I have recently had a bankruptcy discharge of all debts except my student loan. I would like to know if I should continue to pay the minimum monthly payment of $295.00 while saving $8,000.00-10,000.00 which I could do in about a year. I could then pay $800.00-1000.00 per month toward my student loan which would allow me to pay it off in three to four years. Or should I forget saving and pay off the student loan as soon as possible?
Before you do anything, please take advantage of the tools here on The Beehive to create a workable budget for yourself and include building up your savings in that budget. It’s so important in this economy to have an emergency fund available so you’ll be prepared for the unexpected. This is important for every one, but especially for you because you won’t be able to file a Chapter 7 bankruptcy again for eight years.
I would suggest a reserve of eight months’ living expenses. Think now about how you would pare down if you should lose your job or be unable to work for while. Decide how much you will need and save until you have that amount set aside in an account that you can access easily should you need it.
When you’ve done that, by all means do what you can to become debt free by paying down your student loan. Check with the financial company that holds your loan to see how best to accelerate your payments.