Student loan refund - keep it or return it?

[maxim730]

Hi All,

I'm 26 and currently working full-time and going to graduate school for my MBA (accounting or finance - not sure which). It will take about 3-4 years to get my MBA.

I recently got a student loan refund of $6000, which pretty much means that I am taking out too much in loans. I paid off my undergrad loans of $21K in 1 year after graduation, so I am well-versed in getting rid of my loans. I currently have $0 in debt (only $6000 in car financing left)

Should I pay back the $6000 to unsubsidized federal loan (6.8% fixed interest) or should I save/invest the $6000 in my savings account (5% WAMU APY)???

I am thinking that I should save it (I will NOT touch the money - I have more than enough in emergency funds) and add it to my current $$ amount in my bank.. and then watch the interest grow by semester (I'll most likely be getting $6000 per semester)

OR I was thinking of either having the lender automatically deduct $150 per month from my account (as if I was paying back my loans) but still keep decent interest.

I also got a good job promotion and I live at home (yeah yeah make your jokes now ). My monthly CC bill is around ~$800 ( I have no idea what I Spend $ on)

[InDebtInDC]

Here are your options:

1) Pay it back.

2) Spend it.

3) Save it.


#1 sounds like the best choice; however, consider this. If you let the school think that you're overfunded, next year they'll cut your funded amount.

#2 may be a good choice provided you use it to pay off debt. I would be careful with this and make sure you don't blow the money.

#3 sounds smart, but as a career student I highly advise you against having assets in your name. The more asset you have, the less likely you are to qualify for student loans. Take note of this when thinking about investing.


If this were my situation I would pay off the car and transfer the title to a close family member. Not the ideal solution for everyone, but that's what I would do. Also make sure you don't spend any more money than you have to.

What is the interest rate on your car loan?
If the interest rate you are paying on your car loan is higher than the 6.8 you are paying for the student loan you may want to apply the money to that. I ask this because I have heard of people depending on their location having high car loan interest rates.

As InDebtInDC said It is not a good idea to have a TON of assets, So if you take that $6000 that is left over you are paying 6.8 percent to make 5% interest that is a loss of 1.8% PLUS you now have a asset of $6000 that will reduce the amount the bank will loan you in the future and definately will cause you to be less likely to get a grant based on need in the future.

[maxim730]

My car rate is 1.9% (From 2004). I got the rate because of my CC score (769).

My logic is that since I'm taking 20K in loans per year (and 12K in refunds back), I'll still owe 20K + interest (6.8%). I can then use the 12K in refunds, add it to my balance (high 5-digits), gain 5% and go from there.. I think

But the more assets I have (currently cash, stocks, etc.), I may get less in student loans next year. But would it matter since i already got 20K even though my asset was relatively high?