[Raybyrnes]

Hey, God bless the 91 day treasury bill auctioned off in may because that is what student loans are pegged too prior to July 2006. Dropped down to 1.17 with a fixed rate over the T-Bill of 1.7 while in my grace period and 2.3 if you waited until the end of the 6 month grace period. No envy talking. I will admit that I was a bit lucky. Lenders don’t really care what rate I pay because the government is guaranteeing them a rate of around 7%. So you are probably right, your tax dollars go into subsidizing my student loans.

[Raybyrnes]

Hey, God bless the 91 day treasury bill auctioned off in may because that is what student loans are pegged too prior to July 2006. Dropped down to 1.17 with a fixed rate over the T-Bill of 1.7 while in my grace period and 2.3 if you waited until the end of the 6 month grace period. No envy talking. I will admit that I was a bit lucky. Lenders don’t really care what rate I pay because the government is guaranteeing them a rate of around 7%. So you are probably right, your tax dollars go into subsidizing my student loans.

[Raybyrnes]

SDcellar. I effective am pulling it off with my student loans. Pulled 60 k out to go to grad school at 2.77%. fixed the rate at 2.875. I got $2000 back for consolidating with my lender and making a single payment. I recieve a .25 % rate reduction for auto pay and 1% reduction for 36 month of on time payments. That gives me a rate of 1.625 to work off. My company reimbursed me for the majority fo my grad work. I have had roughly 50% of that money in money market accounts and have invested the rest over the last 3 years. The 30K invested has earned about a rate of return of about 14% annually. I put some money into Cohen and Steers REIT and Some into Schwab International funds. This type of circumstance is clearly not the norm but the reality is that there are opportunities that often time present themselves.

[Raybyrnes]

SDcellar. I effective am pulling it off with my student loans. Pulled 60 k out to go to grad school at 2.77%. fixed the rate at 2.875. I got $2000 back for consolidating with my lender and making a single payment. I recieve a .25 % rate reduction for auto pay and 1% reduction for 36 month of on time payments. That gives me a rate of 1.625 to work off. My company reimbursed me for the majority fo my grad work. I have had roughly 50% of that money in money market accounts and have invested the rest over the last 3 years. The 30K invested has earned about a rate of return of about 14% annually. I put some money into Cohen and Steers REIT and Some into Schwab International funds. This type of circumstance is clearly not the norm but the reality is that there are opportunities that often time present themselves.

[Raybyrnes]

You are being a little short sighted here. Time is probably on your side. Historically you are going to earn 10 to 12% indexed to the market. So yes you have to beat a rate of return. Additionlly you are liquid when you need to be. Show up at a bank when you need money and you are a high risk and they price to your risk. Borrow when you are a low risk and you have control of the terms and conditions. Fix the rate on the Line of Credit and if interest rates continue to go up you are in an arbitrage situation. If rates drop back to the 4 % levels they wer at a few years ago you pre pay it back.

[Raybyrnes]

You are being a little short sighted here. Time is probably on your side. Historically you are going to earn 10 to 12% indexed to the market. So yes you have to beat a rate of return. Additionlly you are liquid when you need to be. Show up at a bank when you need money and you are a high risk and they price to your risk. Borrow when you are a low risk and you have control of the terms and conditions. Fix the rate on the Line of Credit and if interest rates continue to go up you are in an arbitrage situation. If rates drop back to the 4 % levels they wer at a few years ago you pre pay it back.

[Raybyrnes]

You get the tax write off. So you are only paying .65*7=4.55
A 5% money market wouldn’t really make you money because you pay tax on this aswell but you would be a little more liquid and depending upon how you invest could make money.

[Raybyrnes]

You get the tax write off. So you are only paying .65*7=4.55
A 5% money market wouldn’t really make you money because you pay tax on this aswell but you would be a little more liquid and depending upon how you invest could make money.

[Raybyrnes]

I am missing something here. If you drive the car for 10 years why would it matter when you paid it off. Wouldn’t the most astute way of looking at it be Investment gains minus – interest paid. If I paid an additional 10000 in interest but earned 12000 by banking it wouldn’t it have lowered my cost of the car by 2K.

I think I know what you are saying. Most people don’t approach it this way and are more rechless with the way they spend but to the savvy person they can make out fairly well.

[Raybyrnes]

I am missing something here. If you drive the car for 10 years why would it matter when you paid it off. Wouldn’t the most astute way of looking at it be Investment gains minus – interest paid. If I paid an additional 10000 in interest but earned 12000 by banking it wouldn’t it have lowered my cost of the car by 2K.

I think I know what you are saying. Most people don’t approach it this way and are more rechless with the way they spend but to the savvy person they can make out fairly well.

[Raybyrnes]

Alex_angel
“I guess you just have to be smart about it. Not like these wannabes in San Diego with their BMWs and Mercedes that they bought with the credit line they had.”

Why would they have bought any other way. Net after tax on a 7% Equity line in 35% tax bracket is %4.55. Cash in the bank is earning 5%. Sort of miss why you would elect for another form of financing.

Now if you have not saved up and could not afford the car otherwise I will go along with your statement that they should not have bought that type of car.

[Raybyrnes]

Alex_angel
“I guess you just have to be smart about it. Not like these wannabes in San Diego with their BMWs and Mercedes that they bought with the credit line they had.”

Why would they have bought any other way. Net after tax on a 7% Equity line in 35% tax bracket is %4.55. Cash in the bank is earning 5%. Sort of miss why you would elect for another form of financing.

Now if you have not saved up and could not afford the car otherwise I will go along with your statement that they should not have bought that type of car.

[Raybyrnes]

I am sort of in the same boat. Very frugal keep my expenses low and tons of cash at the monent because we don’t have a mortgage. Additionally I have fixed Student loan rate in the 2% range. I personally feel that I am better off building up my cash reserve for a future puchase than paying off muy student loan. Additionally I am earning better than 5% in money market account so to me every dollar I pay on the student loan is costing me 2.5% compared to what I could have earned risk free. With a family I also like the Loan Forgiveness option in the event of my death or permanent disability. Had I payed back my loan and croaked they would spit on my grave. Before using a deferment or forbearance you want to see if you would fofit any rate reduction for on time payments. I contacted my lender and I do not. Again, it’s good to know you ahve options.

[Raybyrnes]

I am sort of in the same boat. Very frugal keep my expenses low and tons of cash at the monent because we don’t have a mortgage. Additionally I have fixed Student loan rate in the 2% range. I personally feel that I am better off building up my cash reserve for a future puchase than paying off muy student loan. Additionally I am earning better than 5% in money market account so to me every dollar I pay on the student loan is costing me 2.5% compared to what I could have earned risk free. With a family I also like the Loan Forgiveness option in the event of my death or permanent disability. Had I payed back my loan and croaked they would spit on my grave. Before using a deferment or forbearance you want to see if you would fofit any rate reduction for on time payments. I contacted my lender and I do not. Again, it’s good to know you ahve options.

[Raybyrnes]

Or look to invest the differnce. Would the same people who swear by the conventional fixed rate mortgage swear by Whole Life Insurance Policies. Do we just dismiss nuy term and invest the difference. The key is investing the difference. If you are undiciplined the 30 year conventional is the way to go. If you are fair diciplined the average market return would beat the strategy of paying down the mortgage.

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