Student Loan Repayment Advise

[ballman76]

Hello,

So I will try to make this short. I have Two Federal Student Loans; ( 1 ) $20,500 @ 5.29%, ( 2 ) $20,500 @ 6.54%. I graduate This June, and repayment begins April 2024. My annual income Last Year was around $17,000 and this is because I have been working part-time while at school. Once I graduate, I hope to get into my field of study and increase my income.

Currently, I have $5,500 saved up to tackle my student loans. My parents are also willing to give me another $5,000 to help ( should I need it ). I also have about $6,000 in investments on the stock market. And finally, I have a potential $10,000 from a scholarship I applied for, but I won't know if I win until a few weeks ( I am moving forward with this plan assuming I do not win that scholarship ).

I would like to know if any of you have any advise on how I can get rid of this loan ASAP. I would like to pay off as much as I can before repayment begins. I feel confident in my ability to pay this off within a few years. I really do not see myself dragging this debt on for more than 3-5 years. ( 1 ) Should I start making payments on the Loan with the higher interest, given that both balances are the same? ( 2 ) Should I withdraw my investments and put them towards my loans? Any help would be appreciated, I will list my details below again.

Loans:
( 1 ) $20,500 @ 5.29%
( 2 ) $20,500 @ 6.54

Saved up:
Myself - $5,500
Parents - $5,000
Investments - $6,000

Scholarship:
( 1 ) $10,000

[servodude]

( 1 ) Should I start making payments on the Loan with the higher interest, given that both balances are the same? ( 2 ) Should I withdraw my investments and put them towards my loans? Any help would be appreciated, I will list my details below again.

If the only thing to consider are the interest rates of the loans then "yes" - pay off the higher charging loan first.
- it should be easy to see that your payment against that saves you more than putting it elsewhere

Where it becomes a bit more tricky to work out the optimal thing to do is if you cannot make overpayments without penalty or your investments are likely to return a better rate than your loan charges in interest.

In which case you should take a step back and consider your financial situation as a whole; what you want to do is maximise your return for your money. Even just a thought experiment as to what 1000 dollars gets you in each of your "buckets" should quickly give you an idea of where it would be best to put your available cash.

[LabrandoT]

Congrats on graduating soon! Tackling student loans can feel overwhelming, but I've found that focusing on the higher interest loan first is a smart move. Prioritizing repayment on that one can save you a significant amount in the long run. As for investments, I've personally chosen to withdraw some of mine to put towards my loans. It's a personal decision, but reducing debt gives a sense of financial freedom.