Ask Terry Questions Student Loans

Student Loans

By Terry Savage on August 29, 2023 | College Savings / Student Loans

Hi Terry! I love your personal finance forum. Regarding student loans, I have two loans. One is private with a balance of $26,000, fixed at 15 year, 4.52%. The second loan is a gov’t with $25,000, fixed at 5.05%. Since the government was offering 0% interest, I have been tucking away money in a high-interest savings account earning just over 4.5% and have built this up to about 25,000. I had the intention of using this money towards student loans once interest returned. My question is now that interest is coming back, do you recommend I use this saved money towards one of loans, spread it out as additional principal payments over the next few months, or leave as is? Side note, I am still investing in a ROTH IRA and ROTH 401K. Any guidance is very much appreciated!

Terry Says

Frankly, I think your smartest move is to completely pay off that government loan. It will save you a fortune in future interest. You are SO SMART to have saved that money to do it!
After that, tackle your private loan. The rate is lower, thank goodness. If you could save enough to bring down the student loan in 3 years, set yourself of paying off the private loan by 2027. What a great relief that will be!! Congratulations. This is the nicest post I’ve had to answer in weeks!!!



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