In article <L%sXd.92585$g16.69986[at]trndny08> ,
"mark (sixstringtheoryDOTcom)"
<mark2741[at]no_chance_spammers_verizon.net> wrote:

- quote -

I don't understand what "guts" has to do with it. That is like
having your son or daughter break their leg playing sports, and
then saying that you don't have the "guts" to take them to the
doctor to get it fixed.

There is nothing "guts" to do with it. You pay the money, get
rid of the debt, then spend the rest of your life without that
debt, and save a huge amount of money on interest. Maybe the
word you are looking for is "nuts", not guts, in that some
would consider it nuts to not pay off an expensive debt when
you have cash sitting in an account that hardly makes anything.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

zxcvbob wrote:
- quote -

Thanks guys for the advice.

I've decided to pay off my wife's student loan only. It equates to about
half of our combined student loan debt. The remainder of the money I
will keep in savings for now. I just don't have the guts to spend it,
though I'm seriously considering it and am going to continue to think
about it for a while.

And yes, I have a $20k HELOC, and only $4500 of it used (I say "only" -
as if this were okay : (.... I bumped up the HELOC line right after my
"financial advisor" (I actually have one believe it or not, but I am
going to take my money out of our accounts with him (a money market that
makes less interest than my ING savings account...much less
interest....and a $2000 Oppenheimer fund) and consider putting it
somewhere else, perhaps to pay off my student loan (though I'd still be
a few thousand short).

Paying off the student loans is very important to me because our two
student loans are our only real debts other than our two cars (and our
house and the small HELOC balance, but the house is worth much more than
what we owe including the HELOC). Our goal is to be able to move into
a bigger and nicer house in a few years. In about 3 years, our cars will
be paid off, and they are both low-milage economical and reliable Hondas
(I'm knocking on wood here...). Also around that time our kids will both
be in school and my wife will begin working again. So with no real debt
left, we'd be able to afford a very nice house.

Thanks again,

mark


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John A. Weeks III wrote:

- quote -

I agree with you, I just want to add that the HELOC has to be
established *before* the emergency, because if you lose your job you
won't qualify for a new equity loan. If the equity loan is already
established and sitting there unused you can start drawing on it if
you're unemployed. (Original poster already has a HELOC, but I thought
the point was worth mentioning again)

Best regards,
Bob

In article <1110303907.593402.154820[at]o13g2000cwo.googlegroups.com> ,
"Mike" <mykbuckley[at]yahoo.com> wrote:

- quote -

I understand your thoughts, but I still have an issue with
taking student loan debt and extending it to 30 years and
pledging your house for it. There are too many things that
can go bad down the line to put your house at risk.

Since the original poster had the cash, I still think they
should just write a check. While they want to feel secure
with having a pile of cash in their hands, they don't realize
how much of they are flushing down the terlit each month in
the form of interest (or in this case, usary fees). If they
have an emergency, they can always put the emergency onto
the home equity loan. In that case, they are no worse off
than if they went the H/E route to start with, and if they
can avoid an emergency for 90 days, they will be far better
off since they are saving at least $250 a month in cash flow,
which will soon be $1000 emergency fund after a few months.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

One option is to refinance all of it on to a 30 year mortgage, the
current HELOC, mortgage and student loans. Rates are lower than prime
right now and you can fixed the rate while the HELOC is variable and
the student loan rates are terrible. I don't think taking the student
loans into a mortgage is a good idea most of the time but those rates
are horrible. This is one instance where it may be an ok idea and $15K
isn't a lot of money to add in. Hell, while you are at it, put the car
loans in there and deduct that interest also. But, all the payments you
are losing need to go into the mortgage so you can pay it down quicker.
You don't wan't to pay 30 yrs on a car so pay off as fast as you can at
least for the $36k that you would be adding. Maybe getting a 20 yr
mortgage on the refi will force you to budget those higher payments in.


As for the safety account, if its that important to you, stick it in a
ROTH IRA. You should get better returns and can always take out the
money you have put in (after 6 months), just not the earnings.

The only way to re-consolidate student loans is to send them into
default. Once you quit paying on the student loans, they will
un-package them and begin collections. Then you resume payments and
after 12 months of timely payments you will be allowed to consolidate
again with whomever you wish.

John A. Weeks III wrote:
- quote -

Thanks John, this seems to make a lot of sense though I can't bring
myself to use every last dime of my liquid assets (which reside split
across a savings and a money market account). I will however pay off my
wife's student loan (about $7500) right away, which leaves me with about
2 months of cash on-hand if something disastrous were to happen. This
"disaster thinking" probably isn't rational, and I'm going to take the
next few days to try to think of what would be a scenario where I really
would need that cash. If I can't come up with one, then I may bite the
bullet and try to pay my student loan off as well.

Incidentally, my wife's student loans were consolidated years ago at 9%
and of course remain at that horrible rate. And the real kick in the a*s
is that when she graduated from college she worked for 5 years as a
parochial school teacher and *thought* she was getting student loan
forgiveness...and she should have, but the head Nun never filed the
appropriate paperwork on time. Ugh.

