Buy a House While in Student Loan Debt?

Dear Dave,

I'm 31, single, and I have two college degrees. I have no money to speak of, having just come through a rough patch of unemployment, but I recently landed a job that will pay me $20,000 to start. There's the added possibility of an increase to $40,000 in the first year. I'm thinking about buying a house, but I've also got $50,000 in student loan debt. The good news is that I have no other debt. What are your thoughts on buying a home in this situation?

Trevor

Dear Trevor,

Man, you're broke! There's no other way to describe being $50,000 in debt with a job making $20,000. You don't need to get wrapped up in buying a place right now. At this point, a house would end up being a curse instead of a blessing.

You've been through the valley, and now I want you to come up into the sunlight. I want you to start building a future on something solid, and that solid ground means being debt-free. If I woke up in your shoes, I'd get unbelievably aggressive about paying off this debt. I'm talking about rice and beans and living in a cheap little apartment for the next two or three years while you kill it off.

Whatever you do, Trevor, please don't get complacent about this debt. Lots of times people will play around with student loans. They don't take them seriously, because they have low payments or really low interest rates. The next thing you know, it's still sitting there 10 years later staring at you like some kind of big, dumb pet!

Having a bunch of mortgage payments hanging over your head would completely destroy the foundation of your new financial life. Save up $1,000 for a small emergency fund. Go crazy about paying off the loan. Then, get your emergency fund of three to six months of expenses in the bank. If you get used to living on $20,000 a year, and your income rises like you mentioned, you'll be able to get rid of your student loan fast. After that's done, you can save enough for a 20 percent down payment on a house in no time!

-Dave

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