Hi all,

So, of course, I'm paying off our debts as fast as possible, but my mini MM is partially at the whim of my wife and kids. So we can't pay off the student loan debt in the next couple months. But we do have another option. I've tried to figure out which setup is best, but despite the fact that I've got a decent education in math, I'm still getting a little tripped up.

**Student loan: $22k ish, at 3.5% interest**

**option 1:** leave it here and pay it back as fast as possible. Looking at past statements, it's working out to be roughly $50-$70/mo in interest (not sure why it's not a straight line decline the way I'd expect, but it jumps around from month to month - I'm paying more than the minimum, so they may be applying it in an unexpected way). This is basically money thrown away, the cost of borrowing money.

vs

**option 2:** our 403b plan (like a 401k) will allow us to borrow against our savings. Here are the terms: it's probably around 10% but that goes back to us (it increases the balance of our 403b) plus a $75 loan origination fee and $25 annual fee until we pay it off. So it seems like even though the interest rate will be quite a bit higher, it's essentially forcing us to increase our illiquid savings. The one downside is that that money is coming out after taxes, and since it's a 403b, we'll get taxed again when we start taking money out again after 65 or whenever. I don't expect this to be a huge factor though since we're at a low bracket now and expect to be at a pretty low tax bracket through our retirement.

Seems like a no-brainer to go with option 2. Am I missing something? Feel free to punch me in the face, but feeding my kids ramen every day isn't really an option and the minimal thing is a long term negotiation with my wife.

Here's the simplified version I just put together:

$20,000 at 3% vs 10%

3%: ~$600/yr to the bank in interest. Since it's tax deductible, if I'm at a 15% tax bracket, that's $90 I get back at the end of the year, so total estimated cost $510.

10%: ~$2,000/yr in interest that goes to us, $100 in fees the first year to the bank. Taxes on that = $300. So total cost for the first yr is $400, and cheaper after that since the $75 loan origination fee is just in the first yr.

Thanks, Mustachians!