Disagree with Dave Ramsey???

[Laker]

Listening yesterday and he told a lawyer to pay down his loans that were fixed for 30 years with some cash he had saved up. First, let me start off, we have been trying to pay off debt with the snowball. We have been trying to decide to pay down debt vs. save for home/invest/soon invest for kids college. Our loans are fixed for 30yrs, at a low rate...mine 1.65 and hers 1.8. Plus if either of us were to die, the loan is forgiven. Based on our situation, we disagree with Dave and will probably invest and save instead of just trying to pay down these school debts. What do you think? Ever disagree with Dave?

[SuzySunshine]

I have always been told that low interest education loans should be paid off last, after you have a nest egg, an emergency fund, etc. I know a lot of people want to get out from under them and that is fine but if you can make more on an investment then the interest rate on the loans I think you totally should.

With that said, I don't think a lot of people now have the crazy low rates on their student loans that those of us who are older on this board do.

[Auspicious]

What does "trying to pay off debt with the snowball" mean?

I definitely think of our low-interest 30-year fixed loans as being last on the priority list--defintely behind home/college/retirement/fat savings cushion. If we went the full 30 years on them, though, we'd be paying on them into my husband's seventies (!), so if we've fully funded alllll that other stuff maybe they'll get paid off a little early.

[weeniegeniewife]

What does "trying to pay off debt with the snowball" mean?

It's Dave Ramsey's way of paying down debt. Google it, there's lots of info and it works pretty well.

[Auspicious]

Aha! Thanks.

[poky]

Yeah, I would think it would depend on a lot of other factors, like the rate of the loans, how much you're able to save while still paying it down, what you want/need that savings for, etc. I would think that a nest egg/emergency fund would come before accellerating paydown of a low-interest long-term loan, but other savings would just depend on how you felt about it. If that's the only debt you have, you're doing well, don't sweat putting every possible penny toward it, especially if you can get a better return on the savings than you're paying on the debt; that's not usually the case, but could be in your case with those kinds of rates.

[MrsK]

Financial advise is not one size fits all. There are a lot of other factors to consider like what other debt the lawyer had and how much his savings were, what was the balance of his student debt, etc. I may decide to tackle student loans before a mortgage, for instance, if the balance of the student loans was small and could be paid off quickly. Student loan interest is not tax deductable after a certain income level while mortgage interest is. Also, if you are upside down on your mortgage, aggressively paying it down may be throwing good money after bad if you do not have plans to sell the home in the immediate future.

[SoonerTexan]

DH gets annoyed whenever he talks about educational debt. He apparently didn't get that going to med school and paying off loans as you go isn't feasible.

[Thirteen]

I agree with the "one size does not fit all" comment by MrsK.
We had to defer the majority of DH's med school debt while in residency. I instead have focused on the credit card debt (before my time) and paying it down as much as possible. Additionally, there are a few small personal loans here and there that I have been aggressively paying down. I do the "snowball" method on the CCs, but I've targeted the ones with the highest interest rates first because they just SUCK to have.
We do not use any of the credit cards, nor have we since I took over the finances. I have almost cut the total CC debt in half since I started doing it this way.
We are looking to make a few "lump sum" payments once the high interest rate cards get low enough, and then just say "adios" to the balance.
(I *HATE* CHASE).

[houseelf]

Google Dave Ramsey critics...he has a lot of them. I think he is great for getting people to change their life. Sometimes it takes a revolution to get out of debt and he makes people go hard core.

Nonetheless, I agree with you that aggressively paying down debt and wisely investing makes more sense.

[PrincessFiona]

Lol. I have never heard of Dave Ramsey.


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[MarissaNicole]

Those are rediculously low interest rates, therefore I would definitely pay them off last. Most student loans being issued now are at least
6.8% so perhaps then it might make sense, but I wouldn't think so in your case.

[ladymoreta]

Disclaimer: I don't know much about Dave Ramsey. I haven't listened to his show or read any of his publications. I have several friends who follow his strategy religiously, and all I know comes from what I've heard from them.

I agree with SoonerTexan. The way my friends live "debt free" seems like it would result in a world without doctors. We listen politely while they talk about living within their means, saving up rather than taking loans, and having an emergency fund so they don't rely on credit cards for surprise expenses. I would love that and hope to someday be there, but for now we're just trying to accumulate as little debt as possible, defer our loans, and hope the health care industry doesn't collapse... Talking to them about money makes me crabby!

[SoonerTexan]

This isn't from a direct Dave Ramsey source, but it is pretty identical to what he said on the radio when we were listening, so I'm guessing it is accurate:

http://nashville.about.com/library/b...avesays26a.htm

To me, it shows he knows nothing about the true costs/benefits of med school.

[v-girl]

This isn't from a direct Dave Ramsey source, but it is pretty identical to what he said on the radio when we were listening, so I'm guessing it is accurate:

http://nashville.about.com/library/b...avesays26a.htm

To me, it shows he knows nothing about the true costs/benefits of med school.

The only ways I know of to get through without loans is to get into an MD/PhD program (that's how DH did it -- but it requires someone pay most of your living expenses since the stipend isn't much), have your wealth parents or Aunt Edna pay for it, or marry someone who makes a big enough salary that they can pay for it. Umm...are there really scholarships?