No. of Recommendations: 0
There are several different ways to approach this decision and ultimately you'll have to decide which approach works the best for you.

Assuming your loan is a federal one (and not private party), one small measure you could take would be to prepay a certain number of loan payments (Double check your loan terms to make sure, but all the federal loans I've seen have a provision were an early loan payment allows you to skip the next payment while also reducing the current balance for interest calculation). You could take an upfront amount out of your savings and then in future months forgo paying the loan and instead transfer the loan payment amount back to your savings account. It takes discipline and some tracking, but from your description of your savings account it sounds like that's something you might actually enjoy.

As a variation to the one above, you could use the balance transfer check to prepay the 2 years worth of payments, then repay the credit card with the money you would have paid to the student loan. Note that this would increase your risk as student loans usually have more favorable terms regarding payment deferrals and economic hardship.

If it weren't for your desire to buy a house, I think the clear choice would be to payoff as much of the student loan that you could afford to. I would include the CDs as part of your efund amount, as its liquid enough to use in an emergency if need be. Then after looking at your monthly expenses, if your new efund is bigger than what you need, put the extra towards your student loan.

If you want to buy a house in the near term than it would be a good idea to build up your cash savings. This would help you with qualifying for a loan and avoiding having to pay for mortgage insurance. And nothing would prevent you from paying down the loan after you've moved in if you still have enough money.

Just some of my thoughts in considering. Good luck!
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.