Payoff student loan or use it as deductable?

My husband and I have around 30K student loan, interest is about 8%.


Right now we are paying monthly payment, sometimes pays extra in the good days, and hoping to pay it off sometime in the next 5-6 years.


But another hand, because student loan could be one of the income tax deductible, so we are not sure if we should keep the student loan as long as it takes and just pay minimum each month.


Which way actually save us money?


Use student loan as deductible each years or pay it off as soon as we can?

Payoff student loan or use it as deductable?
Generally I wouldn't hold off paying ANY debt just for a tax deduction. In actual refund dollars, a deduction ends up being the amount you pay times your marginal tax rate.





So for example, if you paid $1,000 in student loan interest for 2007 and you are in the 25% tax bracket, you're "netting" a payment of $750 [1000 - (1000 x 25%)]. In other words, the deduction only gets you back 25% of what you paid.





Personally, I'd rather just be done with the debt altogether and pay it off ASAP.
Reply:Since you can deduct the interest and it comes directly from your highest tax rate, you can make the calculation like this.


I will assume a 25% tax bracket.


8% x (1-.25) = 6%


So if your interest is fully deductible then you are paying 6%. Not bad but not great either.


FYI, my wife has about 36k in student loans at a 2.75% interest rate. You should check on a consolidation loan at a lower rate.
Reply:You never want to pay interest just to get a tax deduction.





Pay it off as soon as possible.

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