Reply to Student loan payoff conundrum

Forum Index » Money and Finances

Reply to "Student loan payoff conundrum"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous]When my wife graduated from law school 18 months ago, we determined to pay off her $150,000 debt as quickly as possible. We have been making payments of at least $6,000 a month (that's about half our combined after-tax, after-retirement-contribution, after-FSA earnings), and have it down to just under $40,000. These payments take us to the edge of our comfort zone every month, but we are highly motivated to free her from the need to remain employed at a big downtown firm. We drive a beat-up 1990 Camry, rent a relatively small apartment, and in general avoid expenses that may be typical of a household earning nearly $300,000.

Here's the issue. She's five months pregnant and baby-related expenses are starting to knock at our door. The car broke down this weekend, and the mechanic says it'll be a least $900 to fix--maybe more. Oh, and we owe $10,000 to the IRS by October, on account of we didn't withhold enough last year.

And we really want to buy a house to take advantage of low mortgage rates and stop living like grad students finally (she's 31, I'm 38). We have $90,000 saved up in a brokerage account invested in index funds and meant to fund a down payment. We expect to receive another $90,000 down payment inheritance.

I don't think we will be able to make our $6,000 student loan payment this month, and I know we're going to have to sell some stock to pay the IRS bill eventually so here are three options I'm contemplating:

OPTION 1. Cut the student loan payment this month by just enough to fund the car-repair cash crunch and go one as we have been. This will entail selling just enough stock in October to pay the IRS.

OPTION 2. Sell about $20,000 in stock now. Use half to pay the IRS, and another $5,000 to buy some baby furniture and replenish the $4,000 emergency cash fund we have basically depleted in recent months.

OPTION 3. Sell enough stock now--about $60,000--to finally pay off the entire student loan bill, tax bill, and some baby expenses. Then start replenishing the down payment fund as quickly as possible, theoretically at $6,000 a month.

My wife prefers the last option, as she's really suffering psychologically under the weight of her student loan burden. I worry that we'll be less disciplined about saving once the student loans are paid off.

Thoughts? [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics