Debt to Family

[VexedCoffee]

New here and I had a question about paying off debt.

First the background:
Partner and I are both students and combined our debts are:
about $47,000 on a 30 year mortgage ($460 a month)
My student loans (subsidized and unsubsidized) about $24,000
Her student loans (subsidized and unsubsidized) about $16,500
We both have about 1-2 years of undergrad left and then plan on going to grad school in geology and computer science.
My car (Honda Fit) at $11,045. The loan is from my dad at 0% interest and he just wants me to pay him back as I can.
Her car (Dodge Stratus) at $1,900. This loan is from her mom with the same situation as mine.

We carpool in my honda fit 3-4 times a week but can't do it everyday because of school/work schedules; and we make a combined income of about $2,300 a month.
We also have about $6000 in savings which is for emergencies and for home renovations(which are pretty extensive but we are doing the labor ourselves)

My question is which debt should I pay off first? The unsubsidized loans are the only debts getting interest and mathematically that obviously makes the most sense to pay towards. But, our parents are not expecting us to pay off our loans to them anytime soon but I wonder if it would be better to pay those off first anyway?

Thanks guys, just trying to get all our finances in order and have a plan of attack.

[CNM]

It's a little tough to say without knowing the interest rates on the debts.  You're right that mathematically it makes sense to pay off loans with the highest interest rates first. 

However, you have a unique situation in that you have borrowed money from a family member.  It's really for you to decide what early versus late payment will mean for your relationship.  Will your relationship with your parents suffer if you pay off other loans first, thus putting them last in line?  Will they not care at all and just be happy they're getting paid back as usual?  What are your monthly payments to these familial loans anyway? 

[plantingourpennies]

Its tough to say without the percentage, and frankly a lot depends on the relationship you have with your respective parents.

I'm currently in hoc to my parents for 50K...but I pay them 6% interest. That debt will likely be paid off this year, but they have made it clear that they'd rather have the safe 6% for another few years =P

If there was even a 1% chance of having the money be an issue with your parents, I would pay the family debt off first.

Best,
Mr. PoP

[snshijuptr]

You might want to speak to your parents about your debt payoff plans. See if they want aminimum payment amd explain that you want to tackle your debt from highest to lowest interest rate to saveoney in the long run.

[VexedCoffee]

Up to this point we have just been paying them randomly when we've had surplus money. Of course after reading MMM we've realized we can reduce our expenses a good deal and so we should have extra money every month. We haven't had any strain on our relationships up to this point but I would feel kind of guilty paying towards the larger more time consuming loans.

The subsidized loans are no interest because we are still students and the unsubsidized loans are I believe 6.80% No minimum payments are required either because we are still students.

[jnik]

Up to this point we have just been paying them randomly when we've had surplus money.

Send 'em a cheque ($50? $100?) monthly, or on some other regular schedule, just so they know you're still aware of the debt, are taking it seriously, and intend to pay it off. Then focus on the loans that are accumulating interest.

[gooki]

Make it easy.

50% to family
50% to your highest interest debt.

We borrowed $26k from family when purchasing our first home and did the above approach.