Pay off student loans or DVC in full?

[Arguetafamily]

I understand this is a no brainer for many. My mother came into a little money and wants to help us, myself and my 2 brothers. We have many bills, car payment, mortgage, student loans, the amount my mom is giving will only pay in full 2 of those debts, my student loan or my DVC contracts.
My mother tells me, it’s your life, you have your priorities, up to you. I can’t decide.

What would you do and why?

Thanks everyone in advance

 

[WinterSolider]

Simple answer is whatever has the highest interest rate.

 

[aceshigh73]

Tough to say without knowing your financial situation, salary, and loan terms and amounts, but Id probably bang out the DVC first, then student loans... unless your car loan is high APR, then bang that next.
Good luck with whatever you decide!

 

[Let's Get Kronk]

I would definitely choose the student loans. I don't know specifics with your interest rates and all of that, but there are no other way to get rid of student loans except to pay them off. With DVC, if you decide to sell your interest down the road you have that option. That debt has more options to get rid of. It's just my opinion, but getting rid of my student loans would be my first priority.

 

[bdrex28]

Simple answer is whatever has the highest interest rate.

100% , which I would guess is the student loans.

 

[WinterSolider]

I don't know specifics with your interest rates and all of that, but there are no other way to get rid of student loans except to pay them off. With DVC, if you decide to sell your interest down the road you have that option.

That's the wrong way to think about it (mathematically).

Yes, if they pay off student loans now and things get bad you can sell your DVC to pay off your DVC loans.

But also, if they pay off their DVC now and things get bad you can also sell your DVC to pay off your student loans.

"Sell DVC to pay off debt" doesn't only apply to DVC debt.

Honestly, if someone has all this debt, my real advice would be to sell DVC anyways and use the combined DVC plus gift to pay off as much as possible, and not buy DVC again until I was able to do it without debt.

 

[Arguetafamily]

Simple answer is whatever has the highest interest rate.

Unfortunately for me interest for student loans are 8% and DVC 11.05%.

 

[bdrex28]

Unfortunately for me interest for student loans are 8% and DVC 11.05%.

But the loan for student loans are longer right?

 

[Aladora]

Unfortunately for me interest for student loans are 8% and DVC 11.05%.

The money you have to pay off the loans, is it enough to pay either of them off entirely or just pay down some?

 

[WinterSolider]

But the loan for student loans are longer right?

Doesn't matter, you would still pay off the higher rate and then take all the money they're currently paying on DVC and paying extra on student loans so that the student loans are paid off way earlier than their minimum payment amortization schedule.

 

[crvetter]

But the loan for student loans are longer right?

Doesn't matter, you will always come out ahead if you pay off the highest APR. This is because there is no penalty to make accelerated payments on the student loan. They can easily take the payments saved from the DVC and apply that to the student loan and come out ahead.

 

[Cabius]

Unfortunately for me interest for student loans are 8% and DVC 11.05%.

Paying off higher-interest debt first will save you the most money long-term. You can use your monthly DVC payments to pay off your student loans faster.

 

[tom1944]

Pay off whatever has the highest interest rate

 

[Arguetafamily]

Doesn't matter, you will always come out ahead if you pay off the highest APR. This is because there is no penalty to make accelerated payments on the student loan. They can easily take the payments saved from the DVC and apply that to the student loan and come out ahead.

That was half my thought. I am going to do that, since my student loans are in deferment until 2029.

 

[Arguetafamily]

The money you have to pay off the loans, is it enough to pay either of them off entirely or just pay down some?

Pay them off entirely.

 

[pianomanzano]

Is the student loan interest deduction still a thing? Not sure if that would fit into calculations or not, but something to consider.

 

[Mackenzie Click-Mickelson]

That was half my thought. I am going to do that, since my student loans are in deferment until 2029.

Is it accruing interest at the same time? 5 years of interests (just going from right now) is a lot. Especially at 8%

 

[Mackenzie Click-Mickelson]

I had 3 different types of student loans (federal, private and endowment). The endowment was the lowest interest but a repayment period of 2 years. I paid that off the fastest in under 2 years.

The federal was lower than my private in interests and repayment period but during the pandemic with the zero interest I paid that off before applying money to my private loans. Zero interest was great but it also meant that I was lengthening the time I had on that loan if I had stopped payments entirely and so I continued payments like I would have and paid off early for that reason. It was the highest payment I had each month even though it was the lowest interest of the loans left and by highest I mean the two private loans together were about $75 less than the one federal loan on a per month basis. The federal loans also had fixed rates whereas my private adjusted over time when interest rates raised (or lowered) by the government. I have 1 private loan left which is just about to be paid off.

In my situation paying off the highest interest rate would not have netted me the best advantage to my particular situation.

I would go into a deeper look at the finances. Is it better to completely pay off loans or is it better to apply payments to multiple loans. What's the net affect to the overall finances including credit score. That really is looking at it from the terms of each loan not just the interest rate but how the payment is being calculated between principle and interest. There's also the length of payments you have left

 

[Sandisw]

Unfortunately for me interest for student loans are 8% and DVC 11.05%.

Then go with DVC.

 

[geargrinder]

Pay off the DVC and pray for a federal loan forgiveness program to pay off your student loan.