“I don’t live extravagantly by any means”: I have $28K in student loans. Should I pay it off all at once or at a faster rate? Help me decide!

Hi Money Minder,

Hey Money Minder,

So, my current loan is sitting at 27,854 with a 4.38% interest rate. Here are my stats:

– Age: 26 years old
– Salary: 140k
– Retirement Account: 60k
– Checking Account: 41k
– Haddock: 15k
– Individual Broker Account: 11k
– Location: High Cost of Living
– Rent: 2300 (covers everything)
– Expenses: 300/month (car, subscriptions, etc.)
– Personal/Fun: Around 400/month (eating out, shopping, groceries, etc.)

I’m really torn on whether I should pay off my student loans right now or cash out some of my stocks to do it. Here’s my thought process:

Option A: If I decide to pay off the loans, maybe I should just stick to the minimum payments and invest the rest in an ETF/index fund with a better return than my loan interest rate.

Option B: Drop around 10-15k to reduce the accruing interest and then start paying 1k a month towards the loan.

I’m hesitant to drop a big chunk of money because my company tends to have layoffs every 6 months, so I want to be cautious. Plus, I’m working on my masters degree (at 650 a semester).

Thanks for any advice and insight! Appreciate it! <3 Farewell, Decisive Debater

Response from THE MONEY MINDER: Thank you for reaching out! What specific financial questions or concerns do you have that we can help with?

"Hello There,"

Hello,

Based on your current financial situation and the options you’ve outlined, it seems like you are in a good position to tackle your student loan debt strategically. It’s great to see that you are considering your options carefully, especially given the uncertainty of potential layoffs at your company.

Given your age, salary, and diversified financial portfolio, it might be a wise decision to liquidate a portion of your individual stock brokerage account to make a significant payment towards your student loan debt. Dropping 10-15k to reduce the interest accrued and starting to pay off the loans at $1000 a month could be a practical approach.

Since you mentioned that your company has a history of layoffs every six months, it’s essential to have a contingency plan in place. It might be wise to maintain a liquid emergency fund equivalent to 6 months of living expenses before making a decision. Additionally, you can consider setting aside a portion of your salary specifically for savings to provide a financial cushion in case of unexpected events like a layoff.

Considering your current expenses, a measured and calculated approach to paying off your student loans while maintaining financial stability is key. Perhaps, you can evaluate both Option A and Option B, and find a balance that aligns with your risk tolerance and long-term financial goals.

Best of luck with your decision-making process and pursuing your masters. Remember, financial decisions should be driven by a blend of practicality and foresight. Take care and stay financially mindful.

Farewell from THE MONEY MINDER.