This week I wanted to talk about paying off student debt, inspired by both the interview we watched with Mr. Benikov, and Professor Bassett’s email earlier this week. I, like many of us here, have student loans out for law school. The amount I am going to have to pay off after graduation and the bar is frankly terrifying and I don’t like to think about it too much.
But the reality is that everyone with loans will have to
confront paying them off eventually. I do appreciate Mr. Benikov’s logic in
paying off the loans as soon as possible. You pay less interest overall and
don’t constantly have the Sword of Damocles hanging over your head. I wanted to
discuss the methods of paying off debt mentioned in Professor Bassett’s email, to
decide which method seems the most effective for getting rid of student debt.
The article debates between the avalanche method and the
snowball method. Basically a debate between getting rid of the highest interest
loan first or the lowest amount first. I am personally more of a fan of the
avalanche method. The snowball method is well and good, and does provide more
of that dopamine hit we’re all looking for. You get more successes and more payoffs
quicker.
However, that does mean that your loans with higher balances
will just keep climbing, as the minimum payments usually don’t fully cover the
interest, let alone touch any of the principal. That’s why I prefer the avalanche
method. You sort through your loans, find which one has the highest interest
rate, and throw everything you can at that one while making minimum payments
on the rest. Then once, the highest interest rate is gone, start throwing what you
did at that exact same loan at the next highest interest rate. You don’t get as
many quick victories as you do with the snowball method, but you do pay off the
total loan balance quicker, which is the superior victory in my opinion.
Does anyone have any other thoughts on this? I know paying off
loans is dreadful to think about, but I know I’ll feel better about facing the
monster that is my loans if I have a plan.
This is something that I have been trying to figure out even since getting into law school. There is no suitable method of going about this; it is a lose-lose. I think once a job as an attorney is secured, only then can we actually come up with a real plan to pay it off.
ReplyDeleteKatie, I agree with you on the avalanche method. If you pay off certain loans quicker, you will pay less in interest overall. Student loan repayment also depends on the salary you get after graduation and whether you are working in a public sector job with loan forgiveness as well. Each of us will ultimately have to decide the best course of action for paying off student loans.
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