Author Topic: Pay-Off Student Loans (early) or save to avoid more student loans ?  (Read 1481 times)

Dman214

  • 5 O'Clock Shadow
  • *
  • Posts: 19
My wife has about $60k of student loans for graduate school (~$8500 subsidized, the rest accruing interest at 5.4% and 6.8%).  She will be finished this summer and then will be making approximately $75k, which we've committed to devote entirely to paying off the loans and will live off my income.  Question is - between an upcoming bonus and a tax refund, we could avoid taking out any additional loans for her final semester of school this summer - OR we could make that payment to the 6.8% loans early (prob end of Feb timeframe), versus new loans coming out in May (which would be about $6k at 5.4%).

Is the best decision here to take the money and apply it to the 6.8% existing loans and accept new student loans for the may semester? Or hold on to the money and pay the tuition directly for May?

Cincy Stache

  • 5 O'Clock Shadow
  • *
  • Posts: 59
Re: Pay-Off Student Loans (early) or save to avoid more student loans ?
« Reply #1 on: January 21, 2014, 06:45:49 AM »
Dman, sounds like you'd have to run the #'s to find out which route will save you more $.  It also might effect your decision if you have a 6 month forbearance after her final semester.  That could give you a window of time to save w/ no interest and throw a huge chunk or pay it all off when the forbearance ends.  5%+ on aprox 50k is daunting, so that'd be my vote; to lower that balance as much as possible. 

cheers

Mlkmn

  • 5 O'Clock Shadow
  • *
  • Posts: 39
Re: Pay-Off Student Loans (early) or save to avoid more student loans ?
« Reply #2 on: January 21, 2014, 10:33:14 AM »
If your credit is good you could open an interest free credit card say 12-18 months interest free and then use it to pay for the last semester. Use your refund to pay off the 6.8% loan, and then set aside a certain amount each month to pay off the credit card at least 1 full month before the interest free period is up.

We are doing that. While I could drop 3.75k directly to the school, I can just spread it out over 9 months on my interest free rewards credit card and feel better about my checking account.