Should You Pay Off Student Loans Early?
Вставка
- Опубліковано 4 лип 2024
- Help grow this channel with just ONE cup of coffee a month: / calebhammer
Do you want to be in a Financial Audit and you're in the Austin area? Email castingcalebhammer@gmail.com
Private 1-on-1 consultation: calebhammer.as.me/
_______________________
00:00 Intro
00:29 Pros & cons
01:47 10 facts you should know
04:24 Paying off early vs investing
06:37 My own student debt
07:46 Final thoughts
_______________________
Socials:
Website: www.calebhammer.com/
TikTok: www.tiktok.com/@calebhammerco...
Instagram: / calebhammercomposer
Facebook: / calebhammercomposer
Snapchat: calebhammer
My filming equipment:
Camera: amzn.to/3OqHkG5
SD storage: amzn.to/3OaimKD
Tripod: amzn.to/3ObsaEn
Microphone system: amzn.to/3ObIYeq
Lighting: amzn.to/3REor4Z
Teleprompter: amzn.to/3OaiLN9
USB C SD card reader: amzn.to/3PAq02m
*Disclaimer: neither this video, nor any content produced by Caleb Hammer should ever be considered investing advice or official financial advice. All content is made for entertainment and educational purposes*
_______________________
Give this video a like and drop any comments below so that UA-cam recommends this video to other people. Subscribe and stick around for more. Thanks!
Thanks again for 1,00 subscribers! Reminder that 1 of my first 10,000 subscribers will win $1,000, and 5 will each win $100. You will be randomly selected and announced within the first week of hitting 10,000 subscribers!
I think the advice in this video is correct, but only if the person actually invests the excess cash. I'm under the impression that the average person who choses to pay the minimum will not invest the cash and instead use the cash to enhance their living standards (eating out, car loans, fun stuff). As a result, I think the advice is only suitable for some.
YES, has to invest the extra to actually make this work!
It’s only not suitable for people who aren’t financially literate and lack basic self control. Not a good reason to choose to do something else. It’s not that hard. Just automate your investments with the excess
@@astrahl I think you only need to watch Financial Audit to realise that it is the minority of people who have the self control needed.
I paid off $60k in federal student debt in a little over 3 years working a tech job in CA. I hated the job and the absurdly expensive suburban hellhole that I lived in. I definitely lost some money paying the loans off that fast, but it allowed me to leave that job much faster. Being debt free allowed me the breathing room to take some time to transition into a different field (from hardware to software). I enjoy the work I do now! I would have absolutely paid $10k to get out of that awful job a year early if I had had the money, so that's how I view the opportunity cost of the lost investment interest.
I’m always flipping on whether I want to pay off student loans faster, invest more, or put more in my house down payment fund.
I’m in the same boat haha… what did you end up doing?
Yes thats my life even though ive been turbocharging my loan payments as of now
For me, I couldn't handle 40k looming over me. I payed it down to 15k and don't mind focusing on saving for a home and investing more now. I needed the amount to be easy to handle if I had to fall back on a minimum wage job.
Truth of the matter is this, it's up to you how you personally want to attack student loans. If you follow any one of these 3 options, you're crushing anybody who is ignoring their debt. It's down to if you value your peace of mind or more digits in the bank account
I have like ~$270K in federal student loans after finishing health professional school. Just paid off my car loan for my 2021 SUV in 1 year. No credit card debt. I work for the federal government, so paying minimum income based amount for 10 years to obtain PSLF is the right direction for me. Currently focus is saving enough downpayment (20% hopefully) to purchase a house in the near future.
I got lucky and got a job in the oilfield in 2012 and was able to pay off my $85k student loans within 18 months. I wanted that peace of mind. I refuse to borrow for any additional schooling.
Same, once I paid of my undergrad loans, I promised nev3r to pay another dime in further education. If my company isn't paying for it, or I'm not getting it.
The answer to this question should be decided by looking at your habits and your personal finance discipline. I would trust somebody like Caleb to make the decision to pay off after investing as he seems to show discipline and intentionality with his money. I would say most people (I.E the people who have never seen this or any reputable finance channel or are getting their financial advice from social media influencers) should absolutely get out of student loan debt a fast as possible.
