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Author: aquila66 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 736615  
Subject: What to do? Date: 3/28/2001 11:55 PM
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Here is my "What to do?" question. It's a little convoluted, so bear with me.
The Story:

In my late 20s I saw the light and figured out that I wanted to retire early. Or at the very least that no debt and plenty of investments can give you a lot of freedom in life. So I never got in debt, started buying stocks and bonds and generally doing all the right things to increase my net worth. The most important being, once again, never getting in debt for anything other than a house. But, then I got married. The result being that I married a wonderful woman and a lot of debt in the form of student loans. She has since seen the light too, which is good.

The question.

While I was collecting my assets I bought some fannie mae bonds that mature in 2014. I could sell them now and along with increased payments take care of my wifes student loan debt by October of 2001. Or, we could just enter into a very agressive payment plan and pay them off by April of 2003. Here are the numbers if you are interested.

Debt = 48,000 at 7.75%, no tax savings on interest.

Fannie Maes = Currently $27,000 at 9% and taxable.

Current loan Pmt. plan = $600 + $500 extra per month plus two extra $5000 yearly payments on the principal plus $8000 in Feb. of 2003.

Should I sell the bonds and pay off the loan by October? I could then take the money from the agressive payment plan and save and invest that to replace the big hole in my savings?

or

Should I keep the bonds and just pay off the loan with the agressive payment plan? Keeping everything else intact. It's very difficult for me to dig into my capital for any reason, but this may be a real good time to do it. What do you think?

I guess a simpler version is should I use investments to pay debt fast, or keep investments and pay debt not so fast?

Aquila
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