Comment by patio11 | Hacker News Reader

Comment by patio11 | Hacker News Reader

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I did the damn-the-emergency-fund-full-speed-ahead loan repayment plan myself. You're basically gambling that you won't suffer a cash shock. That can be a reasonable gamble if you are e.g. well-insured, have very stable employment, have family support, have other income streams, etc etc etc. Otherwise, you'd consider the marginal 10% APR or whatever you're paying an insurance premium against a cash shock.

There is no circumstance where student loans will grow when you are actively making scheduled payments on them. Your balance will decrease monthly if you make your normal payments. Just mentioning that for sake of clarity -- some smart people I know don't necessarily have a lot of personal finance knowledge. Your loans will only grow if you either default on them or do something like triggering one of the income-contingent payment plans (which are a lot less good of an idea than people usually think, BTW).

Unsolicited financial advice: go to the institution you deposit your paychecks in and ask about consolidating student loans. (Another option, if you've been diligent about building your credit history, is taking a CC cash advance for a year, or take an unsecured loan. I'm getting unsolicited offers for either "1% fee, 0% APR for 12 months, then normal interest" from my CC at BoA or "9% interest, no fees" for signature loans from Discover at the moment.)

"I'm getting unsolicited offers for either "1% fee, 0% APR for 12 months"

Lotsa fine print in those offers as far as what happens if you miss a payment (interest rate could jack up and retroactive things might happen). May or may not be the case in the one you received. I remember always getting offers of free financing on things for a year and if you don't pay off at the appropriate time you owe all the interest retroactive.

In any case, someone wanting to follow that advice really would need to read all the fine print and understand all the fine print before making any decision. I wonder how many people could do that.

Indeed; these teaser rates make money for the banks when most people who take them snap up to the higher rate (by error or simply keeping the balance after the promotional period).

It's best to only take them when you can set up an automatic monthly payment, and zero the balance before the higher normal rates return.

(Personally, I'd also make it illegal to advertise "0% for 12 months" if accompanied by "3% transaction fee" on the insider/fine-print. That makes the effective 12-month rate about 3%, which should be the headline. But banks, lotteries, and perhaps even government schools have an interest in keeping most people from being too good at time-value-of-money/expected-return calculations.)

Thanks for the advice. Honestly, being that I work in startups, am a year and a half out of grad school, don't have to well-to-do parents, and support my partner, I think you've helped me realize it's definitely not so smart to be bufferless.

Honestly, part of this mania began when I looked at my statements for just one provider (Chase) and realized the minimum payments they were asking for (~$300) covered ONLY the monthly interest. That sort of freaked me out, and I got spooked at the prospect of allowing that bank to rent-seek on my back for the next few decades, while I lack any sort of consumer rights to even ask a court for bankruptcy protection.

"don't have to well-to-do parents"

Statement like this (details that is) prove what I am always saying about advice you read online. When I read your comments my first thought was what other safety net you had. If you had reasonably secure middle class parents I would give you different advice then I would if you had no safety net at all.

The answers to all these questions totally depends on details and when people are giving general advice there may be something that is left out that could change the advice greatly.

As an example, I generally fill my gas tank when it is down to 1/4. But if I hear a storm is coming I fill up no matter what the level.

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