Home     Forum     401k     401k Rollovers
    Register   Login   Members   Search   FAQs     Recent Posts    




Student Loan or Use Emergency Fund???

Reply to topic
Money Talk > Credit & Loans

Author Thread
DivietoDiSosta
New Member


Cash: $ 0.70

Posts: 3
Joined: 26 Feb 2013
Location: NJ
Student Loan or Use Emergency Fund???  Reply with quote  

Hello,

I'm looking for some help deciding how to pay my graduate school tuition this fall.

I have the option of receiving an unsubsidized federal loan for the amount I need (about $7000) at the current interest rate of 5.41%.

I also have an emergency fund of a little over $20,000, in an online savings account earning 0.8% interest. This is about 4-5 months of mortgage payments and living expenses, which I consider to be borderline sufficient (I would prefer to have 6 months).

I also have retirement savings (Roth IRA + 401k) of about $55,000 and personal investments (mutual funds + individual stocks) of about $12,000 which have all been growing somewhere around the market average for the year (11-13%). I could tap these if needed, but considering the return these are getting now, I plan to leave them where they are.

What would you do in my situation? Should I take the money from the government, or spend my emergency fund and avoid paying the interest? Or should I cash out my investments instead?

Thanks for your help!
Post Tue Aug 20, 2013 3:49 pm
 View user's profile Send private message
littleroc02us
Moderator


Cash: $ 382.50

Posts: 1882
Joined: 09 Feb 2009

 Reply with quote  

Use 7k of your EF fund and pay for school in cash. Student loans aren't bankruptable if the problem ever arrives. It seems as though you do a great job of saving money, so it shouldn't be that hard to replenish your EF fund. Smile

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Tue Aug 20, 2013 4:13 pm
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 720.20

Posts: 3503
Joined: 21 May 2006
Location: arizona
 Reply with quote  

I would keep the cash/investments and borrow the $7000 at 5.41%, that's a good rate, your investments are doing well - ie, you will be borrowing at 5.41% and investing it at 11% to 13%.

But what about your employer - won't they pay the tuition for your grad school? (In a previous post you mentioned a $70k income, sounds like a good job?)

quote:
personal investments (mutual funds + individual stocks) of about $12,000 which have all been growing somewhere around the market average for the year (11-13%).


Personally I would move about $15k of the savings into the $12k account. I keep our EF capped at about $5k, that's enough 'dead' money to cover most things. And then if something major happens use your Fallback personal account, that money is accessible in about 2 days.
Post Tue Aug 20, 2013 4:23 pm
 View user's profile Send private message
DivietoDiSosta
New Member


Cash: $ 0.70

Posts: 3
Joined: 26 Feb 2013
Location: NJ
 Reply with quote  

quote:
Originally posted by oldguy

But what about your employer - won't they pay the tuition for your grad school? (In a previous post you mentioned a $70k income, sounds like a good job?)



Yes, my employer provides assistance up to an annual limit. The $7k is to make up the difference between what they pay and tuition.

Thanks for the advice. I'm hesitant to put my emergency fund into an investment account, since the market is so unpredictable, but I'll consider moving a portion to where it can earn a higher return.
Post Wed Aug 21, 2013 1:46 pm
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 720.20

Posts: 3503
Joined: 21 May 2006
Location: arizona
 Reply with quote  

quote:
Thanks for the advice. I'm hesitant to put my emergency fund into an investment account, since the market is so unpredictable,


Yes, that's a tough choice for most people. It is a mathematical cetinty that the savings account will lose money (relative to inflation), that is what they are desgned to do, you pay for that safety. The market, OTOH, can drop 50% in a year, altho it never stays down, it is currently at an all time high. (35 yrs ago it was Dow 1000, now it is Dow 15,000),

Later, when you have maybe $500,000 in the account and you have a $30,000 emergency, you may be forced to sell $30000 in a 'down' market - and, yes, that makes the emergency worse. But, overall, $30k is only a small piece of the $500k. But most people never have that $500,000 becasue they are hesitant to start. Very Happy
Post Wed Aug 21, 2013 2:52 pm
 View user's profile Send private message
campbeelld
New Poster


Cash: $ 2.00

Posts: 2
Joined: 23 Aug 2013

 Reply with quote  

Bad credit student loans have frequently provided student with opportunities that have led them to achieve what they have been looking for. There has been an obvious distrust among loans borrowers relating to bad credit. However, there is no way that you can avoid the hiccups like higher rate of interest, but it certainly gives you the education you want. Research, inquiry not only facilitates you acquiring of a student loan but improve your prospects in relation to bad credit student loans. Bad credit student loan will ensure payment of your education, books, room, computer etc. More and more financial institutions are coming forward to provide bad credit student loans. Make use of this probability to see the possibilities.
Post Fri Aug 23, 2013 9:11 am
 View user's profile Send private message
Angelass
Member


Cash: $ 3.00

Posts: 15
Joined: 03 Nov 2010

 Reply with quote  

I would probably go into my emergency fund, since I'm very scared of the idea of getting into debt again.
Post Fri Sep 13, 2013 6:50 am
 View user's profile Send private message

Reply to topic
Forum Jump:
Jump to:  
  Display posts from previous:      





Money Talk © 2003-2016