Will try to keep this short. All input welcome.
27m, MCOL
Income: 100k
About to move back in with parents for a few months.
Student loans are combo undergrad & grad school.
Assets:
Cash/savings: 25k
Taxable brokerage: 25k
Retirement (403b,401a): 50k
Car: 2015 mazda (paid off)
Debt:
Private student loan (5.7%): 76k
Federal student loan (3.4%): 4.2k
No car loan/credit card debt
Should I:
make regular payments + additional 1-2.5k per month?
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Dump most of my liquid funds (maybe 30-45k) to my big loan? Then continue making regular payments and build savings back up? (Also, approved for a refi of 4.8%)
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Different option you suggest?
Pay student loan off or invest?
byu/UselessCommentary996 inpersonalfinance
Posted by UselessCommentary996
3 Comments
Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics.
debt or invest: https://www.bogleheads.org/wiki/Paying_down_loans_versus_investing https://reddit.com/r/personalfinance/comments/16jcmnh/_/k0qox0x/?context=1 https://reddit.com/r/personalfinance/comments/zssug0/_/j1ddljd/?context=1
I wouldn’t be in a rush to pay off the 3.4% loan. You could kick some of your paychecks towards extra principal on your 5.7% loan, and maybe put some of your liquid funds towards it, but it’s not really an “emergency” interest rate, so I wouldn’t sell any of your investments for that purpose if I were in the same spot.
Paying down a 5.7% interest debt has the same effect on your finances as investing that money in an investment with a guaranteed 5.7% tax free return.
That’s not a bad rate of return. I recommend using the Avalanche Method of debt repayment to make a plan to pay your student loans off ahead of time.
If you aren’t already budgeting, it’s a good idea to budget. Your monthly budget can include funding debt repayment, investments, funding an emergency fund, having a bit of fun, and your other spending needs.