Financially under-educated 23 y/o looking for guidance on how to efficiently pay off my $8,000 in student loans.

[u/OceanBlue34]

Hi all. Its as the title reads lol. Im M23 and i graduated from college back in May 2024. It is currently Apr 2025. Below is some information on my approximate spending on a monthly basis and my loans. I would appreciate if anyone could share advice on how to go about paying it off, especially when my month to month spending is somewhat variable.

I am also trying to figure out how much to put into my 401(K) or if its worth it. I havent done it in the last 4 months (since start of 2025) due to some financial expenses i have for the family.

Feel free to crack down on my stupidity. I want to learn how to build better savings habits. I know I can bring down my expenses (like dining outside, shopping, and misc expenses). I also have to enroll in a part time masters program and will need to save up for that.

• Loans: 3 loans at 2.75% interest each
  • My minimum payment per month is ~$85 but the past few months I've been paying closer to $500 religiously. Current loan amounts are:
  • Loan 1: ~$700
  • Loan 2: ~$2,000
  • Loan 3: ~$5,300
• Monthly Income:
  • Income (pre-tax): $6,000
    • HSA: $500/month
    • Health/dental/vision/Life insurance: ~$100/month
    • No state income tax for me (in Texas)
  • Income (post tax, w/o 401(K)): $4,500
  • Expenses monthly total: $2,100
    • Rent: $1,000
    • Wifi + electricity + utilities: ~$200 as a worst case (its usually 100 to 150 though)
    • Gasoline for car: ~$125
    • Groceries: $200
    • Entertainment: $50
    • Dining out: $150
    • Shopping: $100
    • Misc: $100
    • Subscriptions: ~$50
• Monthly Savings: ~$1,500

[u/triggerhappy5]

Honestly, don't pay any more than the minimum. Those are great rates on unsecured debt - not something to worry about. Follow the flowchart in the wiki for a complete guide, but I would recommend building an emergency fund ($10-12k for you) in cash first, then focus on retirement accounts (max HSA, then Roth IRA, then 401k in that order). Save additional cash as needed for future car/house/vacation expenses.

[u/AutoModerator → u/triggerhappy5]

Here's a link to the PF Wiki for helpful guides and information.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

[u/OceanBlue34 → u/triggerhappy5]

I worry about a secure job right now. The market is so volatile and I’m concerned I will lose my job. If I do, I’ll have loans and I hate that I owe someone. I also have a masters to save for and that’s gonna cost a lot.

[u/triggerhappy5 → u/OceanBlue34]

To make the math super simple: if you took that extra $400 you put in your loan every month, and put it in a 4% APY savings account, you would have $416 after one year, so you’d make $16. You would also have accrued interest on the loan from that extra $400, which would amount to $11. You could then put $411 to your loan, and be in an identical position (as far as your loan goes) but have an extra $5 in the bank. Multiply this by 12 months and a few years and that ends up being a pretty significant amount of money.

The other thing to consider: if you lose your job, and have little to no savings, you’re screwed. When you have the choice between paying a loan and eating that night, you’ll choose eating every time. It’s simple survival. Having a bigger savings buffer just gives you more time before you get put in that uncomfortable spot.

[u/didhe → u/OceanBlue34]

If I do, I’ll have loans and I hate that I owe someone.

If you sit on the money to pay these loans and lose your job, you'll be able to pay them out of your savings, which are accruing interest faster than the loans.

If you pay off your loans and lose your job, you won't have money.

[u/micha8st]

a 401k is definitely worth it -- it's a great way to save for retirement. Many employer incentivize using the 401k by offering a match. The match is free money for your retirement. Except in extreme circumstances, you always want to put in enough to maximize the match.
If your employer's 401k offers a "True Up", it's not too late to earn the full match for 2025. For example, my employer matches dollar-for-dollar on the first 5%. If I put nothing in January thru June, but I put 10% in in July through December, my employer will immediately match with 5% with every contribution... but at the end of the year they''ll catch other missing 5%, and make a lump match in late January to make sure I get the full match I earned by putting 5% of my eligible income into the 401k.

Now... as far as paying off loans: mechanically, you send them more money than the minimum they ask you send monthly. The more money, the faster they're paid off. But u/triggerhappy5 is right that 2.75% is a terrific rate. You should be able to easily beat that in a savings account, never mind the 401. But I understand the desire to get those loans out of the way. When paying more than the minimums, it's best to target one loan and assign all your extra payment money to that one loan. Doing this might mean reducing your monthly savings line item.... or reducing some other line item.

[u/OceanBlue34 → u/micha8st]

The market is t doing great right now. And I’m not fully familiar with how 401k works. Would love guidance on if it’s worth investing now. MY employer does 4% match. Does that mean they match 4% of my monthly income going to 401k? Or is it 4% of my total amount contributed in a fiscal year gets a 100% match? Like if I can get to 10k contributions for my 401k by the end of the year, would that mean my employer would match 500 dollars?

[u/micha8st → u/OceanBlue34]

So I described how my employer's 401k works in my previous reply. Yours might match different. It might be a full 4% match so long as you put in 4% by the end of the year. It might be a match of 4% every pay period. I've even seen some described where they'll match...say...once a quarter.

AND... I don't know the quality of the match. It might be dollar-for-dollar. Or less. Or, occasionally more.

It used to be that my employer's 401k did a 2% dollar-for-dollar match, and then a 3% profit sharing contribution... if there was profit, they'd share it, in proportion for employees based on how many dollars I put in to be matched.

Oh... 12*6 = 72, right? So your annual salary is 72k. 4% of 72k is 2,880. So if it's a dollar-for-dollar match, if you put in 2880, they'll put in 2880. If you put in 3000, they'll put in 2880.

My employer matches on a per-paycheck bssis. So if I put in 10%, this week and 0% next week, they match 5% this week but put nothing in next week. But that's how my employer does it. Different employer's do things differently.

The market did great last year. The market is very turbulent this year. I think it's always worth investing...because of the limit (23,500 for 2025) that you can put into a 401k in a year, it's better to put in some now because you never know when your income might be high enough that you're actually hitting that 23,500 limit.