimate on the low side.

So in the course of the next 3 years will you be bringing in $50,000 or $150,000? that is a big difference. If you could pay off the student loans in a year or so then I would do that and then go gazelle on house savings. If you can't then I think I would pay a set extra payment on the loans each month with the rest of your paycheck going to house savings. Good luck!

I highly doubt I could pay off the loans in a year, I will be going back to work only 3 hours a day after all LOL! I also want to beef up our EF, as Khaski mentioned, as well as deposit into our sinking funds. No we will not be paying for childcare. My husband gets off work at 3pm and I will be going in to work 4p-7p. It works out pretty well actually!

Thank you everyone!

**my4littlebuffaloes** · 12-05-2011, 08:10 AM

In light of everything you just said, then I think I would prioritize everything you want to accomplish with your income (also talking to myself here as I recently posted about something similar!) Then take it from there. Something to think about though is that you can always move to a better district and RENT a house. I highly recommend paying off the student loan before buying because I know exactly how expensive houses can be and sometimes I long for the days when I could just call a landlord to come fix something rather than either paying a ton of money out of pocket or trying to fix the furnace myself. It is very stressful trying to pay for all the random expenses that go with a home and while there are benefits to owning a home, there are also drawbacks and when you have a hefty student loan debt I don't think I would want the stress.

**GirlBoyGirl** · 12-05-2011, 09:16 AM

Originally Posted by my4littlebuffaloes

In light of everything you just said, then I think I would prioritize everything you want to accomplish with your income (also talking to myself here as I recently posted about something similar!) Then take it from there. Something to think about though is that you can always move to a better district and RENT a house. I highly recommend paying off the student loan before buying because I know exactly how expensive houses can be and sometimes I long for the days when I could just call a landlord to come fix something rather than either paying a ton of money out of pocket or trying to fix the furnace myself. It is very stressful trying to pay for all the random expenses that go with a home and while there are benefits to owning a home, there are also drawbacks and when you have a hefty student loan debt I don't think I would want the stress.

I agree! It is something we have thought about. But we have had terrible luck in the landlord department and rentals in this area for a house would be more than a mortgage would be, so we will most likely be buying but renting is not completely off the table! IF we are still in this house when the kids are school age then I either will just homeschool or attempt to get them into this one charter school that should be "good enough" (good students but not the best academics but I can always supplement at home if I feel the need)

**dancemommy** · 12-05-2011, 10:38 AM

I don't really have advice for you, but can tell you that student loans are the last thing we are paying off. We make our payments monthly and they are dwindling down, but the interest rate for us was tiny. We were better off taking care of other obligations first. We did buy a house and for us it was a good situation. My husband owns a business that is doing fine and we are planning to be in our area for a long time. We are just now at a point where we are working on those loans. Our eldest child will graduate from high school in 2 years. I'm not positive we will be done paying off our own loans by the time he goes, but that is the goal.