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Posted: 8/21/2014 11:12:14 PM EDT
OK wife's school loans are currently just under 68k at 6.5%

What options are there to refinance?

What kind of rates are we looking at? Assume high 700s credit scores and a bit under 200k annual income.

We have the money to pay it off but I'd rather keep the money in case of emergency.

For sure we don't want to get a second on the house.

Other than a secured loan I don't know of any low rate loans.

I could be wrong but 6.5% seems really high considering banks are giving less than 1% on deposits.

I'm unsure on private funding but I guess that is an option.

What else should we look into?
Link Posted: 8/21/2014 11:15:22 PM EDT
[#1]
Pay it off if you have the money, that is a 6.5% return on your money when you are complaining about a 1% return from a bank.
Link Posted: 8/21/2014 11:19:12 PM EDT
[#2]
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Quoted:
Pay it off if you have the money, that is a 6.5% return on your money when you are complaining about a 1% return from a bank.
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I was afraid of that.

I guess it makes the most sense.

Is there anyway to use pretax money to pay back school loans?
Link Posted: 8/22/2014 7:07:43 PM EDT
[#3]
I wouldn't burn all your cash reserves by paying it off at once, but at 6.5% I would definitely work on paying it off sooner than the minimum payments would.  If things go sideways having a pile of cash will at least allow you to make minimum payments for a while.
Link Posted: 8/22/2014 8:49:27 PM EDT
[#4]
Pay it off. That is 6.5 percent guaranteed return. You make 200k you can build savings back up in no time.

How much do you have saved? For arguments same lets say you have 88k. Now let's pretend you didn't have this loan and you only had 20k the bank. Would you go borrow 68k so you could have 88k in the bank? When you look at it in reverse you can see how it makes no sense to keep the loan.

I wouldn't take your cash below 10k but I would throw everything else you have got at the student loan. If you need money for something later you can always borrow it then.

Link Posted: 8/22/2014 10:10:34 PM EDT
[#5]
I agree with the poster above, pay it off.  I paid mine off 3 years ago and its been awesome.

Also 68k? Good lord.  My undergrad was 23k and I paid that off 3 years ago.  My Masters was 25k and it was all cash.  I can't imagine having my combined 48k in loans, let alone 68k.  That's crazy.
Link Posted: 8/22/2014 11:09:57 PM EDT
[#6]
It was a doctorate from USC. About 80k so we paid a little in cash as well.

It was expensive but it is paying for itself many times over.

Looks like we're cutting a large check this week. Thanks for the push in the right direction.
Link Posted: 8/23/2014 1:58:53 AM EDT
[#7]
Every month I have~1k left after boss and living e expenses.  I send an extra 250 to both my car and student loans. The extra$500 goes into an investment account.
Link Posted: 8/23/2014 2:14:16 PM EDT
[#8]
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Quoted:
It was a doctorate from USC. About 80k so we paid a little in cash as well.

It was expensive but it is paying for itself many times over.

Looks like we're cutting a large check this week. Thanks for the push in the right direction.
View Quote



You are making the right choice. I was I a similar situation back in 2008/9. I paid off 70k in student loans. It was not fun at the time but it really changed me and how I view debt. I now have that and much more in savings. It feels great not owing anyone and I have a lot less stress in my life.
Link Posted: 8/23/2014 3:02:12 PM EDT
[#9]
Yeah might be worth asking a tax advisor/CPA, but AFAIK unless you make under 60k or something low no school stuff is deductible. I'd either roll it in with the mortgage for a 4.x rate or try to pay it off asap, that rate will kill you.
Link Posted: 8/23/2014 4:41:56 PM EDT
[#10]
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Quoted:
Yeah might be worth asking a tax advisor/CPA, but AFAIK unless you make under 60k or something low no school stuff is deductible. I'd either roll it in with the mortgage for a 4.x rate or try to pay it off asap, that rate will kill you.
View Quote



