my question is: Should my wife and I prepay my private variable-rate student loans, given our particular financial profile? Or are there higher priorities to address with any extra cash we have at the end of the month?
Here is the rundown.
Ages: Me mid-thirties; my wife mid-twenties.
Place: US city with a high cost of living and very high real estate prices.
Expected 2010 total gross income: ~$160K
- ~$50K in cash in checking/savings
- ~$35K cash in an emergency fund
- ~$120K equity in a home (we bought in '09 after the crash; prices are relatively stable here)
- ~$22K in 401(k) and Roth IRA accounts
- ~$20K resale value of a car we own outright
- ~$415K left to pay on 30-year fixed rate mortgage @ 5.125%
- ~$40K in private student loans from my MBA; variable rate, currently @2.25%
- ~$55K in federal student loans from my MBA; fixed rate @ 2.35%
- (Zero consumer debt)
Now that I feel we have enough cash saved in an emergency account, it's time to turn to other priorities. I can really feel the weight of those private student loans, and though the interest rate on them is low now, I'm concerned it could go up soon. Obviously we are way behind on retirement savings too, and we'd also love to save some cash for a planned new addition to our family sometime in the next couple years...
Just don't know which financial priority to place my focus on next. Is is smart to really focus on killing those private student loans? THANK YOU for any thoughts or advice you have!