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Paying Off Student Loan Debt: How Fast is Too Fast?

Student debt can be awful. At its worst, it’s an albatross wrapped around the neck of your ability to make ends meet from month to month. At its best, it’s a monthly financial burden that keeps you from driving a nicer car, living in a bigger apartment or enjoying a higher quality of beer.

That’s why you’re probably scheming ways (drastic and otherwise) of paying it off as quickly as possible.

Not so fast.

Sometimes taking drastic measures to rid yourself of student loan payments is a bad idea. Here’s a look at three of them.

When you’re carrying unsecured debt

If you have student-loan debt and credit card debt, it’s always a smarter move to pay off the credit cards first. Here’s why:

  • Credit cards are probably charging you a higher interest rate.
  • Credit card debt can quickly spiral out of control.
  • Student loan payments are usually a lot more reasonable

Pay off your credit cards first, then start attacking your student loans.

When you trade your future happiness for present happiness

If you’ve been in the profession for a few years, you’ve probably started to build some retirement savings. You might get those quarterly statements and think, “Hey, I could take this money and pay off my student loans.” Don’t do it. Here’s why:

Taking money out of retirement account will cost you (big time) in taxes

  • Once you remove money from a retirement account, it’s extremely difficult to repay it and make up for the lost interest
  • Your student loan debt is likely tax deductible—so you’re not really paying as much as you think each year.

In short: You’re better off saving for retirement while you repay your loans. Saving a couple of hundred dollars a month now can cost you (big time) later on in your life.

When you’re worried about your credit score

You want the finer things in life—a house, a car, a boat. You want to take out loans to purchase those things. And you think you need to improve your credit score so you’re willing to do whatever it takes to pay off your student loans.

Don’t fret too much about it. In general, student loans have a very limited effect on your credit score.

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