It's absolutely person to person. I would love to see us get to a point where the average American has discipline and intentionality with their money... luckily, I think we might be seeing the start of a shift towards people self educating via books and other sources like here!
I won't lie, I support Dave Ramsay method. It just leaves a bad taste in my mouth that someone is earning millions of dollars in interest off the dreams of young adults. We, the people, need to become better at finances and pass it on to future generations. The government, to some degree, is profiting off the student loans and their interest. They aren't changing fast enough to help. So we have too.
Sorry for ranting...
Great video, simply articulated
I spent a year just paying student loans off ~5 years ago, freed up $400/month.
I was looking to see if i should pay minimum, monthly payments on federal student loans and just invest more in the stock market but it's crazy the amount of growth your channel has had man congratulations you've definitely have changed my mindset on alot of things money wise keep killing it Caleb!
Can you make a video that goes over Income based repayment vs like 10year repayment? Like IBR is really cheap (Comparatively) but lasts forever, but with the recent changes…
Luckily for me, I qualified for fafsa, so I would receive Pell grants every semester. I only owe around $5,000 in loans. I acquired an internship at Microsoft as a software engineer. Would it be wise to just pay it all then ?
Yep you don’t want that hanging over your head acurring interest
This is a great video going into some of the nuances of student loan repayment. I would like to add another caveat. Age. The older the borrower the more important it is to pay off student loans. The goal being going into retirement without any debt makes being able to retire much more possible. I also watch the Money Guy show and they spell out student loan repayment based on age and interest rate. Basically once you are in your 40's any debt with 4% interest or more is considered high interest debt. I took those words to heart and paid off my student loan the interest rate was a touch over 4% so I thought it was low interest. But since I'm 47, not so. Keep up the good work!
Yeah I absolutely would not want to go into retirement with student loans
@@CalebHammer Great video, and I am becoming a fan of your content. However, I respectfully disagree with what she said. I am in my 40s and facing the same thing. While no one wants to carry debt into retirement, you also have to realize the clock is ticking until retirement. Having debt can hurt your retirement, but not having a nest egg already built up will hurt it even worse. We also have to acknowledge the reality that some of us may be forced into retirement due to the company we work for, or have difficulties physically continuing to work until 65 or 67. I have seen both scenarios happen to relatives and coworkers. While still paying $300 a month on student loans in retirement would suck (although unless you went to school later in life, you should be able to pay off those loans from your 40s to 60s), losing years of compounding interest and bonuses like company 401k matches would suck even worse.
I find it interesting that so many people talk about retiring at ages 60-65. Both of my parents are still working in their 70s, one full-time and one 2 days a week, because they enjoy working. I guess that's also the benefit of finding a fulfilling job that you like.
Congratulations on the first 1k subs!
Thank you so much!
Paid off Sallie Mae too. Paying the minimum on fed loans. Just bought my first home. Focusing on saving with how this economy is looking.
I think you need to add a caveat to 4:30 because my private loans have a lower interest rate than my federal ones. Mine is a 3.66%
Saw your videos on TikTok super interesting! Do you have to be in debt/have poor spending habits to come on?
Thank you so much! And not at all! Are you near the Austin area?
what would you suggest for interest at 5.35 is that still too high and I should pay it off?
Does the “pay off private student loan debt immediately” still apply if you have a decent interest rate? Mine is 4.33% on private loans, not sure if that recommendations was based on the assumption that private loans will have higher interest rates.
I think that the suggestion to pay off private student loans comes from the fact that private loans never go away. They can't be forgiven, so it makes sense that you would still want to get rid of them, because if anything were to happen, they wouldn't stop.
Did you include long term capital gains taxes in your calculation?
You're assuming the market keeps giving 8-10%
Hi! Great video! How would I go about investing in the Spx 500 fund. I have clue where to go or how to start and would really like some guidance to first start. Thanks!
Open up a brokerage account with a company and then you can invest in one. If you still need help, let me know!
Idk why but I have a hard time Comprehending index funds and compound interest
Honestly, I'd play with a compound interest calculator online! It helps you visualize things much easier.
