General financials:
I can afford to pay them off in full and have plenty left over for general life needs
The interest rates on them should be 4.53% according to their chart of when it was awarded.
If I do hold onto the money and pay off monthly I can put everything into a CD but I’ll still be losing .03% if I lock in the student loan money maybe I’ll beat but .07-.43% so not a ton of upside unless there’s sudden political will to actually follow through on student loan forgiveness.
Is there anything else I’m missing when considering this? I am leaning towards just pay off as I’ve been planning for this, but I want to make sure there isn’t something else to do.
100% pay it off. Not only are you eliminating all interest, but an unpaid loan sits as a liability on your credit ledger which affects future borrowing.
The absolutely optimal move is probably to keep 5 or so k of debt around just to hedge the forgiveness play. But just paying it all off is also a great investment. You’re not likely to find another way of using your money with a >4% ROI. If the hassle of keeping another set of bills current is going to significantly add stress to your life I would pay it off. Really, though, there’s no way to lose here.
The [S&P 500] index has returned a historic annualized average return of around 11.88% since its 1957 inception through the end of 2021.
https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
I think you’re okay either way but personally if I have an emergency fund and no higher interest debt, I’m paying that off for sure. Even if I lost a couple bucks, worth it for peace of mind.
Would be different if the debt was a mortgage at 3%, which many people do have right now.
Edit: One note for folks doing similar math, don’t forget interest and yield on bonds are taxed as ordinary income (20~30% in the US).
I’m watching this now because we’re about to do the same in October or whenever that turns back on. We’re even having to return the Pell grant credit from being that close to paying everything off.
I just want to be done with it all, there’s no political will for it. The excuses are constant. The Supreme Court majority would call an Apple a banana if it meant they could deliver something miserable to their very politically defined opponents by legislating from the bench.
I think the only thing going through is if you’ve been paying for more than 20 years. It’ll be a LONG time before that happens for us, so we just want to send it all back.
I’m curious if anyone else knows more though.
Interesting you say SCOTUS legislating from the bench in this case. Deferment and forgiveness were both “legislated” from the White House. Seems the only party not legislating here is the legislature.
No, they weren’t. Congress passed laws giving the executive that authority.
It was in fact legislated by the legislature.
I think it’s disingenuous to make it sound that simple.
If Congress supported forgiveness, we wouldn’t be having this discussion. Whether they had implicitly given that power to the executive with previous legislation is controversial, thus the SCOTUS case. But it’s not like SCOTUS was the first to question it. Pelosi and even Biden had previously stated it was not an executive power.
Again, it could be easily settled now by the legislature if they supported it, but they do not.
Under powers that were explicitly granted to the White House by the legislature. You can doubt their validity all you want, but they’re there—including the right of the secretary to “waive or modify”—WAIVE or modify—“the existing provisions.” It’s quoted in the majority opinion then ignored by the ruling.
That is the apple being legislated into a banana.
I guess you must know more about law than Biden did 2 years ago when he publically talked about probably not having the authority: https://www.politico.com/news/2021/02/17/student-loan-forgiveness-biden-469677
It’s nowhere near that straightforward. And for a third time, if it was the intent of Congress, now would be the time for them to clarify that with direct legislation. But they are not.
I think at that rate there isn’t a bad decision. Pay it off for the peace of mind. Or, if you have a higher risk tolerance, invest it in the market, since long term it would likely return more than 4.5% (historically speaking, of course). I think keeping the money to keep it in a money market account or CD is probably not worth it, though.
