Student loan debt is often considered as a good debt, since it helps many people to go through college years. Therefore, it is very common to graduate with student loan debt; many people carry this debt with them even when they do not have other debt or having a clean credit report. However, trying to pay off the student loan can create a dilemma. Should you pay off the loan early, or include it in your debt payment plan?
Here are some alternatives of ways that you can try in managing your student loan with the debt payment plan.
1. Lower your debt to income ratio
One good reason to pay off your student loans is that it will lower your debt to income ratio. This means that you have more money available to you when it is time to buy a house or make other decisions. You will not have the commitment to make that additional payment every month. You will be free of bound and have the opportunity to invest as well as really begin to make money.
2. No tax break
One common misconception about student loans is that you should keep them for the tax break. This may be enough reason to put the student loans at the end of your piles of debt, but you should realize that that only $2500.00 of the interest can be deducted each year. Additionally the amount starts to phase out if you make more than $65,000.00 a year, if you are single. Finally you will still end up paying money either to interest or to taxes.
3. Deduct the cost
Even if you can deduct the majority of interest you are paying on your student loan, you should consider how much money you are losing each month because of the payment. If you invest it in a mutual fund, you can earn high interest rates on your investment. Even if you are not paying interest, you are losing the earning potential of the amount of your payment each month.
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