Paying Off Student Loan Debt Giveaway

I’m scared to part with my money. By sweating the big stuff, I no longer worry about the little things. Decisions about whether or not I should treat myself to dinner are over. But what’s not over are all those big decisions I have to make. And believe me, I’m sweating!

My decisions surrounds what I should do with my extra money. I have a healthy emergency savings account and I’d much rather earn more than 2.15% on my extra money. That’s great for a savings account, but my extra money should be earning a little extra!

If I could, I would sign up with Lending Club and earn a great rate, far outpacing the 3.5% student loans I have. But living in D.C. prevents me from doing that, so I’m left with the same three boring choices:

  • Save at 2.15%
  • Pay off loan, effectively earning 3.5%
  • Invest at ??%

I know the smart thing to do would be to pay off part of my student loan. I could reduce my student loan debt by 25% in the blink of an eye.

But I don’t want to!

I didn’t realize I’d get so emotional about my money, but making a decision is the last thing I want to do. Why can’t I just let it sit there forever? I want to see my bank accounts grow, not get smaller!

But I know the smart thing to do is to at least pay off some of that student loan debt. While I have no problem spending it, I’m unable to feel the direct connection between paying off debt and getting wealthy, even though that’s exactly what it is.

Giveaway Details

What I would like from you is a little encouragement. Let me know that it’s ok to let go of money. Help me disconnect from it.

And as a thank for your helping me, I’m giving away $50! Cash! And I’m making it super easy:

All you have to do is leave a comment below with some words of encouragement!

Plus, I’m in a super good mood, so I’ll give you two extra ways to win!

Sign up for my RSS feed or email feed. Just leave a comment letting me know.

Follow me on twitter and retweet this post using the button at the top or bottom of this post.

*Each action is worth one entry. Entries close at midnight EST on Saturday night, the 3rd and I’ll announce the winner on my Best of the Rest roundup on the 4th.

I’m scared to part with my money. By sweating the big stuff, I no longer worry about the little things. Decisions about whether or not I should treat myself to dinner are over. But what’s not over are all those big decisions I have to make. And believe me, I’m sweating!
Paying Off Student Loan Debt Giveaway

Sweating the Big Stuff

31 thoughts on “Paying Off Student Loan Debt Giveaway

  1. Imagine you’re in a hot air balloon. You are taking in the beautiful sights and feeling great. Then you look down and realize you’re only a 100 ft off the ground. You want to soar through the air without a care in the works but something has you anchored down. That is your debt. No matter how much you try, that debt is not going to let you enjoy any freedom. By paying off even 25%, you’re cutting one of the ropes and sailing a little higher than before. It may seem counterintuitive that you have to let air out of the balloon in order to cut a rope but in the end you’ll be have all the freedom you want.

  2. I liken that money that you are paying in interest (albeit a reasonable interest rate) as money you are taking and putting into a paper shredder. So, for each hundred dollars you carry in your wallet, picture taking 3 dollars and just putting it through the shredder. Then take the 2 quarters and just whip them out the window. Do that every time you see a hundred dollars, or any denomination. That is money you are wasting by not paying down that loan.

    I remember to this day making my last payment on my student loan. I had to borrow a lot of money for college,so getting it paid off early was a huge accomplishment in my mind. You will be moving that happy day closer by paying it down.

    Plus, you can’t safely invest your money in a ‘liquid’ vehicle that makes more than the rate you are making.

    Good luck. I really think you will be glad with your decision in the long run if you pay it off as early as possible.

    1. @Everyday Tips, I love thinking like that. The only thing…is that I can make 2.15% with my savings accounts, so I’m only losing $1.35 for each hundred dollars. That’s not so bad, right??

      I’m not sure why I want to hold onto it. I already have my emergency fund set up, so having the liquid savings gives me some flexibility, but with no large purchases coming up, there’s no real reason to keep it around. Obviously it makes sense and will get me closer to my goals!

  3. Daniel-san, I would save your money and lock it away in a 3.55%, 7-yr CD such as that you can get at

    I equate wealth to assets. Let’s say you were to runaway to a foreign country. Your cash is your cash, whereas your debt… what are they gonna do if you don’t pay? I’m just saying as an extreme case.

    I’m assuming you make less than $115,000 a year or so, hence your student loan interest is tax deductible.

    Build the NUT!



    1. @Financial Samurai, 3.55% and 7 years?! Like I said in my previous comment, I don’t really need the flexibility, so I might as well make something on the money. Plus, about half of my loans are variable, so eventually they’ll be well over that 3.55%.