In my mind is doesn't matter if its deductible or not.  Say it is deductible, he would be paying $3k in interest a year to get back $300 a year in taxes.  Same goes for your mortgage, you are only getting a fraction of what you paid in interest back.  If you are holding onto your mortgage because of the tax deduction, you are losing in a major way.
Link Posted: 8/24/2014 4:45:47 PM EDT
[#11]
Pay it off.   It's 6.5% and non bankruptable.   Why would you keep it around.   It's better than a 6.5% really since you don't owe taxes.   It took 3 years to pay off my 185k.  Got lots of complaints from people but in now have 77k and no debt, I like this side of the fence much better.    Now the complainers ask how i did it.  I haven't said not listen to your stupid ideas yet.
Link Posted: 8/24/2014 7:35:33 PM EDT
[#12]
Keep in mind that your student loans are tax deductible, which put the in the "good debt" category, if you can even call any debt good.. anyways, your effective interest rate after deductions would be closer to 5%.



That would put your right on the border of pay off vs save.




Personally, if I had $68k in student loans and $68k cash in the bank, I would put the $68k cash into a couple of mutual funds that would eventually collect 5%+ average over the 10 years of the loan.
Link Posted: 8/24/2014 7:38:10 PM EDT
[#13]
My student loans were at 9%.  I wouldn't be complaining if I were you.
Link Posted: 8/26/2014 8:59:31 AM EDT
[#14]

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Quoted:
In my mind is doesn't matter if its deductible or not.  Say it is deductible, he would be paying $3k in interest a year to get back $300 a year in taxes.  Same goes for your mortgage, you are only getting a fraction of what you paid in interest back.  If you are holding onto your mortgage because of the tax deduction, you are losing in a major way.
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Discussion ForumsJump to Quoted PostQuote History
Quoted:



Quoted:

Yeah might be worth asking a tax advisor/CPA, but AFAIK unless you make under 60k or something low no school stuff is deductible. I'd either roll it in with the mortgage for a 4.x rate or try to pay it off asap, that rate will kill you.






In my mind is doesn't matter if its deductible or not.  Say it is deductible, he would be paying $3k in interest a year to get back $300 a year in taxes.  Same goes for your mortgage, you are only getting a fraction of what you paid in interest back.  If you are holding onto your mortgage because of the tax deduction, you are losing in a major way.
Wrong, You can deduct up to $2,500 of student loan interest dollar for dollar off your taxes, its not like mortgage interest.

 



If you paid $3,000 in interest you will receive $2,500 of it back, assuming you don't make too much money.
Link Posted: 8/26/2014 9:43:14 AM EDT
[#15]
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Quoted:
Wrong, You can deduct up to $2,500 of student loan interest dollar for dollar off your taxes, its not like mortgage interest.    

If you paid $3,000 in interest you will receive $2,500 of it back, assuming you don't make too much money.
View Quote View All Quotes
View All Quotes
Discussion ForumsJump to Quoted PostQuote History
Quoted:
Quoted:
Quoted:
Yeah might be worth asking a tax advisor/CPA, but AFAIK unless you make under 60k or something low no school stuff is deductible. I'd either roll it in with the mortgage for a 4.x rate or try to pay it off asap, that rate will kill you.



In my mind is doesn't matter if its deductible or not.  Say it is deductible, he would be paying $3k in interest a year to get back $300 a year in taxes.  Same goes for your mortgage, you are only getting a fraction of what you paid in interest back.  If you are holding onto your mortgage because of the tax deduction, you are losing in a major way.
Wrong, You can deduct up to $2,500 of student loan interest dollar for dollar off your taxes, its not like mortgage interest.    

If you paid $3,000 in interest you will receive $2,500 of it back, assuming you don't make too much money.



