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0% interest through Jan 31: You investing or Paying down?

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  • 0% interest through Jan 31: You investing or Paying down?

    I recently started making attending salary. I have some liquid money for once.

    Federal student loans = 346k
    Retirement 401k = 58k
    New salary = 240k, 30k bonus

    I do not plan on doing PSLF (Debt to Income ratio <1.5) and will likely refinance after Jan 31 to lock a lower interest rate. Might wait to see if Biden pulls through with some forgiveness a few months after interest starts again...

    My question is do I start paying down my student loans to lower that principle? I figure I could aggressively get the loan amount down to 290k by Jan 31
    or invest that money and wait until the forbearance ends to start chipping away at the debt amount. My partner also works, makes close to 100k. We rent from my mother 1500k/month and are essentially building equity in the home without a mortgage.

    Thanks

  • #2
    Neither bad idea as long as you’re meeting your goals. Just have to decide what your priorities are. Good article on prioritization of cash here: https://www.whitecoatinvestor.com/fi...nd-attendings/

    We are debt averse and have prioritized paying off the student loans. I am still in training but with enough cash in an ally savings account to pay them off since Sept 2020. Have been holding out to see how the student loan moratorium will play out. Never expected to have anything like it and have been delighted to make a little cash in the meantime. Am waiting to pay off the balance on the off-chance of a bit of universal student loan forgiveness (unlikely, but nothing to lose in waiting). Would have made more in the market during that time, but am not willing to take that risk. Killing that debt was most important to us.

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    • #3
      I’m waiting and investing. And holding a sizable amount of cash in my pslf side fund. I’m no longer going for pslf.

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      • #4
        if you aren't doing PSLF then the 0% rate for a few months isn't doing much for you in the long run.

        put loan forgiveness out of your mind right now. even if something were to go through you would likely be in a phase out.

        don't but a house with someone you're not married to.

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        • #5
          I'm in a similar dilemma and not sure what's the best idea to do. I have a ridiculous amount of student loans, ~528k (which includes interest). Started working partway through this year as attending so finally making good income, but not sure where is the best place to put that money. Previously my rate was 6.88% (horrible), but that's been at 0% for a while now. Planning to refinance to maybe 2.5-3% end of January when the fed ends the 0% period. I plan to max out my IRA, but not sure if it's worth it to aggressively pay off the remaining loan balance or do a mix of paying it off and investing. Thanks for any input anyone has.

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          • #6
            Option 3 is not investing, not paying off debt but putting fund in a “low yield” cash equivalents.
            Seems definitely line you plan on paying on loan is an unknown.
            Why cutoff your option now. More info will be available shorty.
            Wait for it.

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            • #7
              Wait until federal holiday is over to start paying down your loans and refinancing. Keep investing the money you would be using to pay down your student loans.
              Helping student loan borrowers manage their student loans. StudentLoanAdvice.com. [email protected]

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              • #8
                I'm paying down aggressively.

                I know the math doesn't necessarily work out, but my loans are driving me absolutely crazy with anxiety. The sooner I'm rid of them the better.

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                • #9
                  Originally posted by funkmstr47 View Post
                  I'm paying down aggressively.

                  I know the math doesn't necessarily work out, but my loans are driving me absolutely crazy with anxiety. The sooner I'm rid of them the better.
                  The math never works out. You're throwing away free money.

                  Dont overthink it, pay yourself first, refi to a nothing rate, stack cash in retirement/taxable and reassess in 5 years.

                  Pay off if you still feel it, unlikely to be true. Change your frame of mind to longer term, and relax.

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                  • #10
                    Originally posted by NewRad123 View Post
                    I'm in a similar dilemma and not sure what's the best idea to do. I have a ridiculous amount of student loans, ~528k (which includes interest). Started working partway through this year as attending so finally making good income, but not sure where is the best place to put that money. Previously my rate was 6.88% (horrible), but that's been at 0% for a while now. Planning to refinance to maybe 2.5-3% end of January when the fed ends the 0% period. I plan to max out my IRA, but not sure if it's worth it to aggressively pay off the remaining loan balance or do a mix of paying it off and investing. Thanks for any input anyone has.
                    We have a similar situation....currently having the same dilemma. Basically boils down to how debt averse you are, in my mind.
                    Have a couple months to figure it out but we are looking at 7 year repayment plan at <3%. Extra cash in a given month will likely be split between taxable investment account and throwing at student loan balance.

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