Student Loan Vs. Investment

[dpar0987]

I am little confused about paying off my two student loans vs. investment. Fortunately, I have been able to save some money on my savings account. As you all know, savings accounts or CDs are not giving any ROI.
on the other side, I have two student loans to payoff (bachelor's and masters).

Bachelor's loan balance is $8,000 @ rate of 2.5% interest.

Master's loan balance is $35,0000 @ 6.8% interest.

Now, my question/confusion is should I pay off one of this loans? I have spare 10k which I can use to pay off either first loan completely which is at lower interest rate of use entire 10k towards the principle of second loan at higher interest rate.

Another question is that since my bachelor's I have been claiming student loan in my tax return. So, lets say I pay off entire first loan, than I won't be able to claim it anymore. Are there any benefits to claim student loan on tax return?

Last, instead of paying off student loan should I invest 10k into something else?

Please help/advice. I am not much into Finance. I would really appreciate good advice.

Thank you in advance.

[disneysteve]

Welcome.

I would not prepay a 2.5% loan.
I would prepay a 6.8% loan as that's a pretty good rate of return.
Never keep a debt just to get a tax deduction. If you pay $100 in interest and save $25 on your taxes, it still cost you $75. Not worth it.

Make sure, before putting your money toward the loan, that you have an adequate emergency fund of at least 3 months worth of expenses.

[Seeker]

I am little confused about paying off my two student loans vs. investment. Fortunately, I have been able to save some money on my savings account. As you all know, savings accounts or CDs are not giving any ROI.
on the other side, I have two student loans to payoff (bachelor's and masters).

Bachelor's loan balance is $8,000 @ rate of 2.5% interest.

Master's loan balance is $35,0000 @ 6.8% interest.

Now, my question/confusion is should I pay off one of this loans? I have spare 10k which I can use to pay off either first loan completely which is at lower interest rate of use entire 10k towards the principle of second loan at higher interest rate.

Another question is that since my bachelor's I have been claiming student loan in my tax return. So, lets say I pay off entire first loan, than I won't be able to claim it anymore. Are there any benefits to claim student loan on tax return?

Last, instead of paying off student loan should I invest 10k into something else?

Please help/advice. I am not much into Finance. I would really appreciate good advice.

Thank you in advance.

Agree 100% with DS ; always pay off the higher interest rate loans first with "extra" dollars versus that lower interest rate. You save more money in the long run by lowering the higher interest rate debts first.

The interst paid on all your student loans are tax deductible. Essentially they lower your tax total taxes due, regardless of whether or not you can itemize (I believe Master degree costs are also tax deductible????).

There's that "benefit" (if you want to call it that), but in reality you are paying xx dollars in interest costs and only recouping xx cents from the tax returns. In other words, it's not really a much of a benefit.

[dpar0987]

make sense

thanks all for your reply. it make sense to me now, will try to pay off higher interest rate loan.
However, how does it affect tax return?