How do you put together the finances for your travels, long-term or short-term? What do you sacrifice in order to save up the necessary cash? What's your best money-saving tip on the road? Share your money tips - and pick up a few - right here.

The student loan blues?

Fluffhead

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  • Added on: November 1st, 2007
Need advice!
Few months ago I decided to start putting about half my paychecks into my savings account to start saving money for my RTW trip - leaving about a year from now. Today as I threw $2,000 more into savings, now $5000 total, I realized that $5000 is a quarter of my $20,000 student loan... good math huh? that's the education hard at work! Currently my min. payment is $100 a month, and it'll ramp up over time.

I want to hear from people who have been in this situation. Just graduated, (moved to LA, as I work in television) and as of today I got a promotion at the production company I work for, so I'm "movin' on up".

Those who said 'screw the debt, lets pack!' do you regret it now? I know you don't regret traveling, but do you regret coming home knowing that you COULD be debt free right now? It just seems more logical to pay off the debt first and THEN think about cruising the planet, but I can't get over the fact that I'm a sell out, and 2 years from now their will just be another excuse not to go.

Am I an idiot for wanting to travel while $20,000 in debt, or am I a genius for discovering that with $5000 I could pay off 1/4 of my loan Smile haha.

Help?

Poor Dave

Joepro

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  • Added on: November 1st, 2007
Are these federal student loans or private loans? Assuming they are federal then you probably have a pretty low interest rate. As long as you don't have other debt like a car loan or credit card debt it shouldn't be to big of a concern to travel cause you are not racking up lots of interest. Of course you don't want to miss or be late on payments. You don't have to all or nothing though. Personally paid 4 times my minimum and saved the rest. I didn't just put the maximum I could afford into paying off my student loans.
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"Friends, Family, Religion... These are the three demons you must slay in order to succeed in business" C.M. Burns

mikkel

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  • Added on: November 2nd, 2007
I have about the same amount in student loans as you. I have had the same thoughts as you as well. Thinking by the time I'm ready to leave, I'll have enough saved up to pay them off. I've just been planning on this trip too long, and need it badly, that I don't want to postpone it any longer.

The way my repayment plan is set up is if I make more than the monthly payment, they put the amount over towards the next months payment. I found this out the hard way. Thought I'd take a chunk out of the debt by putting a large amount towards it... nope, it just towards four monthly payments. If I actually want to make a payment toward principal, then I have to call in and pay over the phone.

So, basically, I'm doing two things: paying ahead and then deferring the loans if need be. By the time I leave, I should be paid far enough ahead that I won't have to worry about deferring. That is only in case my trip turns out to be longer than I have planned (<-- which I am hoping for!)

marty

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  • Added on: November 2nd, 2007
How I hate loans, the government and Sallie Mae especially. I wouldn't count on low interest rates on those things, since you're probably on a 10 year payment plan. Interest on loans is the first thing to go up in a budget crunch, mine went up 3 points over the course of a few years. Its INTEREST> you are giving your hard earned money over to a money hungry shameful company, or government for them to spend...Have you calculated what you'll pay in interest?

Its very sad. I regret not paying off loans quickly. I love the added savings I have now that the loans and Credit Card debt are all paid off. I'm not saying drop everything and pay them off, but if you can strive for paying double your minimum you'll be in good shape. That advancing payment racket is very frustrating, but its also a security net for poorer times...you can take months off completely if you need to.

One of my friends got her parents to buy the loan from her. IE, they paid it off completely, and (suposedly...) she paid them interest free. If your rate if 5% that is huge savings!!

Try to put a dent in that loan before you go away. It'll free you up in years to come. I was trapped by debt for about 6 years from 27 to 32. That meant I was stuck having to work instead of travel. No Fun.

Too much advice, maybe...Its just my opinion, and circumstances are different for everyone.
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"dry and brittle does no good for dreams of fields in passioned hues. and to bring you to this place I'm at brings me no closer to you..."
-The temptation to pick wildflowers-

Fluffhead

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  • Added on: November 2nd, 2007
Great thanks guys and gals.
Yes they are federal loans, and I'm not actually sure what my interest rate is (though I certainly should) haha.

Mikkel, what your saying is that you owed $100, and had to pay $10 a month, but you paid $50 at once. But rather then them sayings "You now only owe us $50 more bucks" they said "You just paid for the next 5 months, and you owe us $90 now, $80 next month, $70 the next" kinda thing? Cause if I drop $10,000 into this loan it would drive me crazy if it took that out in monthly payments! heh

mikkel

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  • Added on: November 2nd, 2007
quote:
Originally posted by Fluffhead:
Great thanks guys and gals.
Yes they are federal loans, and I'm not actually sure what my interest rate is (though I certainly should) haha.

Mikkel, what your saying is that you owed $100, and had to pay $10 a month, but you paid $50 at once. But rather then them sayings "You now only owe us $50 more bucks" they said "You just paid for the next 5 months, and you owe us $90 now, $80 next month, $70 the next" kinda thing? Cause if I drop $10,000 into this loan it would drive me crazy if it took that out in monthly payments! heh


Exactly! I called up good ol Sallie Mae (Roll Eyes) and asked them about it. They stated that I had to call in to make the kind of payment I was trying to make. Then they told me they'd charge me a $10 dollar fee for making the payment over the phone!

