Cash out I-Bonds to pay SL's? Life story update, lol

[jlt19]

Is anyone thinking of doing this or cashing out and just putting it in a regular savings? 

I'm trying to figure out how to best pay for my SL's that will start in September. I have about $33,000 at 6%. I have it all in I-Bonds ($20k in each of mine and DH's names) b/c the rates were high and I was hoping for some forgiveness. Refinancing doesn't seem to be a good option and while I could pay the monthly payment OOP, it seems kind of counterintuitive when I just looked and I'm getting 3.38% interest, based on when I purchased them.

I don't work in a public sector and I haven't looked at Biden's new plan. I do make six figures and don't want to put any hope in it anyway. 

[plutosmoon]

Personally, I'd cash out, just pay the loans off and be done, assuming you have other emergency fund savings. I'm debt averse and made some questionable decisions to pay of my student loans quickly, so others may have better answers. I'm not sure how long you have already been paying, but with SAVE (new repayment plan), it's 20-25 years of payments to forgiveness at your loan amounts, and since it is income based repayment with a higher income you may end up paying the loan off before forgiveness kicks in. NASFAA (professional org for financial aid professionals, I work in student aid) just sent me an email about final rules on SAVE, so I've been looking it over. I think this is about as good as we will get on the forgiveness front for a while, based on what I'm hearing in my professional circle.

[wildrice]

If you don't need the money for something else, I think I might just do that. I HATE paying student loan interest and I'm pissed about the whole thing so I think paying them off ASAP and being done with it sounds great. If you don't want to actually spend 33k right now, I guess another option would be cashing in one of the iBonds and paying just 20k or paying half or whatever.

My H owes almost 90k and we do not have that sitting in savings, so I am dreading the interest that is going to start accruing again soon.

[Susie]

How long ago did you buy the I bonds?  If it was within the last year, you can't cash them in yet.  If it was within the last 1-5 years, you can cash them in, but you'll lose the last 3 months of interest.  How do those rules impact you?

I have a bunch of SLs at about 4.24% and 4.32%, and I've been really torn on what to do with them.  They are private, so forgiveness isn't on the table.  However, the rate is similar to what I'm earning on a savings account (4.25% at Lending Club).  Holding the money for flexibility and keeping the loans on the books is kind of a wash.  I'm just tired of having them in my life and my monthly budget.

[sadlebred]

As long as you don't need the money for anything, I'd cash them out and get rid of the SLs forever.

[Roc A Bee]

Is that money part of your efund? If it’s just extra, yeah I’d pay them off.

[bee20]

Yes, I paid mine off early, guaranteed 6(.8 in my case)% return. I am leaving my I-bonds in, I don't have a ton of money in them so I figure I'll see what interest rates do for another year.

[jlt19]

It’s been over a year for the bonds, so while I’ll still lose the 3 months, I can cash them out.

We have different types of savings for SL’s, e-fund, and general savings. Retirement is all separate

Rough estimates:
$40k in I-Bonds
$40k in 360
$35k in brokerage
$15k in HSA

Few extenuating circumstances:
1. DH lost his job in January, unemployment was crap, he started working again May 1 for roughly 50% less salary. His spending habits never changed…

2. DD had unexpected medical expenses that will cost us nearly $10k, but we’re still going through insurance stuff and on a sustainable interest free payment plan. Not sure if I should use HSA for this, as I did hope for that to be a retirement vehicle.

3. Due to said medical situation, we have spent a LOT more this summer than usual on a variety of things. This will soon catch up with us (few 0% cc’s- I will NOT pay interest) and take a large amount from the 360 savings. But DH is also finally getting commission but I don’t know how that works or how stable that will be.

4. I’m not sure how much longer I will be married. Lots of backstory there (searchable) and I was nearing the end until DD’s mental health situation pushed it way on the back burner. But I’ll be fucking damned if I’m stuck with only HALF of those I-Bonds that were actually purchased with MY old employers college reimbursement and lawsuit settlement. Only in his name because of limits. Plus, I’d be 100% liable for the loans. Not to mention I make 2x what he does now.

I was going to talk to our FA about this all, but he’s also a friend and I’m not ready to talk about #4 with him, even though I know he would 100% understand my concerns due to another fucked up thing DH did in his presence. Still, not to that point.

Would I be a total asshole if I at least cashed his $20k out and paid 2/3 of it off and then waited to see what the SAVE program looks like once it’s implemented? I feel like I just kind of talked myself into that option, lol

[gretchenindisguise]

How long have you been paying your student loans?

[Poppy]

I am not a lawyer, but yeah I think you should pay them off, given #4. I don't know if it will matter whose name the I Bonds are in if assets are split since they are marital assets.

