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I really want to get out of student loan debt. I’ve been paying on my loan for the last eight years and I have $12,000 left to pay. I was thinking of taking all my money out of savings and just sending my lender one big check. Would the benefit of getting out of debt outweigh the cost of cleaning out my savings account? I’m a disciplined saver and I have a steady job, so I know I can build it back up again.
I see that you’re itching to kick this debt to the curb—but not so fast. You would be doing yourself a grave disservice by depleting your emergency savings fund. The economy has not fully recovered and the job market is still shaky. What would you do if you lost your job tomorrow? Your financial discipline won’t matter if there’s no money coming in. The majority of your unemployment benefits will evaporate once you’ve paid for food and housing.
You have to move past the discomfort you’re feeling today and actively prepare for financial security tomorrow. My suggestion is that you continue to pay your loan as usual. And if you haven’t already, start taking advantage of the tax breaks that paying student loan interest provides. The interest is tax deductible regardless of whether you fill out the short or long form. In any event, resist the urge to raid your emergency savings.