I think most ppl just want the reassurance that their bills/loans are paid off especially if we’re headed for a major recession. That is more important, in the immediate future, then financial savviness bc saving is optional and paying one’s bills is NOT. See below for FICO score. 🙄😂😂😂
Do you still have student loans or did you pay them off?
Im financial illiterate but dont those interest rates in profit , dont they fluctuate and the projections are not 100% accurate ? investment wise.
They fluctuate from year to year, but they typically average around a ≈10% return over long term investment(like 10 years) which makes these projections mostly accurate(but yes there could be some slight differences). Some years may be 8% but some may be 12% so it would balance out(or other examples like that). But that is assuming you’re investing wisely and not being risky with your investments. Even if you don’t know much about investing, you can do that by investing in some index funds which are pretty safe bets and diversifying your portfolio(investing in a lot of different stocks and not just putting all your money in a few of your favorite/random companies).
Most stocks in the market tend to fluctuate together as a whole so as long as you diversify your portfolio, aren’t extremely unlucky, and the US/world economy doesn’t go to complete shit where money is no longer a form of currency, you should have some decent annual returns in the long term(10+ years).
Caleb you need to make an update 🙏🏾🙏🏾
This is a really nitpicky point, but around 5:30, you mentioned the amount of interest paid and it was almost exactly half as that of the 10 year payment. Wouldnt it be lower, as the principal would decrease a lot faster per month, so the interest rate would be multiplied to a smaller balance? It wouldnt be insanely lower, but I just wanted to check if you did that or just multiplied the interest rate by the initial balance for 5 years.
The explanation you gave is precisely why the interest paid for the 5 year payment is lower than exactly half of that of the 10 year payment and not actually exactly half. It’s just that a 4% interest rate is extremely low and won’t have as much of an impact on paying it early as most people would think, which is exactly why it’s more beneficial to invest that extra money for an annual ≈10% return
I regret trying to pay down loans first (even though I targeted higher interest loans first) for my first two years out of college. After that point I started investing more and also once the student loan repayment freeze came into effect I stopped paying altogether however I did put most of my money in at a bad time when I started investing, but I’m just going to keep aggressively investing now while the market is down.
I’m hoping we get loan forgiveness (but not counting on it) but I hope they only forgive $10,000 worth because otherwise people like me who paid down our loans get screwed for being fiscally responsible people.
Buying the market at a discount currently!!
The biggest thing for me is retiring and still having student loans. It’s really a new problem. Six figures of loans and when you retire they may still be there. So even if you invest money then you’ll have to either pay them off while alive or keep paying monthly payments until the day you die.
I personally want to pay off asap. Not to mention all my loans are over 7% 😂
when and if we have to pay them... lol ok. I agree that investing is the best. option.
Would you recommend acorns for investing?
I use Acorns! I
If you don't know how to be responsible and pay off your loans. There is no way you will responsible to invest wisely and will just lose it all.
How long does it take for you to make a video on average?
5-8ish hours, sometimes more.
Can u talk more aboimut sp500
What's considered a high interest rate?
My interest rates are at 7.75% now
I would pay those off early!! Anything over 4-5%
@@CalebHammer thanks Caleb!
It's tied to be the LIBOR as well, which is increasing!
@@TheAlchemist1089 ooohhhhh wow 😬
Pay it off. Guaranteed ROI equal to the interest rate, and you can't put a price on freedom.
I don’t feel not free lol
What about parents. We have student loans for our children. I paid my own way for college but my kids couldn't even get in to college without parent student loans. I feel cheated. And it wasn't even my education
How the f*ck did you get $270k worth of loans 😳
There's a fatal flaw with this logic and the reason is taught in formal financial education. Having debt by nature carries inherent risk, and in finance, when one investment is riskier than the other you cannot compare apples to apples. A beta must be applied to the mathematical equation to account for the risk, which is completely missing from your advice. You didn't "work out the math" because you failed to apply a beta for risk. Your advice in that sense is flawed.
... "There's always the chance that Biden or someone else will forgive those loans in the future."
Are you psychic Caleb?
..."black" v "white"...with no additional context...fantastic...
NO! Biden says he got this. 😄😄😄
🤑🤑🤑
He lied bro
You people must be rich
Biggest advice I got from this is don’t date black women owing money lol