I have about 18k in graduate student loans that are on pause till 5/2022 and have about 23k in cash. Assuming no other debt, what's the best way to handle this? I live at home so no huge expenses either. Is it a good idea to pay off the entire loan balance in May, or do I take advantage of the discounts in the stock market?

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Every business delays payments of expenses as long as they can without penalty so I would suggest doing the same

likesmart

Personally I’d dumped it all on the loans then use whatever’s remaining + your earnings the next few months until May to invest. As long as you get rid of the loans before the repayment period.

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Payoff the loans, become debt free, invest the remaining amounts. Remember, as you begin your career, always pay yourself first (into savings and investment accounts) then you have the remaining to spend.

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Lots of reasonable options above, at the end of the day do what is most important to you. If you want to be unburdened by debt, I would wait until the very end of the pause to pay them off. The pause could get extended further, or on the slim chance any debt is forgiven you could save some money. I have the same amount of student loans but mine have very low interest rates (around 3%), so I’m prioritizing investing rather than paying them off all at once. Personally I’d hate to pay them and have the payment pause extended or loans forgiven, but it depends on what your priorities are

likesmart

Best to hold onto the cash and see if there’s another pause. Paying it off ASAP is more expensive than waiting for your situation.

likefunny

Stock market is too volatile right now. I wouldn’t take that risk because we just can’t time the market. If it keeps declining or stay stagnant until May, it won’t be good. If you had a longer time horizon, it could work. I would park the cash in a HYSA for a bit of interest instead and pay off the loan right before the repayment starts.

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Have you done your 2021 Roth IRA contribution yet? If not I'd do that first then just keep the rest in cash (until they announce another extension of the 0%).

You don't even need to invest the full $6k right away if you would prefer to dollar cost average but get it contributed to your Roth IRA account before 4/15 so it counts toward 2021.

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@salesforce I use Vanguard

It doesn’t have to be a binary choice. Do both. Buy into the market gradually starting now while the market is down and also start paying off loans.

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Just pay it and move on

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100%

USDC 9%

smart

Keep enough for emergency fund i.e. living expense for 3-6 months and rest put it towards the loan. Sooner you get out of debt, better you can use your new cash. Debt is never good. Once you are out of debt, you can make your dollar work better because you can take more risks.

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Does your state provide tax benefits for 529s and also allow disbursements to be used for student loans payments? This is the case for me in DC, so I plan to pass $10k through my 529 and save about $850 in state income tax—currently invested conservatively in the 529 with that money and holding off until payments are actually required again on my loans.

smart

OP, what’s the interest rate on your loan(s)? Whatever that is, is a guaranteed return. Let’s flip the scenario - would you take out a new loan to invest in the market right now?

This ultimately comes down to your risk profile. My advice is to pay it off now and use the remainder to start your emergency fund. If you already have a sufficient EF, start investing.

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Seems like a slam dunk to just pay off the full student loans since you live at home and 5k is plenty of an emergency fund. Coming from personal experience, you’ll feel great once you’re student loan debt free!

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Refi with credible or sofi. It’s like 2-3% loan. Cheapest money you will ever find. Keep 10-15k in an emergency fund, and the rest in the market

Never invest with a borrowed money. If the equity you bought tests your bottom you will not be in a position to hold than to force sell. I was in that situation during 2018 market fall. Learned a hard lesson. No money is made in a day and opportunity always exist. So prepare yourself better and be comfortable investing. You will be better off that way.

Let inflation take care of your debt and start making minimum payments once due.

Invest the 18k and/or keep some cash on hand in case things go south for a bit. Getting exposure to Bitcoin is not a bad idea right now imo.

I’m in the minority, pay them off and never think about them again

That’s what I did but I had 65k at 7%

I am in the same boat. I thought I’d offer my opinion. I have my loans on freeze due to the no interest, the freeze is likely to be extended but the chatter for loan forgiveness continues. I plan to hold off on paying mine while keeping it invested in mutual funds, then move the money to pay off my loan. However, I’ve been using this strategy for years and I’ve been waiting for a good time to pay them. I don’t want to pay them and then forgiveness occur.

Under the Cares act your employer can defer up to $5,250 towards your student loans. I would defer that amount and pay off the difference. Then use the balance to take advantage of the market.

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