Undergraduate Student Loans While in Grad School

[goalphish2002]

What do you guys suggest?  I am paying the minimum on my student loans while I pay for grad school out of pocket?  Should I continue this?  Should I take out home equity to pay off my student loans?  Maybe take out new loans for grad school and pay off the old ones faster? 

Please help!

[Gin1984]

Right now I believe federal loans for graduate school are higher than undergrad loans.  If you are in grad school, however, your undergrad loans should be in deferment so you can pay off any unsubsidized loans while paying no interest on your subsidized ones.  But what are you doing in grad school that you are paying for grad school?

[Daleth]

What do you guys suggest?  I am paying the minimum on my student loans while I pay for grad school out of pocket?  Should I continue this?  Should I take out home equity to pay off my student loans?  Maybe take out new loans for grad school and pay off the old ones faster? 

Please help!

Wait wait wait. What are you in grad school for? (Just checking to see if it's a field where it makes sense to take out loans for grad school at all.)

[goalphish2002]

Sorry guys.  This was my first post so here's some more info.  I am getting a M.S. in Accounting.  I need the extra hours to sit for the CPA exam and I also do NOT have a bachelor's in accounting.  I really need it for job security if I were to go to another company since my undergrad was outside of business.  My employer will reimburse me for 2 classes a year but I must pay for 1-2 a year by myself so I can finish it sooner than later.  The earlier I finish the sooner I can bargain for a higher salary or work for a CPA firm- just more possibilities and earning potential. 

That is around $4,500 a year for books and tuition out of pocket.  The rest of my cash is going to debt.  I currently owe around $20,000 for my undergrad and my wife owes $50,000 (total) for her undergrad and masters.  She will get some loan forgiveness if she keeps doing speech therapy in the area we are in.  She is eligible for 17K in forgiveness in 5 years. 

So I am trying to pay off my $20K first and pay out of pocket for grad school.  We don't have car loans or credit card debt.  She contributes to her pension with the state and I am in a 401K to get my employer's match. 

We basically owe $70K in student loans and have $65K for a mortgage (got a foreclosure).  That is it as far as debt.

[goalphish2002]

Or hell pay the house off first?  If worse came to worse I'd always have a place to live.  The gov't can wait for their money.  Of course the interest rate of student loans is higher than the interest rate on my home.

[MDM]

...the interest rate of student loans is higher than the interest rate on my home.

How much higher?  And how worried are you (and should you be) about worse coming to worst (i.e., not having a job and thus unable to repay anything)?

Looking only at the loans, and assuming "you will be able to pay all of them", paying off the highest interest rate is the thing to do.  If you can reduce interest rates (e.g. by swapping student load for HELOC at a lower rate), that's good too.

Broadening your perspective to include "making investments" in addition to "paying loans", things get less clear.  E.g. it might be better to go for the maximum $17.5k in your 401k and pay less on the SL - or it might not, both from financial risk/reward perspectives and personal preference.  You'll have to figure the numbers for yourself, or share more and people will be glad to opine.

[goalphish2002]

I would say I'm not really worried about losing my job or my wife losing hers.  I do need the graduate degree to open more doors and make more money since my education was outside of my field.  Our students loans are about 6.8% and the house is 5.25% I believe.  I will check into a home equity loan.  With the housing market I don't know if I have enough to take out at this point.  I guess I personally feel like I want to pay off debt before increasing my investments but I don't know if my preference is wise.  I've thought of investing in some index funds and raising my 401K but debt is just something that looms over my head.  That is also why I am paying out of pocket for grad school instead of investing that money. 

[goalphish2002]

That is paying out of pocket for some classes instead of taking additional loans and  then investing any money I have.

[Gin1984]

I would say I'm not really worried about losing my job or my wife losing hers.  I do need the graduate degree to open more doors and make more money since my education was outside of my field.  Our students loans are about 6.8% and the house is 5.25% I believe.  I will check into a home equity loan.  With the housing market I don't know if I have enough to take out at this point.  I guess I personally feel like I want to pay off debt before increasing my investments but I don't know if my preference is wise.  I've thought of investing in some index funds and raising my 401K but debt is just something that looms over my head.  That is also why I am paying out of pocket for grad school instead of investing that money.

If you are at 6.8% then grad loans may be cheaper.  I think they are a 5. Something.  If they are a percentage below your loans (so 5.8), I would personally switch to the grad loans.

[MDM]

Might be worth your time to write up a case study.  See http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/.

Whether you decide to post it, after getting your numbers together, is a separate question - the "answer" may or may not be "obvious" to you (or anyone else) by then.