Pay Off Student Loans Before House Hacking?

[Justin Kemp]

Hi all, new here! I am a recent college grad in Connecticut and planning to invest in my first property to house hack sometime next year. The plan is to live with my parents and save as much as possible this year, in order to invest next year. I am extremely fortunate to have a great-paying first job and a relatively small amount of student loans, all federal. I am in the position to pay off my loans in full - at the moment this would consume 1/3 of my current savings, which I would recover after three months working. There is currently a moratorium for federal student loans - they are not accruing interest and no payments are due. Currently the moratorium is supposed to end in September, but there are rumblings that it may be extended. I am considering two options here: 1) Pay off the loans in full now. 2) Allow my money to continue earning interest in my high yield savings account until the moratorium ends, then pay them off in full.

I have the following concern about waiting to pay: I expect my credit score will take a hit after I pay off the loans. They represent half of my total credit accounts and my oldest credit account is one of these loans. How long should I expect it to take my score to recover? I am concerned about this initial hit impacting my ability to qualify for a mortgage, or qualify for a better rate, and therefore wondering if I should pay off my loans ASAP to allow for recovery. Any advice is appreciated, thanks!

[Abigail Hansen]

Hey, Justin! I'm in a very similar position. I have a great paying W2 and have a relatively small amount of student loan debt now. I lived with my parents for a year after graduating, moved to Chicago for a year, and will now be moving back in with my parents to begin saving again for REI. I too, have a similar credit situation as you and it's something I've been having to think about lately. Here is what I've been thinking. I've been waiting to see if there will be an extension to the moratorium. IF there is not, I'm just going to go ahead and pay off those loans before those interest rates come sneaking up on us agian. If you have the money, why not do it? You will recover in three months' time. I see your concern on whether you think this could potentially risk your chances of qualifying for a mortgage. But if there's anything I've learned so far in my REI education it's two things. 1. There are so many different ways to finance deals than conventional loans. If we want it bad enough, we'll make it happen. We just have to get creative. 2. We have to take a little risk to reach success. Look at all the successful Real Estate Investors we always hear about. Seriously, google a successful investor. Look at their background, their stories. I guarantee somewhere along the way, risk was involved in some way. No one ever achieved their dreams by playing it safe! Just my two cents!