Student Loan question/suggestions?
 

I have about 33k in student loans from grad school owed. I missed the deadline for consolidation at a lower rate due to timing of my graduation and have received a [insert bad word] rate of 6.25% for the first 3 years and then based on successful payments ( i am not worried about this as I am on an auto payment plan) at which point it drops to 5.75%. I have about 15k in high interest savings (5%) and am trying to figure out what I should do.

a) take 10k and pay towards the loan in one lump sum owing 23k

b) keep the 15k and just make payments on loan fo rthe next 20 years

c) refer to a or b

Thats all I could really think of. A lower interest rate would be nice but I haven't come across anything yet. My car is paid off and I have no intentions of making any large purchases or buying a house in the near future. I have excellent credit and no other debt if thats of any importance. Any help/suggestions would be appreciated.

P.S. Obviously one of my options is to invest the money which for me is the most likely place this will go (if i don't pay towards the loan) as a starter for retirement. But I didn't want this post to turn into a discussion/debate about investing vs. paying back loans so for this reason we will assume that I would only be getting the 5% from a savings at this point.

Re: Student Loan question/suggestions?
 

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P.S. Obviously one of my options is to invest the money which for me is the most likely place this will go (if i don't pay towards the loan) as a starter for retirement. But I didn't want this post to turn into a discussion/debate about investing vs. paying back loans so for this reason we will assume that I would only be getting the 5% from a savings at this point.

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If you rule out purchase of an auto or home in the near future and you don't plan on needing this cash for anything (you already have other funds as a safety net incase you get laid off, etc.), then you should pay back the loan as it's got a higher interest rate.

If you don't have any other cash around and you have the discipline not to spend the 15K it might sense to keep it on hand. Eventually you'll need to finance something and you'll always pay more than you'll be paying on your student loan.

Re: Student Loan question/suggestions?
 

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If you don't have any other cash around and you have the discipline not to spend the 15K it might sense to keep it on hand. Eventually you'll need to finance something and you'll always pay more than you'll be paying on your student loan.


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This is the very point that has thus far kept me from paying on my loan in a lump sum. With interest rates on the rise, its hard to pass this opportunity up in taking advantage of a low rate.