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Why would they keep the loan? They like paying 8.5%?
Do they know a risk free investment that will earn more than 8.5%?
Heraclitusstudent saysWhy would they keep the loan? They like paying 8.5%?
Do they know a risk free investment that will earn more than 8.5%?
I agree. They should pay off the loan, because there is no reliable way to get more than 8.5%, especially after tax. (factual argument)
Also, I just hate debt. (emotional argument)
Pay half of the loan. Or 1/3 of it. Or 2/3 of it. Or x% of it. Why does have to be all or nothing?
Well, you were wondering if the benefit is larger if they pay off the loan (entirely) or not at all. If you are not certain about that, it looks strange to me that you are certain that the benefit is a monotonic function between 0 and 1.
The 8.5% interest rate makes it certain that it is that way.
Update: well they did it and paid off the loan ?
Update: well they did it and paid off the loan ?
Starting Principle: $173K
Federal Interest Rate: 8.5%
Loan Term: 10yrs
Min payment: $2,147
First Payment: 1/1/2013
BayArea saysStarting Principle: $173K
Federal Interest Rate: 8.5%
Loan Term: 10yrs
Min payment: $2,147
First Payment: 1/1/2013
wtf, that's an enormous amount of debt.
I had $18,000 of graduate school debt, and paid it off 6 months into my FIRST job.
Goran_K saysBayArea saysStarting Principle: $173K
Federal Interest Rate: 8.5%
Loan Term: 10yrs
Min payment: $2,147
First Payment: 1/1/2013
wtf, that's an enormous amount of debt.
I had $18,000 of graduate school debt, and paid it off 6 months into my FIRST job.
Sounds like you might be out of touch with what medical school costs today.
Doctors are regarding as smart by most I assume. At some point, they'll get smart and realize there are other fields that pay as much with waaayyyyy less loan debt to take on.
Being smart and having common sense are two completely different animals.
At some point, they'll get smart and realize there are other fields that pay as much with waaayyyyy less loan debt to take on.
WookieMan saysForgive me for my error.
Patnetters never apologize or even contemplate they could be wrong.
What are you trying to do? Destroy p-net? :-)
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Hi guys,
I've been asked to advise on the following situation:
Husband and wife are both in their early to mid 30s. Wife finished up a medical program in 2013 that left her in school debt of $173K:
Starting Principle: $173K
Federal Interest Rate: 8.5%
Loan Term: 10yrs
Min payment: $2,147
First Payment: 1/1/2013
They've been paying down the loan and today owe $95K. They have about $200K in savings and a combined income of about $200K/yr so the interest is not tax deductible since their salaries are too high. They don't currently need the money, have no plans to start any business, etc. However, they would like to purchase a home in the next 2-4yrs.
Question: Should they pay off the loan in full now? By doing so, they save about $400/mo in interest (or $24K over the next 5yrs or so).
My initial impression is that they should probably go ahead and pay off and close the loan. With all the changes in the current tax system, I just wanted to check with the savvy folks on patnet to make sure I'm not missing anything before I advise them to pay off the loan now.
Since they don't have a need for the money in the near future and since $400/mo savings is substantial and it wouldn't stress them significantly to do so, my impression is that they should close the loan.
What do you guys think?