CathyA
1-28-15, 12:28pm
This is complicated, so I hope I don't confuse you.
DD has a lot of student loans which are in deferment because of her low income (but of course, the interest continues to accrue). She is very busy and works 2 jobs, but they just aren't real high paying jobs.
For her birthday, we'd like to pay off $10,000 for her. (After all, who needs to save for retirement??!) We'll pay with a home equity loan, and the interest will be deductible. DD can deduct the loan interest on her taxes.
One loan didn't qualify for deferment, so she is slowly paying that down. Fortunately, that interest rate is only 3.5%.
We were going to pay off one loan completely (approx $10,000 with 6.3% interest) because it had a higher interest accrual (because it's the oldest loan.) That's what DH wants to do, since it will totally get rid of one loan.
But........her other loans are twice that much and have an interest rate of 6.5%. From the online student loan site, it looks like the loan DH wants to pay off only charges about $3.50/mo. interest. Whereas the larger loans charge about $47/mo. These loans are about 6 years old.
My feelings are that, sure, it's great to think you have one less loan to pay off........but my choice would be to pay half of one of her larger loans. That way, the interest would ultimately be much less, right?
I fear DH is making too quick a choice without really thinking it through. He's basing his choice on the fact that the $10,000 loan has accrued the highest amount of interest.
What do you think? I'm not very knowledgeable with these things, but the choice I want to make seems to save money in the long run......but I'm not sure.
Thanks for any insights you might have.....and I'm sorry for any confusion.
DD has a lot of student loans which are in deferment because of her low income (but of course, the interest continues to accrue). She is very busy and works 2 jobs, but they just aren't real high paying jobs.
For her birthday, we'd like to pay off $10,000 for her. (After all, who needs to save for retirement??!) We'll pay with a home equity loan, and the interest will be deductible. DD can deduct the loan interest on her taxes.
One loan didn't qualify for deferment, so she is slowly paying that down. Fortunately, that interest rate is only 3.5%.
We were going to pay off one loan completely (approx $10,000 with 6.3% interest) because it had a higher interest accrual (because it's the oldest loan.) That's what DH wants to do, since it will totally get rid of one loan.
But........her other loans are twice that much and have an interest rate of 6.5%. From the online student loan site, it looks like the loan DH wants to pay off only charges about $3.50/mo. interest. Whereas the larger loans charge about $47/mo. These loans are about 6 years old.
My feelings are that, sure, it's great to think you have one less loan to pay off........but my choice would be to pay half of one of her larger loans. That way, the interest would ultimately be much less, right?
I fear DH is making too quick a choice without really thinking it through. He's basing his choice on the fact that the $10,000 loan has accrued the highest amount of interest.
What do you think? I'm not very knowledgeable with these things, but the choice I want to make seems to save money in the long run......but I'm not sure.
Thanks for any insights you might have.....and I'm sorry for any confusion.