Hey pf, I'd like help on addressing my current student debt. Throwaway for reasons
I recently graduated with a lot of debt, ~2x my gross income. Let's say for convenience my income is 100k and my debt is 200k. It's all federal, with an avg interest rate of 6%. The CARES act has helped a ton over the past ~yr, but that's about to end and my interest is going to start accruing again at the end of the month. As of now, I could pay down 75k of my loans by drawing out all of my savings (34k) and selling my stocks (41k; 50% profit, long term cap gains tax). That leaves 125k of debt, which I can pay off in apprx 4.5 yrs (28k avg annual payment). This represents the fastest I can pay off the debt.
However, in this scenario, I am saving almost nothing for the 4.5 yrs. I max my employer contribution 401k, but I contribute nothing to my roth IRA. Some alternatives I've thought about:
- Save 12.5k for my emergency fund. Dump the rest of my cash+assets at the loan. Follow the same payment plan. This gets me clear in 5 yrs.
- Save 12.5k cash and don't sell the assets. Dump only remaining cash. Follow the same payment plan. This gets me clear in 7 yrs, but my assets keep accruing.
- Save 12.5k cash, don't sell assets, and max out roth IRA each year. This gets me clear in 9 years.
I could apply a blanket 10% expected gain to my assets, which would make this question easy.. but of course market returns aren't guaranteed. Reducing my loans that have a 6% rate, however, is guaranteed.
What would you do? Thanks for the help!
Submitted January 12, 2021 at 07:03PM by throwaway142526 https://ift.tt/35Ryvld
