I need some financial advice

[BOK]

Here's the situation: My wife is currently attending school for her masters. We have paid some of the tuition, and will need to pay the rest by the end of summer, 2002. The company she works for will only pay $5000 annually for tuition reimbursement. She has tried, unsuccessfully, to have that amount increased. There is practically zero chance of that changing.

Bottom line: We need to come up with $35,000 by the end of summer, 2002.

Question: Should we take out a student loan for the $35,000, or pay it off in full? I project our savings will be approximately $50,000 by the end of summer, 2002.

Our combined annual gross income is currently $150,000. It will probably increase by 10-15% at the turn of the coming year.

Another consideration: We have a $2200/month mortgage payment ($275,000 30-year loan @ 6.125%). Maybe it makes more sense to use the money towards paying this off, instead of paying off the tuition in full?

 

[GSOYF]

I would go with the student load, and try to pay off as much of the principle on your house as quickly as you can.

 

[Sluggo]

the student loans are offered at such low interest that you may be best using that option and letting your savings accrue at a higher interest (invest it.) Although at your income level, I am not sure that there is going to be any student loans available to you.

Paying your mortgage down early is a waste of time for most people, again because of the amount of the interest. You can make more money investing your money than by payng down your mortgage. Paying a mortgage down early is good if you plan on living there forever, but most people move so quickly, that they are better off letting their money work for them.

 

[BOK]

<< Although at your income level, I am not sure that there is going to be any student loans available to you. >>



I don't mean financial aid. What I meant was a regular loan. Perhaps a home equity loan.

 

[Sluggo]

<<

<< Although at your income level, I am not sure that there is going to be any student loans available to you. >>



I don't mean financial aid. What I meant was a regular loan. Perhaps a home equity loan. >>



That would depend on the interest rate you could get on the loan as opposed to what kind of return you think you could get on your money.

 

[Superdoopercooper]

Remember... your mortgage rate, after tax savings... is probably 8% * 72% = ~6%... maybe less depending on your actual mortage rate.

Stafford loans for someone with your financials run around 6.75%, if not higher, and the interest is NOT tax detuctible cause you make TOOO MUCH MONEY, you scrub (me too.... heheheeh).

SO, I would go with paying off the school.... or if you have an AUTO at a crappy rate, pay that off, and get the cheaper interest school loans.

But don't eat up too much of your money... got to plan for bad times just in case (God forbid) one of you loses your job... so don't eat up all your savings.... but if you're only making a few percent on it, I would suggest using at least 25k of it to pay off whatever. You should keep 3-6 months of savings handy just in case. If you guys are AWESOME, and will NEVER lose your jobs... drop most of the 50k into paying off debt.

DEBT is SUCK. Mortgages are ok... they are an investment. School loans are sort of an investment. Car loans are SUCK. Credit card loans are even more SUCK. Pay these things down in the reverse order of the way they are listed here.