Student Loan Debt vs. Gear

D Bopp · #1 03-23-2011, 06:52 PM

I have a lot of gear that I love, including several all original vintage basses. I had no intention of selling them. Recently I graduated college (went back after about 8 years) and have a good bit of student loans. However, I could pay off the debt by simply selling a good bit of my gear.
I am realizing that by selling the gear, paying off the debt, and investing the same amount of money I would have paid towards the monthly payments, I will have quite a bit of money on my hands after 10 years.

Is this a no-brainer? I love my gear, but love being debt free too.

Ziltoid · #2 03-23-2011, 06:55 PM

Imo it depends on the "emotional value" you give to the gear, or rather your attachment to it. Don't sell it if you're going to be kicking yourself for doing so the rest of your life

edit: Wait, you're an economic major, do you actually have feelings?

Stingray89 · #3 03-23-2011, 07:01 PM

I know it's alittle different but I'm debating about selling some gear to pay off some car repairs/college bills myself too, but I love my gear to much.

tplyons · #4 03-23-2011, 07:02 PM

Depends on the interest rates... if you're lucky enough to get some of those 2.5% interest rates, I wouldn't be selling anything. Any higher interest rates, I'd be inclined to offload some gear.

Don't forget that the economy is down, you might have issues offloading gear for what you think it's worth or even what you paid for it.

Unfortunately, I sold all my gear during college in order to pay my way partially through.

fdeck · #5 03-23-2011, 07:02 PM

No brainer. You will develop new attachments. You might never again have a chance to pull yourself out of debt so easily.

GregC · #6 03-23-2011, 07:13 PM

Quote:

Originally Posted by fdeck

No brainer. You will develop new attachments. You might never again have a chance to pull yourself out of debt so easily.

+1, especially after seeing the number of feedbacks you have!

Jim Nazium · #7 03-23-2011, 07:24 PM

Generally I'm in favor of eliminating debt. However, there are some situations where I can tolerate it. How burdensome are the monthly payments? If they are straining your budget at all I'd say sell the gear and pay off the loans. However, if you can comfortably make the payments and be out of the debt in 10 years or less anyway, and you would really miss that gear, to the point where you might be tempted to re-purchase it for more than you got from selling it, then I'd say keep the gear. Get me?

D Bopp · #8 03-23-2011, 07:33 PM

Quote:

Originally Posted by Jim Nazium

Generally I'm in favor of eliminating debt. However, there are some situations where I can tolerate it. How burdensome are the monthly payments? If they are straining your budget at all I'd say sell the gear and pay off the loans. However, if you can comfortably make the payments and be out of the debt in 10 years or less anyway, and you would really miss that gear, to the point where you might be tempted to re-purchase it for more than you got from selling it, then I'd say keep the gear. Get me?

Yes I got ya! I haven't started paying off the debt yet. July will be the first payment. It's about $23K. Monthly payments of $275 at about 6.5%.
I think over the life of the loan, I would pay over $35K with interest.
I can probably physically afford the payments. But I was just thinking about pros and cons.
Pros: less debt, less is more attitude with my gear

less spontaneous purchases on TB, lol

Cons: less cool gear

Sandvich Hero · #9 03-23-2011, 08:00 PM

I think, like some hinted, that you should also try to evaluate the yearly appreciation in value of your vintage gear. If you have a pretty low rate for your debt (ok, maybe not at 6.5), it might actually make economic sense to keep the gear and make the monthly payment.

IconBasser · #10 03-23-2011, 08:29 PM

sounds like it's time for a marginal analysis, Mr. Econ major. Obviously, it's hard to quantify just how much utility you derive from your gear. You have to ask yourself: does the emotional revenue gained from my instruments equal the opportunity cost of having money to spend on other things? With reduced or eliminated debt payments, you could afford better food, a nicer car, maybe a nicer computer, etc.

if you gain higher satisfaction from your gear than from having other extra stuff, then you should keep them. If not, sell what you need and enjoy your higher credit score.

iamlowsound · #11 03-23-2011, 08:30 PM

Sell the gear, pay off debt, save up money the money you save on monthly payments, buy more gear. That way by the time you would have the debt paid off, you will have more gear and you will have saved yourself $12,000 in interest. It is a win-win.

lowsound

D Bopp · #12 03-23-2011, 08:37 PM

Quote:

Originally Posted by IconBasser

sounds like it's time for a marginal analysis, Mr. Econ major. Obviously, it's hard to quantify just how much utility you derive from your gear. You have to ask yourself: does the emotional revenue gained from my instruments equal the opportunity cost of having money to spend on other things? With reduced or eliminated debt payments, you could afford better food, a nicer car, maybe a nicer computer, etc.

if you gain higher satisfaction from your gear than from having other extra stuff, then you should keep them. If not, sell what you need and enjoy your higher credit score.