    1. @leslie, Actually, you can claim a deduction of the following conditions apply:
      -You paid interest on a qualified student loan in tax year 2009
      -Your filing status is not married filing separately
      -Your modified adjusted gross income is less than $70,000 ($145,000 if filing jointly)
      -You and your spouse, if filing jointly, cannot be claimed as dependents on someone else’s return

  4. I don’t know if it helps to know that someone else is in the same boat, but hi! We’re using $8700 of our $10,000 emergency fund to pay off the rest of my husband’s car loan. The Smarty Pig interest was 2.15% and the car loan is at 4.6%…so we’re taking the plunge as soon as my husband has a signed contract from a school district for next year (within the next few weeks). Good luck with your plunge too!!!

    1. @Budgeting in the Fun Stuff, Woah that’s a bit of a hit to the emergency fund, but the security of him having that new contract will likely take care of any worries.

  5. You should invest at sharebuilder. It’s so wasy and really promotes buy and hold. You can set up an roth ira to get the retirement savings if you want.

    p.s. I’m signed up for your RSS and I follow you on twitter and retweeted :)

  6. I don’t have a wonderful analogy BUT I think you should pry your fingers open and let go of the money.

    The sooner you get rid of the debt the sooner you can really get on with the rest of your life.

  7. I say keep on saving that money bro! You can always pay down your loans, but you can’t get your money back once they’re paid off ;) haha…Nice seeing ya tonight @ Happy Hour.

  8. Simple- track your net worth, not just the amount in your savings account. Because paying off loans with money you already have doesn’t change your net worth number, it shouldn’t have the same impact.

    Besides, it’s not how much money you have in a savings account that makes you rich- you could have a million dollars in a savings account and a million dollars in debt and have less money (effectively) than someone with $10,000 in a savings account and no debt.

    At the very least, pay off those loans with variable interest! Those aren’t going to get any cheaper to pay off than they are right now. Think of it as a special bargain basement sale, just for you.

  9. Hi,
    As an ivy league graduate with loads of student loan debt, I know that student loans are a fact of life. But given the opportunity to pay off 25% of it in one shot, I wouldn’t even think twice! I’m a financial analyst so I often find myself doing rate of return calcs on all of my money decisions, but think about the emotional freedom you will have when you let go of that debt. It may seem like a lot to part with now, but a few years down the road when that debt is totally wiped out, I promise you will feel much happier than if you just invested in a crap paying savings account or a crap paying investment account (given the shaky market and low interest rate environment at the moment)!

    Hope this helps!

  10. Save the money now, then later down the road when you are making more money, you can apply the extra towards your student loan. You might even want to invest your savings into a high-interest CD. 5-year CD’s are ranging around 2.8%, slightly better than your 2.15% rate.

    Also, your student loan at 3.5% is still a great rate, not much is going towards interest payments. Student loans also report to the credit bureaus a little differently than say a car loan or credit card loan, so having student loan debt on your credit report isn’t as much a negative as having some other type of loan. Just a thought, but ultimately you need to do what you think is right for you!

  11. Do a halfer!!!! That way you still have money but then you feel good knowing that you’ve paid off some of your debt! Anyhow isn’t it better to have no debt and money piling up? OOoh keep going! You can do it!

  12. Hey, I just tweeted your post, and I personally would dump it on the debt. If I had the opportunity to pay off 25% of one of my debts I’d take it in a heart beat. You’ll also be able to build up your savings quickly after as well. Also, you may as well pay them down before rates go up.

  13. I’d pay down the student debt. We paid off my husband’s student loan last December and it feels so great. Only debt now is the mortgage. I love that feeling. Plus for me when my savings is a little lower, I have more motiviation to want to build it up.

  14. I am student that will graduate in 5 weeks. And believe me my head right now it is all over on getting a job to pay my rent and pay off my loan as soon as I can, even though if that means that I will be very tight on money for almost a year from now.
    My student loan is my first depth ever, and I got it because I really needed to complete my BA but the experience taught me how uncomfortable it is to have a depth. Free of depth= free life to do whatever you want. Pay the student loan to be free again…the feeling will be priceless:)

  15. It depends on your personal psychology. Some people are made uncomfortable by the mere fact of being in debt, interest rates aside. Others are not bothered and regard debt as a way to leverage their way to various goals.

    There’s almost a percentage point of difference between what you can earn on your money and what you’re paying on the debt. The variable rate could increase that spread, although conditions right now suggest rates won’t increase much, at least not for a while.

    Have you looked in to other investments besides Lending Club? Vanguard’s Small-Cap Value index fund supposedly is making 4.48%. That would reverse the spread between earnings and cost of debt, possibly making it worthwhile to invest the cash rather than pay off the loans. If you go to Vanguard’s personal investing site, you can find a list of VG funds and their YTD and average annual returns. Most are pretty depressing, of course, but look carefully and you’ll see that several are well into the positive numbers.