Thanks again,

mark

Andy wrote:

- quote -

It is at prime rate, which I believe currently is 4.5%? I don't know for
sure because it has gone up two or three times over the past year or so.
But I do know it is the prime rate and I can't ask for any more than
that : )

- quote -

Thanks Andy. I think I am going to take John's advice and take half of
my cash and pay off my wife's student loan first and then try to work on
the other. I don't feel comfortable paying off my student loan with the
rest of our savings....not yet at least.

- quote -

Well, the plan was to take the $250 per month I'd save from paying the
minimum student loan payments that would have been "paid off" by the
HELOC and put those towards the student loans, but I can see now that
that is a risky proposition considering our expenses are fairly tight as
it is and the temptation to not send off that extra money would be too
great.

If there is one thing I've learned over the past 2 years since my wife
stopped working to stay at home with the kids (which, I was really
scared about at first but it was the best thing for us looking back) is
that you truly do spend what you have, and make do with what you don't.

I'm not religious at all. But I gotta say, I'm blessed. I'll feel even
more so once these student loans are out of our lives : ) The payments
aren't that big but the thought of having a debt for another 10 years or
so is just terrible.

Thanks again,

mark

In article <v2QWd.53633$t46.22353[at]trndny04> ,
"mark (sixstringtheoryDOTcom)"
<mark2741[at]no_chance_spammers_verizon.net> wrote:

- quote -

There is your answer. Use you cash to pay off the student loan.
That student loan is expensive at 8.75%, and I doubt you are
getting much for this cash.

If you have an emergency, use your credit card for small items
that you can pay off in a month, and use the home equity loan
for larger items.

If you don't have an emergency, you come out very well in this
scenario. Work to replace the emergency money. If you do have
an emergency, you end up using your home equity, which is no
worse than what you were originally thinking of doing.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

mark (sixstringtheoryDOTcom) wrote:
- quote -

The one bit of information I kept looking for in your post was the
interest rate on the HELOC and whether it was fixed or variable. Its
hard to evaluate your situation without this bit of information.

In general, though, I think its a bad idea to convert unsecured debt
like a student loan to secured debt like a HELOC. You can't lose your
home because of an unsecured debt, but you can face foreclosure because
of default on a secured debt.

If you had some realistic plan for cutting back on expenses and using
the extra money to pay down the HELOC aggressively over 2 years, then I
would say the risk of putting the student loans on the HELOC was
acceptable. However, it sounds like you are planning to just move the
balances over to HELOC and then let them ride there for years.

Andy

I asked this of a finance guru about 18 months ago and he told me not to
do it. That converting "good debt" into a HELOC is a bad idea. Since
then I've managed to come into a small chunk of cash and think possibly
that perhaps now might be the time to do this:

Here's my situation in a nutshell:

Married, 2 very young kids. I have a great job and am confident that I
will not lose it anytime soon. My wife did have a great job too, but 2
years ago stopped working to stay at home with the kids. It was real
tough for us financially the first year and I was biting my nails every
day it seemed. But we have done well and have not gone into any debt
since then. We're still living "paycheck to paycheck" in terms of not
being able to save any more, and my wife and I have student loans that
it seems will never be paid off.

Student loans (combined) = $15000, hers at 9% and mine at 8.5% - we
consolidated these loans about 6 or 7 years ago, so we can't consolidate
them again I was told. Apparently the fed doesn't allow consolidation
more than once. What a scam. Hopefully someone tells me I'm wrong on this.

We own our home. It is a modest home that we purchased 4 years ago,
right before we both got pretty big raises at our jobs. Had we not
purchased the house prior to getting these large raises we surely would
have spent much more on a bigger house, and then my wife would not have
been able to stay home with the kids now. So although our goal is to get
a bigger house in a few years when the kids are in school, we're happy
with where we're at for now. Also, and more importantly for this
discussion, I owe $135 on the house with 23 years left to pay, and it
would sell at $235 (not counting realtor fees/closing costs). I am
positive of the price because this is a townhouse and I keep track of
all the neighbor sales. The neighborhood is excellent and we lucked into
this appreciation I guess. The low interest rates didn't hurt either.

We opened a HELOC about 2 years ago to pay for a new heating/cooling
system. We owe $4600.

We have no credit card debt. We have 2 vehicles, late model hondas, and
owe about $8000 apiece on them.

We now have 6 months' worth of liquid assets available in the event I
was unable to work and we no longer had any income. Unless my arms and
legs fall off, I'd find some work immediately waiting tables if I had to
to keep *some* income coming in in order to stretch this out further. So
I am now comfortable with our emergency cash on hand (in a money market
account). This cash came from our savings prior to having kids (about
half the money), and the rest I just came into via an unexpected job
bonus. Before I was content just moving along as we were until the kids
were in school. But now with the emergency fund covered, I think I'd
like to start making some financial headway and here is what I was thinking:

Pay off the high-interest student loans with the HELOC. That would bring
the HELOC to be about $20000 total. Then take the amounts I would have
had to pay each month to the student loans ($260 per month combined) and
put that towards the HELOC via an automatic debit transaction each month.

My rationale for this is, even though I want to maximize the equity in
my current home for when we plan to sell in 3 to 5 years and move to a
bigger home, I am afraid that we are not going to be out from under
these student loans for another 10 years at the current pace. Since I am
confident my house will remain close to its current value, paying off
the student loans with the HELOC seems to be a smart move.

Any advice? If I'm leaving out any important/necessary info, please let
me know.