Savages, I tell you...

Joepro

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  • Added on: November 2nd, 2007
I think the pre-payment thing is actually standard for student loans (not the extra fee though). At least that is how mine and my friends are (different lenders). I have to check a box on the payment slip to put the extra money toward the principle. I can't use auto pay unless I pay the minimum.

Re: Interest rates - Looks like the rates are much higher now then when I got my loans so you might want to pay them off a little quicker. I consolidated my loans when interest rates were at historic lows. The rate is readjusted once a year based on treasury bond rates or something. If you consolidate your loans (since you get 1 loan per year) into one loan then your rate freezes.
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"Friends, Family, Religion... These are the three demons you must slay in order to succeed in business" C.M. Burns

mikkel

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  • Added on: November 3rd, 2007
quote:
Originally posted by Joepro:
Re: Interest rates - Looks like the rates are much higher I consolidated my loans when interest rates were at historic lows. The rate is readjusted once a year based on treasury bond rates or something. If you consolidate your loans (since you get 1 loan per year) into one loan then your rate freezes.


This is also what I did.

AmazingJulesVerne

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  • Added on: November 6th, 2007
quote:
This is also what I did.


Yep -- me too. I hate my student loans -- I wish that I never would have taken them in the first place. Course, it would have taken me 45 times as long to get through school, but still.

Now that I am back in school, I am paying for it out of pocket, on top of repaying my loans. At least I am not taking on any more student loan debt for my school habit.

Roll Eyes

I've been working on paying down the loans this year -- which means that I have cut out my many little trips that get me through the year. As much as it pains me to do so, I just can't abide with the debt anymore. Course, school keeps me so busy that I hardly notice that I don't have a trip planned every month. Well, mostly.
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'It involved a squirrel, a dryer and a Scotsman doing the Haka in my kitchen.' - La Rosser.

Kathryn M

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  • Added on: November 6th, 2007
I have two different student loans. One of them is only about 2.5% interest (my mom did a very good job of consolidating it) and the other is about 4.5%. When I pay extra, which I do every month it advances my next pay date. Despite this I still send them $200 a month (for the 4.5% one) and they put it towards the principle. This is pretty typical for SL's.

What I have done for my rtw is to save extra money (actuality this is all I have left to save)that will be used to pay off my SL's while I am traveling. I'll continue paying extra, like I am now, the entire time I am on my rtw.

I could easily pay off my loans in full now (about 30K) but I have no interest in doing that. You get one life, and whereas credit card debt is bad and you should not travel if you have it, SL debt is different.

EMH

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  • Added on: November 8th, 2007
Also, if your student loan interest rates are as low as Kathryn's, there's no point in paying them off early because you can make more by investing the money.
Follow my travels through Central and South America: www.talesofagringo.com

Eppyboy

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  • Added on: November 12th, 2007
you can't invest your student loans if that is what you are referring to EMH, it is against the law and you actually sign something indicating you won't.

I am in law school myself, heavily in debt, but will be taking my student loan money on a trip this summer. I'm doing study abroad, and then traveling afterwards. Kathryn M - that is really low, this must be undergraduate student loans?

Currently my LSL go at 6.8% - federal loans, and my private are at 7.5& a month and i dont have to pay back until 6 months after i gradufy...

students loans 120,000, a new car = 25,000, food, rent, clothing for a year = 10,000, Only living once and traveling whenever you can = priceless
Josh has taken his much needed vacation and will be going on another Christmas to New Years 2011/2012. However, before he does read about his past trips http://blogs.bootsnall.com/eppyboy

Kathryn M

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  • Added on: November 12th, 2007
It is undergrad, but they were also consolidated a few years ago when student loan interest rates were super low. It's just luck really.

Littlemustard

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  • Added on: November 29th, 2007
Also don't forget the interest on your student loans IS tax deductible.

I think KM has the best idea and I plan to do something similar as well. But I agree life is short, too short to put off something for 20k in loans that you can actually write off your taxes.

EMH

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  • Added on: November 30th, 2007
A few points:

1) When you're still a student, you can obviously put your student loan money in an interest-bearing checking or savings account until you need it.

2) If you're using your student loan money to fund your travels (and I can't tell Eppyboy if that's what you're doing), then that clearly is illegal. The allowed expenses for students loans are as follows: tuition, room, board, institutional fees, books, supplies, equipment, child care, transportation, commuting expenses, and computer. Furthermore, the funds must be used for attendance at the school that certified your eligibility. Granted, the chances of getting caught if you use the money some other way are slim, but the penalties are large - they can ask you to give all the money back right away.

3) My original post had to do with how to handle your money after you graduate. If you have some extra money at the end of the month, should you invest it or use it to pay down your student loans? The answer really depends on what the interest rate on your loans is vs. the interest rate you can make by investing. For people like Kathryn and myself, who have such low interest rates, it makes more sense to invest the money. For others, it may make sense to pay down the student loan. Of course, there are other factors to consider as well (e.g., some people don't like being in debt so they'll pay down regardless).

4) Great point Littlemustard! The student loan interest deduction also needs to be considered when deciding whether to invest or pay down. The deduction skews things in favor of investing. Of course, there are some of us who make too much money to qualify for the deduction. And no, I don't expect any sympathy...
Follow my travels through Central and South America: www.talesofagringo.com


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