Hey All,
I've been reading MMM since darn near the beggining and am trying my best to exercise my frugality muscles and grow my 'stache. I'm newer to the forums though, but it looks like it's very healthy and active. I'm looking forward to participating.
My situation is likely a no-brainer, I'm just looking for some independent verification that I'm making the right move. I have roughly $7k left in student loans, $1,500 of which is at a 4.8% rate and the remainder of which is at a ludicrisly low 0.04%. I have the ability to knock out the remaining $1,500 and I would like to do it by surrenduring my $250k death benefit Variable Universal Life policy. I took this policy right out of university as I was starting from roughly zero and didn't want to be a burden on the family if I died without enough to cover burial costs/medical expenses. Looking back, I should have gotten a term policy. Now that I have a growing 'stache and I'm still a health, unmarried, childless man I don't see a need to continue making the insurance payments. To boot, the VUL investment vehicle is crappy and lacks any good investment options.
My plan is to cancel the policy and cash out the surrender value on the VUL (lesson learned), using a portion to pay off the remaning higher rate student loans and placing the remainder into higher return investments. I don't see the need to pay off the rest of the student loans since it is essentially free money. I would likely just make the minimum payments for the remainder of the loan. This will actually free up an additional $300 a month between the VUL monthly and what I have been paying extra towards the student loans to crush the higher interest rate portions.
This seems like a solid plan in my own mind since I will be cutting an under-performing investment loose (roughly $8k paid in premiums/investments; only $5,800 in value; $3,650 in surrender value), knocking out the last significant chunk of students loans, and freeing up additional cash flow for real investments. Does anyone think this is not a good plan? Could I be missing something I should be taking into account? Thanks!