Living with Parents at 23: Pros & Cons

[NeoDevin]

You have 20k in loans, he has 60k in loans, nearly 3 times as much Neo. I think your comparison is unfair.

And if I can pay it off in one year, with a family to care for, there is no reason he should not be able to pay it off in three years.

Edit: And remember, I was just making some ball-park estimates. The end result is, unless one is very poor with their finances (or manages to rack up upwards of 300k in loans) there is no reason one should be paying off for more than 5-10 years, while living on their own. Even 10 years is ridiculous. It's not unreasonable to expect to find a job which pays 35k/year (16$/hr. 40 hrs/week). 15k is enough to live on if one lives frugally (and that's not doing without too much either), which leaves 20k to put towards the loans. Thus 60k ~ 3 yrs...

Edit2: I could go back to my previous job as a janitor and make 35k/year, so please don't anyone suggest that you can't make that. I could also go back to bartending and probably make closer to 50k.

 

[gravenewworld]

Boy would I love to hear how to pay off $60K in 3 years.

If you make $45 K a year, which is a reasonable estimate for a salary for a new college grad, 33% of that automatically goes toward taxes, 401 K (you would be incredibly stupid not to contribute since you would be throwing away free money from your company), and health insurance. That leaves you with $30 K in disposable income. So you say should easily be able to contribute $20k automatically to student loans? That would leave only $10000 a year to live off of. That is simply not feasible. If you found a place to rent for $300-400 a month (which would be a hole in the wall in a dangerous neighborhood probably) that would automatically be $4200-4800 or almost 40-50% of your DI (assuming $20K goes towards loans). Rent alone would eat up almost all your loot.


This is also completely ignoring the rising cost of food, the rising cost of gas, car insurance, utilities, and most important of all, interest on the loans.

 

[NeoDevin]

Sorry, I meant after-tax income in my post, my bad. It is perfectly possible to live in reasonable comfort for 15k/year (including rent, utilities, and food). You're not going to be living the lifestyle of the rich and famous, but you should never go hungry or do without. Obviously, if you choose to put money into a 401k or similar savings plan, then you will have less to pay on student loans. That is your decision, and not everyone has company matching 401k or similar. I am deciding between a couple positions, and only one of them offers this. If I get a job without company matching, then I won't contribute anything to retirement for at least my first 2 years out of university. If I get a job that has it, I may decide to take longer to pay off my loans, I'll work it out and see which is more profitable.

35k after tax - 15k essentials = 20k. Decide how much you're willing to spend on other stuff, and put the rest towards your loans.

Don't own a car, live in an appartment so utilities are low, and pay off your loans quickly before the interest compounds too much. Remember, you may be `throwing away free money from your company', but every month you extend your student loan payments, you're throwing away money as interest on them. Depending what your company is willing to match (if anything), the interest you expect on your 401k, and the interest charged on your loan you can work out which plan makes the most sense for you.

My point is simply this: It is perfectly possible to have your student loans paid off in a few years. Whether or not this is the best plan for any particular person is up for debate.

 

[Cyrus]

And if I can pay it off in one year, with a family to care for, there is no reason he should not be able to pay it off in three years.

Edit: And remember, I was just making some ball-park estimates. The end result is, unless one is very poor with their finances (or manages to rack up upwards of 300k in loans) there is no reason one should be paying off for more than 5-10 years, while living on their own. Even 10 years is ridiculous. It's not unreasonable to expect to find a job which pays 35k/year (16$/hr. 40 hrs/week). 15k is enough to live on if one lives frugally (and that's not doing without too much either), which leaves 20k to put towards the loans. Thus 60k ~ 3 yrs...

Edit2: I could go back to my previous job as a janitor and make 35k/year, so please don't anyone suggest that you can't make that. I could also go back to bartending and probably make closer to 50k.

Does your wife also make an income?

 

[NeoDevin]

She is a stay at home mother for now.

 

[gravenewworld]

Don't own a car, live in an appartment so utilities are low, and pay off your loans quickly before the interest compounds too much. Remember, you may be `throwing away free money from your company', but every month you extend your student loan payments, you're throwing away money as interest on them. Depending what your company is willing to match (if anything), the interest you expect on your 401k, and the interest charged on your loan you can work out which plan makes the most sense for you.

My point is simply this: It is perfectly possible to have your student loans paid off in a few years. Whether or not this is the best plan for any particular person is up for debate.

-Have to drive to work

-401k grows at an exponential rate, you would still be incredibly stupid not to put money towards a 401k when your company matches what you put in. interest on student loans is also tax deductible

-20k a year is a lot. Using that logic if I had 35K after tax income (which would be about a 50K per year job) I could buy a $600,000 house with a 30 year loan. That wouldn't be reasonable either.

 

[Moonbear]

-20k a year is a lot. Using that logic if I had 35K after tax income (which would be about a 50K per year job) I could buy a $600,000 house with a 30 year loan. That wouldn't be reasonable either.

No, because you're not factoring in the interest you'd be paying on the mortgage over those 30 years, the downpayment required, property taxes and insurance based on the value of the home, or the added cost of utilities for a home of the size that would cost that much. Or the fact that while it's one thing to live frugally for a 2 or 3 year goal, you might not want to live on that budget forever.

Similarly, if one can save like that to pay off a student loan quickly, you can then spend the next couple years also saving like that for a downpayment on a modest house, and then once you're used to living frugally, you can put what you're accustomed to saving into that 401K or a college fund for your kids so they don't have to struggle quite as much.

As is being pointed out, it's POSSIBLE. It doesn't mean you'll want to choose to give up an employer contribution to a 401K to pay off student loans, but if you don't get an employer contribution, you might be better getting the loans paid off quickly and THEN putting more into a 401K. You'd have to do the math for yourself in your own situation to figure which works better for you. What you CAN do and what you WANT to do are clearly not the same thing, but making those choices for yourself and living with their consequences are part of being an adult.