You are right. However, the marginal utility may not be realized until after it's sold. I have sold some basses in the past that I thought I'd really miss. But once sold and out of sight, don't mean as much any more.
I wouldn't be spending the additional money on depreciating items such as a car, computer, or TV. The money would probably go into my Roth IRA, savings, or daughter's 529 college fund.

Dr. Cheese · #13 03-23-2011, 09:01 PM

Will you have gear that you genuinely love if you sell gear off? Can you afford to make payments on your loan?

My concern is selling off gear you love and then getting in the hole replacing what you sold.

**nutdog** · #14 03-23-2011, 09:12 PM

It's possible your original vintage basses will be worth more than a 529 in 17 years. And proceeds will be tax free.

This post contains information believed to be accurate and complete at the date of preparation. However, no guarantee is expressed or implied by nutdog or any subsidiary of nutdog. Advice given assumes compliance with federal, state, and local regulations.

MJ5150 · #15 03-23-2011, 09:40 PM

I'd rather have no debt myself, so I'd sell it all off.

-Mike

Chebass88 · #16 03-24-2011, 06:04 AM

A couple considerations -

Do you have the vintage gear just for the sake of it being "vintage", or does it sound like **the best bass ever**?. There is a very good possibility of not being able to find something like that again.

You can deduct your student loan interest on your federal tax return, provided your income is less than a certain amount ($85K comes to mind - check the IRS to be sure).

Why not keep it all, and just pay it off aggressively. The old method of paying off the highest interest rate first with available money, and then moving down the line to the next highest results in very large payments, and balances that drop easily.

Dr. Cheese · #17 03-24-2011, 06:33 AM

Quote:

Originally Posted by Chebass88

A couple considerations -

Do you have the vintage gear just for the sake of it being "vintage", or does it sound like **the best bass ever**?. There is a very good possibility of not being able to find something like that again.

You can deduct your student loan interest on your federal tax return, provided your income is less than a certain amount ($85K comes to mind - check the IRS to be sure).

Why not keep it all, and just pay it off aggressively. The old method of paying off the highest interest rate first with available money, and then moving down the line to the next highest results in very large payments, and balances that drop easily.

+100, you know you have debt, so avoid getting anymore, and pay off what you owe. That way you keep your gear, and you handle your responsibilities.

fdeck · #18 03-24-2011, 06:36 AM

Don't forget to consider that student loan debt is evil, because it can't be retired in bankruptcy. Thus you are at the mercy of "nothing going wrong" until it is paid off. You could lose your job, get sick, lose your health care, and so forth.

D Bopp · #19 03-24-2011, 07:03 AM

Quote:

Originally Posted by Chebass88

A couple considerations -

Do you have the vintage gear just for the sake of it being "vintage", or does it sound like **the best bass ever**?. There is a very good possibility of not being able to find something like that again.

You can deduct your student loan interest on your federal tax return, provided your income is less than a certain amount ($85K comes to mind - check the IRS to be sure).

Why not keep it all, and just pay it off aggressively. The old method of paying off the highest interest rate first with available money, and then moving down the line to the next highest results in very large payments, and balances that drop easily.

My 59 P bass is truly a gem. I am still considering keeping that one if I sell most other stuff.
And yes, I know I can deduct that interest at the end of the year, but the peace of mind of no SL debt might outweigh that.

Another option is to pay off about half, so that way, the payments after that would be mostly towards the principle.

L-A · #20 03-24-2011, 07:23 AM

I think there's stuff you can sell. You seem financially smart, so paying off part of your loan and keeping the gear you really want to hold on to sounds good.