I have student loans in the amount of $20000. Through consolidation and never missing a payment I have the interest loan at 2.50% (simple interest). Montly payment is approx $100.

I am getting an APY no a Savings account at 4.75%. I have savings around $5K and growing. I need cash for other activities including saving on a downpayment for a house. In this case, does it make sense to just make the minimum montly payment on the loan while stashing the additional money in the Savings account.

Fr_Chuck

No it makes sense not to get into further debt if you don't have to, to put as much money as possible to pay off this debt before getting into another debt.

At 100 a month what is that maybe 25 years to pay that off.

I am a firm beleiver of paying off debts, not adding more and more debts.

If you tried could you not merley pay that one debt off in a year or year and 1/2 and then you would be free never to worry about it again.

ScottGem

I disagree. With your interest that low, it makes sense to continue minimum payments. As long as you can invest money at a rate of earnings higher than your debt, then you are making a profit. If you figure in the lost income form higher earning investments it will cost you more money to pay off that debt.

CaptainForest

I disagree with Fr Chuck.

I AGREE with ScottGem.

Your bank account will pay a HIGER interest rate than your current debt, therefore, it makes sense only to pay the minimum payment now.

Why?

Because if you paid off the debt, you would lose the extra interest rate you would have earned.