    If it were me, I’d probably try to pay off the variable-rate loans (only because in my experience interest on such loans always goes up and never goes down) and then, if I didn’t find the remaining payments onerous, invest the rest of the extra cash. Then I might try to “snowflake” down the remaining debt with windfalls and budget underruns.

    Your site is hereby tweeted and stumbled!

  16. YOU CAN DO IT!!!!!!!!!
    Feel the force Luke. Oh Wait. Daniel.
    Pay back those loans baby.
    Lauren can deal without some dates.

  17. YAY paying off debt!!!
    I’m so proud of you for being so smart… but you know something that would be even smarter?… Letting me win, because that $50 will help pay off MY student loans, which will ultimately only help you out! Do the RIGHT thing Dan… ;-)

  18. Go for paying off the debt — one of my relatives is about to start school, and looking at his loans makes me feel faint. Actually, it’s not the loans so much as the interest that will have accumulated on them by the time he can start paying them down! The best thing to do is to pay down as much of the loan principal as possible, because otherwise, it’s just out there generating interest that will eat up more of your money in the future.

    Deciding to pay off debt rather than invest is a hard decision, but paying off 25% of your current loans will give you more freedom in the long run. Think of it this way — you can pay off 25% of it now. Assume that you choose to invest instead, with no guarantee on your rate of return. In the meantime, the interest on the loan grows, so that in the future, if you choose to pay down the debt, you’ll only be able to pay down less than 25% of it.

  19. Have you plugged into a loan calculator your loan info to see the paid off date of paying your loan at the minimum payment amount with the interest paid over the life of it? Do it again with paying it off early. That is YEARS of your life that you will not owe the bank money on a degree that you got X years ago. Seriously, it may be low interest, but do you want to be paying for something you completed at age 20something at age 40something?

    And, wait, VARIABLE? What interest rate will it be later?

    If you don’t want to put it all to student loans, do 25% investing, 75% loans.

    1. @Kat, Of course I’d like to shave several years off the debt, and I think I will, but why not invest it when the rates are low and try and come out ahead? We’ve got to hit the bottom at some point!

      I have no idea what the variable interest will inrease to, it depends on market conditions. 6 months ago, I said it would start rising, but now, it looks like I have some more time before that happens.

  20. I would pay off the loan because it is a goal to which a number can be assigned. Pay off $XX = goal completed. To me, for savings the sky is the limit! In other words, you can keep on adding to your savings and choose new goals to attain. As for debt, once you reach that number, it is gone and you can check it off your list. Good luck!

    1. @peggy, Thanks for the comment, I definitely think I struggle on where to stop adding to my savings and where to reduce debt.

  21. Let go of it, and “Show me the money!” Winning $50 right now would feel like winning the lottery. I’ve been given food at churches, county programs, and good ole’ friends and neighbors. What I would like to do with $50 isn’t go to the grocery store since there are plenty of places giving out free food right now to those in need, but rather I’d like to start the “debt snowball” and eliminate my smallest debt of $54 dollars. Then I can put $15 a month toward my next highest debt of $545. Currently I can’t afford to pay any of my debts, but I can afford to pay my mortgage, utilities, minimal food and gas for my vehicle, and when I can’t afford the gas I get on my bike and ride. My encouragement for you is until your ready to give up spending money on non-essentials and live like a pauper you’ll never know the true value of $50. I used to let Mastercard be my “master”, well it still is because I’m still in debt but I want to be master over my money someday and I know you do too. So be master of your money and make that decision to pay off your debtors and free yourself! You’ll be glad you did.

  22. On to the comment… You’ve got to associate the balance of your debt with the balance of your accounts. For instance, I check my student loan accounts as often as I check my bank account balance. Why? Because it’s exciting to see that number go down! The lower the number in my banking account, the lower the number in my debt total… And that ultimately means I’ll be free to do whatever I want with my money that much sooner!

    I saved up $3,000 in my checking account this summer. I was waiting to decide what to do with the money. And when I chose to make the student loan payment, it definitely hurt a little seeing my balance go down in my account so quickly. But from there, I realized that the less money I owe in student loans, the more freedom I have to do whatever the heck I want with my money. I can hoard it, spend it on shoes, pay for a lavish vacation, donate it to charity… I mean, the possibilities are endless when you’re debt free!

    You already know the math involved. It only makes sense to pay off your debt, which is at a higher interest rate than your savings account. Just start associating those student loans with the chains they really are, and you’ll be happy letting go of your money in favor of getting rid of that debt! Good luck! :)

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