But I would expect (again, not a lawyer and I'm sure it depends on your state's laws) that the loans would stay with you and the I Bonds would be split.

[plutosmoon]

In light of number 4, pay them off completely, use his ibond money first and then yours. Depending on state laws, any remaining ibond money could still be split regardless of whose name is on the account, it might be protected depending on the nature of the lawsuit settlement, please consult a lawyer, not the FA. The lawyer can tell you what could be split and what you may be able to protect. You may be able to use the ibond for your lawyer fees, and keep in mind as the higher earner some states may require you to pay his lawyer fees as well.

I'd also pay off the medical debt using the HSA once all the insurance shakes out, as the higher earner in my divorce I'm responsible for 100% of DD's medical, activities, and health insurance, and receive a laughable amount of child support, even with 100% full physical custody. You might get stuck with all the medical debt and only half the HSA. Also, if you have a house you want to stay in not having the student loans will help when buying him out and refinancing, especially if you end up paying alimony and/or child support. I read some of your post history on this, a lawyer is definitely in order to see if his actions disqualify him from receiving alimony. Divorce sucks and is going to put you back financially, but a good family law lawyer can advise you on your state's laws should you decide to move forward.

[shortstax]

Seeing #4, I'd cash them out and pay them off too.

Best of luck in the coming months!

[steamboat185]

With the update I’d pay them off.

[bee20]

I was going to ask whose loans they were but figured you didn't ask with that framing. I think in this case then I'd cash out all the ibonds and move them to HYSA, and then pay off the loans from there. It is the best thing for the interest rate but also don't get stuck with your money in his name.

[tacokick]

100% cash them out and pay off those loans!!

[ohgillian]

Yep, esp with the additional info you provided. Do it.

[pierogigirl]

I'd also cash out the bonds and pay the student loan. My local bank has a cd paying more than the interest you're getting on the bond. I'd put the rest in a high interest account.

[Roc A Bee]

With the update I’d 100% pay them off.

[jlt19]

Jul 15, 2023 9:47:21 GMT -5 gretchenindisguise said:

How long have you been paying your student loans?

I’ve honestly never paid a set amount. While in grad school I paid here and there but I graduated in May 2020, so they’ve basically been in forbearance since.

Thanks to all the replies. I was hoping to get the same advice without adding in #4 because it’s weird/scary to make these big decisions based on that I guess? But I knew that’s probably what’s best.

And we’re in a no fault state so, doesn’t matter what he’s done. His health insurance is WAY better than mine but it only kicked in on June 1, so that’s why it’s all a mess right now. His birthday is earlier so he should be primary as of that date. Hopefully regardless they can be carried on his even if I have to pay the extra monthly premium. A visit to her psychiatrist on mine is over $200 after insurance “deals” but it’s a $25 copay on his!
I didn’t consider having to split the HSA though (not sure why) so thanks for the advice to use that now!

Guess I should also think about my 401k contributions too. I contribute 17% with a work match of 10%. He can’t contribute anything for a full year at his job. Maybe I should lower mine for a bit? ugh. I can’t even get myself to make doctor appointments I need, I’m such a procrastinator. I don’t know how I’ll ever find/call a lawyer. Probably also while I’m still married…

[sadlebred]

For the attorney, ask your friends, your attorney friends, and friends that have gotten divorced. If you have an attorney for something else ask them!

[gretchenindisguise]

Jul 16, 2023 20:42:48 GMT -5 jlt19 said:

Jul 15, 2023 9:47:21 GMT -5 gretchenindisguise said:

How long have you been paying your student loans?

I’ve honestly never paid a set amount. While in grad school I paid here and there but I graduated in May 2020, so they’ve basically been in forbearance since.

Since they are that new, absolutely just pay them. If you had been paying on them 20+ years and with the idr adjustment could see them forgiven soon, it may have made sense to pursue that route. But with them being new, them being relatively low and a guess that your income is far north of the balance - just paying them off is the best choice.

[wildrice]

I think I'd just pay them off now, with your update. Or at the very least, get the 20k out of your H's name and pay all of that towards them. It sounds like you're ok financially otherwise, though I guess I'd also consider how much a lawyer will cost and whether you'll easily be able to absorb whatever extra living expenses come with living alone (though it sounds like he doesn't contribute much financially anyway, so maybe you won't need anything extra) and make sure to keep enough "cash" on hand to cover those. If you do just pay off the 20k, you could probably refinance the rest for a slightly lower interest rate.

I'm sorry you are at this point with #4, but also proud of you. He doesn't deserve you.