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Author: TALEFAN Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: College Debt and Retirement Date: 4/10/2001 2:29 PM
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My wife is about to begin paying off her loans from graduate school . Currently she has about $70,000 in loans, half of which are from Wells Fargo Med Cap Loans (with interest rates between 8.5% and 10%). We also have about $10,000 in cash. If we pay the minimum, the medcap loans will be paid in 10 years with about $15,000 in interest. Is it better for us to dump the $10,000 in cash into paying off the loan right away, or keep the $10,000 and invest it as a retirement fund for the next 20 to 30 years? Any help would be greatly appreciated. Thanks!
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Author: RiverCityFool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29016 of 76237
Subject: Re: College Debt and Retirement Date: 4/10/2001 2:40 PM
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I think a lot depends on your other retirement investment options and your plans in the next few years. If you want to buy a house, it'd be nice to have a big chunk of $$ for the downpayment. It's also good to have an emergency fund.

I'd probably look at my options and plans, and end up putting some of the $10,000 toward starting a retirement fund, some in a rainy day fund, some in savings earmarked for big planned purchases, and then use some to aggressively pay down the debt, starting with extra payments on the loans with the higher interest rates first. Also participate in retirement plans offered by employers.

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Author: tsouth Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29019 of 76237
Subject: Re: College Debt and Retirement Date: 4/10/2001 3:30 PM
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My wife is about to begin paying off her loans from graduate school . Currently she has about $70,000 in loans, half of which are from Wells Fargo Med Cap Loans (with interest rates between 8.5% and 10%). We also have about $10,000 in cash. If we pay the minimum, the medcap loans will be paid in 10 years with about $15,000 in interest. Is it better for us to dump the $10,000 in cash into paying off the loan right away, or keep the $10,000 and invest it as a retirement fund for the next 20 to 30 years? Any help would be greatly appreciated. Thanks!

.....................

Well, I'd keep 3-6 months worth of expenses in a liquid Emergency Savings. I would also be putting money into a tax-benefitted retirement account such as 401k or Roth IRA. And I might put a small bit of the cash towards the highest interest rate loan.

Also, I would suggest that your wife consider consolidating her student loans. The William D. Ford Direct Loans Program through the U.S. Dept. of Education has a consolidated loan with a variable interest rate that changes once per year and is never more than 8.25%. DH consolidated his loans through them and we have been very happy.

Despite the size of the loans, if you send some extra $ when you can afford it, you'll be surprised at how fast the loans get paid off.

Teresa



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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29031 of 76237
Subject: Re: College Debt and Retirement Date: 4/10/2001 6:28 PM
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My wife is about to begin paying off her loans from graduate school . Currently she has about $70,000 in loans, half of which
are from Wells Fargo Med Cap Loans (with interest rates between 8.5% and 10%). We also have about $10,000 in cash. If
we pay the minimum, the medcap loans will be paid in 10 years with about $15,000 in interest. Is it better for us to dump the
$10,000 in cash into paying off the loan right away, or keep the $10,000 and invest it as a retirement fund for the next 20 to 30
years? Any help would be greatly appreciated. Thanks!


This is your emergency fund.

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29041 of 76237
Subject: Re: College Debt and Retirement Date: 4/10/2001 8:04 PM
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Definitely establish an emergency fund first. Second, invest in a Roth IRA if possible and then pay off the debt. Debt is bad, any kind.

Look at it in this light, the interest is 8.5 to 10%, pay it off and it's guaranteeing a return of 8.5 to 10%. Investing in the market, as the past year has shown, is no guaranteed return.

JLC

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