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Author: gastrolith Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 311074  
Subject: Re: Student Loan v. E-fund Date: 8/20/2003 3:59 PM
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Thanks for the replies... cyberisme wrote:

Since you gave no indication of what "sizeable" means here are some parameters:

- 4 months mortgage (in case our our renters leave us with a vacant home.)

1. You should have an efund of about 8 months living expenses.

- Does the fact that I'm active duty Army have any bearing on this? I'm not likely to become unemployed. Seems we military are a busy bunch.

2. Do you itemize your taxes? If so, if your student loans are earning 3% or less, I'd keep making payments on them as the return on savings should match the after tax interest expense.

- I do. My student loans are earning? Is that because the tax benefit is so much that it is greater than the 8.25% I pay?

3. If you are paying any more than 4% interest and you will continue to have a minimum 3 months living expenses efund after paying off the $9k, then I would pay off the student loans.

- see above. I could cut into my vacation fund a bit and pay it down substantially, but not entirely.

4. Regarding #3, if you know you can increase your efund back up to 8 months quickly and easily, then I would definitely do #3.

- So, I should find my comfort level for the efund and then reduce it to that?

Again thanks...
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