How should I allocate my savings? Looking for advice!

Submitted by BoatCompetitive9565 t3_z8faxq in personalfinance

I have a little over 100k in savings. I also have 250k student loan debt (undergrad and grad school, all federal).

Because of the pandemic student loan pause, I haven’t made any payment yet. I have just been saving up and this money just sits in my savings account.

When the pause ends, should I make a lump sum payment of 100k (or other amounts)? Or should I just do minimum monthly payment, which will be 3k per month for 10 years (I know there’s also IDR, refinancing, consolidation, and other options to change my minimum monthly payments) and use the 100k for other things like investment, retirement savings, down payment for a house, etc. ?

Some more info to my current situation:

  1. I have no other debt besides student loans. They are a total of 6 loans with interests ranging from 3% to 6.7%, around 200k of the loans have >5% interest.
  2. 24 yo, not married, no child, no family member is in need of my financial support either
  3. take home pay is 3.5k to 4.5k every 2 weeks depending on how many shifts I work.
  4. initial plan was to pay student loans off aggressively (after paying off other things I need to pay for in order to stay alive, the remainder of my paycheck all goes to student loans)
  5. monthly expense is around 1k because I live at home and split bills with parent, who has agreed that I should live with them to save money on rent. No current plans to move out yet, but if I do, monthly expense will likely triple since I live in a HCOL area
  6. no retirement saved yet in terms of 401k, Roth IRA, and the likes. I’m debating between pushing retirement savings off to pay loans off aggressively (see 4) and prioritizing maxing out retirement savings

I made a similar post in r/studentloans, and was advised to post here as well, so here I am.

Any advice is appreciated. TIA!!

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Comments

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ham_sandwich_please t1_iybdi07 wrote

Aggressively pay down that debt while you still have the opportunity to split housing costs with your parents. Keep 3-6 months aside for an emergency fund, but the rest should go towards the loans once the pause ends. Until then, let it sit in a HYSA earning some interest. Imagine the options you'll have being debt free and taking home nearly $20k a month.

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juneku t1_iybhnrh wrote

The snowball / avalanche methods for paying down loans is pretty good. Plenty of calculators /spreadsheets online if you Google them. TLDR: pay down the highest interest one first, then put that loan's payment as an extra payment to the second highest loan, etc etc. By the end you're putting the whole 3k into the last loan each month. If you really want to go savings-heavy, keep that loan payment going as a straight-into-savings path and keep living like you were.

Whether or not you put a lump-sum payment at the beginning or not is up to you, but definitely save the 3-6mo worth of expenses and make it a habit to rarely-if-ever touch that.

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BigGiantsfan95 t1_iybqndd wrote

Does your company have a 401k match? If so start putting in enough to match it then pat down your debt. Also, take into account what everyone is saying and use the snowball method

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rooster7869 t1_iybsutb wrote

The flow chart in the prime directive the bot will post is great

I would definitely try to tackle the more expensive loans. But follow the flow chart

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