That is not the way I am reading it. http://www.irs.gov/publications/p970/ch04.html

Student loan interest reduces your taxable income on a dollar for dollar basis it does not reduce your taxes due on a dollar for dollar basis. Thus it saves you the deduction amount times your tax rate. So $2500 deduction times 25% tax rate for example and it saves you $625.
Link Posted: 8/26/2014 2:18:59 PM EDT
[#16]
Discussion ForumsJump to Quoted PostQuote History
Quoted:



That is not the way I am reading it. http://www.irs.gov/publications/p970/ch04.html

Student loan interest reduces your taxable income on a dollar for dollar basis it does not reduce your taxes due on a dollar for dollar basis. Thus it saves you the deduction amount times your tax rate. So $2500 deduction times 25% tax rate for example and it saves you $625.
View Quote View All Quotes
View All Quotes
Discussion ForumsJump to Quoted PostQuote History
Quoted:
Quoted:
Quoted:
Quoted:
Yeah might be worth asking a tax advisor/CPA, but AFAIK unless you make under 60k or something low no school stuff is deductible. I'd either roll it in with the mortgage for a 4.x rate or try to pay it off asap, that rate will kill you.



In my mind is doesn't matter if its deductible or not.  Say it is deductible, he would be paying $3k in interest a year to get back $300 a year in taxes.  Same goes for your mortgage, you are only getting a fraction of what you paid in interest back.  If you are holding onto your mortgage because of the tax deduction, you are losing in a major way.
Wrong, You can deduct up to $2,500 of student loan interest dollar for dollar off your taxes, its not like mortgage interest.    

If you paid $3,000 in interest you will receive $2,500 of it back, assuming you don't make too much money.



That is not the way I am reading it. http://www.irs.gov/publications/p970/ch04.html

Student loan interest reduces your taxable income on a dollar for dollar basis it does not reduce your taxes due on a dollar for dollar basis. Thus it saves you the deduction amount times your tax rate. So $2500 deduction times 25% tax rate for example and it saves you $625.

Correct that the student loan interest is a simple income deduction.

AOC (which also happens to be $2,500) and whatever the other one used to be are tax credits directly applied toward your tax bill. http://www.irs.gov/Individuals/Education-Credits.

All I know is I couldn't qualify for any of them when I finished my masters and was kind of annoyed... Education expenses imho are simply an investment and you should be taxed only on your gains (ie the difference between your income and the education costs) like any other investment or business expense. But then again you can deduct almost limitless on a mortgage interest which makes no sense either from a tax perspective. My opinion of course.
Link Posted: 8/26/2014 2:29:20 PM EDT
[#17]
Discussion ForumsJump to Quoted PostQuote History
Quoted:
Wrong, You can deduct up to $2,500 of student loan interest dollar for dollar off your taxes, its not like mortgage interest.    

If you paid $3,000 in interest you will receive $2,500 of it back, assuming you don't make too much money.
View Quote View All Quotes
View All Quotes
Discussion ForumsJump to Quoted PostQuote History
Quoted:
Quoted:
Quoted:
Yeah might be worth asking a tax advisor/CPA, but AFAIK unless you make under 60k or something low no school stuff is deductible. I'd either roll it in with the mortgage for a 4.x rate or try to pay it off asap, that rate will kill you.



In my mind is doesn't matter if its deductible or not.  Say it is deductible, he would be paying $3k in interest a year to get back $300 a year in taxes.  Same goes for your mortgage, you are only getting a fraction of what you paid in interest back.  If you are holding onto your mortgage because of the tax deduction, you are losing in a major way.
Wrong, You can deduct up to $2,500 of student loan interest dollar for dollar off your taxes, its not like mortgage interest.    

If you paid $3,000 in interest you will receive $2,500 of it back, assuming you don't make too much money.


Wrong. Student loan interest is a deduction on your income, and phases out at a certain income level. It sounds like the OP is above that. I just finished paying off 90K+ in student loan debt, and did not get any deduction for the bulk of interest I paid.
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