Advice on Loan Repayment

[eudaimonPsyD]

I have a somewhat simple question that I would love some input on. I'm still in school, so my loans are deferred right now. I recently cashed out some stock options from a previous job, and decided that I actually want to be somewhat responsible and start putting some money toward my loans now.

Which way would make more sense: to take the money I have now and just apply it to some of the interest that has been accruing, or take the money and put it into an account so that it can accrue some interest, and then put it toward my loans once I am obligated to start paying them back.

Thanks in advance!

---

Members don't see this ad.

 

[AcronymAllergy]

This could be financially naive on my part, but I'd say it'd generally be worth it to invest the money if the interest rate you'd accrue would be above that of the student loans. If the interest rate would be lower, then using it to start paying off interest and principle now would probably make more sense.

That's just my take, though, and very well could be wrong.

 

[graduatingsoon]

I have a somewhat simple question that I would love some input on. I'm still in school, so my loans are deferred right now. I recently cashed out some stock options from a previous job, and decided that I actually want to be somewhat responsible and start putting some money toward my loans now.

Which way would make more sense: to take the money I have now and just apply it to some of the interest that has been accruing, or take the money and put it into an account so that it can accrue some interest, and then put it toward my loans once I am obligated to start paying them back.

Thanks in advance!

It depends on how savvy you are at investing and whether you can accrue a higher interest rate investing these days. The stock market though is quite volatile so I would probably prefer to pay off whatever I can now (you can also lose the $$ in the stock market). However, if I was more seasoned at investing, I would probably prefer to invest the money.

 

[Qwerk]

I agree with the above unless you're talking about subsidized loans that don't accrue interest while you're still in school (e.g. Perkins, subsidized Stafford).

 

[JeyRo]

I'd say since graduate loans accrue 6.8% interest these days or more, I'd say you'd have to have some pretty high performance expectations for your stock portfolio to consider holding on to them.

 

[graduatingsoon]

I'd say since graduate loans accrue 6.8% interest these days or more, I'd say you'd have to have some pretty high performance expectations for your stock portfolio to consider holding on to them.

Good point. I don't know anyone who is getting a long-term 6.8% return on investment with the stock market. My portfolio has basically been flat for a few years now (with slight increase the last few months, but isn't keeping up with inflation even). I'm also only getting about 2-3% off dividends these days.