{ "media_type": "text", "post_content": "You just received a bonus of $15k net and you have three options:\n1. Reduce Student loan from 27k to 12k\n2. Invest 50% and reduce student loan from 27k to 19k\n3. Invest all the 15k and continue with the current student loan schedule.\nWhich of these options would you choose and why?\nInterest on loan is 4% annually", "post_id": "5ff6d287df6c6f002a48cb2b", "reply_count": 31, "vote_count": 2, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting" }

You just received a bonus of $15k net and you have three options: 1. Reduce Student loan from 27k to 12k 2. Invest 50% and reduce student loan from 27k to 19k 3. Invest all the 15k and continue with the current student loan schedule. Which of these options would you choose and why? Interest on loan is 4% annually

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I'd go with 2. That is much s gut feeling as it is a logical analysis. In my case I just sleep better st night when I pay down my debts. It might not be the most mathematically logical conclusion, but I think there is value there. I'd go with number 2.

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#1 is mathematically not the right option, but I still chose it anyway. It was just a mental boost knowing I was debt free. I already had higher monthly investment into my 401k and other investments though, so it was just any unexpected/one time windfalls

Mental health isn’t free. Option one is totally fine if you value your mental health

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If loans are federal and there’s the current pause I’d say 3. No need to pay on zero interest loans right now...especially when I think Biden is likely to extend

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SE1 is right, a pause on interest doesn't make the decision cut and dry, it just lowers the effective lifetime rate of the loan. With that said, I'd go with B until we know what Biden is going to do in his first 60 days.

Do you have an emergency fund? That should be first priority.

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Depends on the interest on loan and the return on investment. Go for whichever has the higher rate

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This depends on the country OP is in. I gave the most basic ruke of thumb which should then be tailored to whatever the situation is with the element you mentioned being a good consideration

3. Cancel student debt is coming

likeuplifting

I have mixed feelings on the student loan relief possibilities. I used to be a teacher in a very low income high school, and I think we(the teachers and the administrators) somewhat wrongful pushed too many kids to go to colleges that mostly didn’t finish. When we (as consultants) envision college student loan forgiveness, we’re thinking of some of our colleagues who took on too much debt

Get rid of all the loans with option 1. It feels great and it’ll open up more cash month to month

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I’m in a similar situation. $28k in student loans at 5.25% (and that was refinanced!)....regardless of the math, I’m putting my bonus to the loan. I carry that debt like an albatross. I’m almost ashamed I still have it.

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Come talk to me once you’ve accumulated $120K at 6%

2

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Yolo options trade

funny

I’d normally say 1 but with the talk of student debt forgiveness I’d say 3(a) - put it in a 6 month cd and revisit in 6 months. Don’t invest money you might want in the short term (3yr? 5yr?)

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3 all day

If go with option 2 personally

Don’t depend on student loan wipe our, by the time that comes round you will most likely make too much to qualify. If you can get a better rate on your investment than you pay on the loan then 3, otherwise 1

Student loans are on hold at the moment. High chances on it getting extended. #3

#2!

3. Try to refinance but even if you can’t 4% is low enough

Three. You can beat the returns on your student loans and compound interest will pay off in the long term! I will caveat with the thought that if you don’t think you can keep that money set aside until retirement and are just going to spend it anyway, then I might pay off my student loans. 

Student loan interest is tax deductible no? Plus with socialism on the rise maybe student debt gets “forgiven” (you’re not welcome if it does) I’d go with option 3

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