Personal Investment & Financial Planning Q`s/Loan Repayment/Savings


I am a 1st year college student who has a $5,500 unsubsidized loan at a 3.86% interest rate.  I don't have my first payment due until 1/10/2017 (which is odd because I won't have finished college at that time).  In any case, I am wondering how I should handle this.  Between my parents and I along with scholarships, I don't have trouble paying the remaining school bill.  I will likely use this loan each year.

Through tutoring, I'm able to make a bit of extra money on the side.  This goes toward my loan repayment.  I just paid $1300 toward it.  My question there a better way?  With an interest rate of only 3.86%, is there some bond I could get into with an interest rate around 6 or 7% and eventually have enough in it so that the interest I receive is greater than the interest I owe each 6 months (or however often I get a bond payment)?

I don't have extensive finance background, I was simply thinking about it mathematically today and thinking that if I can be above the minimum payment by the time I have to start repaying, I could pay it off and still have the principal.  Just looking for your comments on if this is possible or wouldn't work.

Thanks for your time,


Hi Jason,

Your question is a good one. To first address the comment you made about your first loan payment being due on 1/10/17; when did you enroll in school and take out this loan? Depending on the type of loan, the first payment is often times not due until 6 months after your expected graduation date (i.e. 4 yrs and 6 months after you start). In any instance, back to your question; at a 3.9% rate on the loan, there is no easy way to instead invest money and expect to make more than this without taking on risk. With interest rates on the rise, I would not suggest simply taking $$ and putting into bonds funds as getting a 4% + return is of no guarantee. Of course, you could invest $$ in a diversified portfolio of stocks and bonds, however, you then run the risk of the market going down at the inoppotune time of you needing the $$ and you would then be forced to sell at a loss. Its a tough call, but if it were me, I would simply continue paying the loan off at a pace you feel comfortable doing so and you will then be happy with a reduced amount of debt you will need to pay off upon graduation. I hope this helps!

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John D Smith, CFP


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