Got $30,000 Coming My Way. What’s the Best Way to Use It?

I posted here a while ago about handling my debt. I have $75,000 in student debt split across 9 loans. Yesterday, I started the double consolidation plan for my parent plus loans. My average interest rate is about 6.5%, with the highest being 7.35%.

I’m really lucky because my parents will make the first 4 years of my minimum payments while I focus on my career. My dad recently took a severance package, and he’s going to give me a lump sum of about $30K over the summer to help me.

I feel extremely fortunate that my family is willing and able to help me tackle this debt. I want to make the best choice with this money.

What do you think is the best way to go? I can’t afford the monthly payments with my current salary, so I’m thinking of moving back home and paying my parents half of what my rent would’ve been, plus groceries, to cover the payments.

I have two options:

  1. I was thinking if I put $25K towards the principal and keep the rest in a high-yield savings account, I could move back home for a year and cover the monthly payments while also contributing about $250 extra each month. After that, I could refinance for lower payments after hopefully getting a better-paying job. This would save me a lot in the long run and would reduce the debt significantly, maybe down to $20K or less. The only downside is that I would have to move back in my late 20s, which isn’t ideal, but it would help pay down the debt faster.

  2. Alternatively, I could use part of the $30K for the principal, but stay in my apartment. My dad’s lump sum would cover the monthly payments, and I would pitch in an extra $200-$250 a month from my income until the funds run out. This plan would make me pay more over time, but I would have more independence and feel secure knowing my payments are covered for about 3 years.

What do you all think?

The person who posted this has a money problem. They can’t afford their lifestyle right now. They should pay the full $30K towards their student loans and move back home. Option 2 is just prolonging the lifestyle they can’t afford because they’re relying on their dad’s money. They mention that Option 2 gives them more independence, but they’re still being financed by their parents.

They should move back home, pay as much as possible on the loans, and yes, contribute some rent to their parents. But that rent should come from their income, not the $30K gift from their parents. They need to live minimally to make it work.

If they want to move out of home in the future, they’ll have to raise their income, so maybe use this situation to push themselves to find a job that pays at least 1.3x what they make now.

It will hurt at first, but they will feel so much better later.

@Eren
Hearing from people here has really confirmed that the way I was thinking was right. I’ll have to move back home. It sucks because I already have the cheapest apartment I could find, and my current job was the only one I could even get an interview for out of over 100 applications. My ‘lifestyle’ is already minimal. I eat out maybe once or twice a month, barely use the heat, and only bought the cheapest furniture when I first moved in. I just can’t afford rent or the gas to get to work. Moving back home will save me a lot since I won’t have to pay rent.

@Parker
I totally get it. I was in the same boat a few years ago. Moving back with your parents feels like you’ve failed.

But looking back, you’ll appreciate having a place to get back on your feet. Someone here did the math and realized that just saving on interest could save you $20K, not even counting the rent savings.

My last piece of advice: since you’re going to save so much, pick up a cheap hobby or sport that doesn’t involve screens or alcohol (no video games). It will help you stay happy while saving, and it’ll be good for your mental health. You’ll be more focused on paying down the loan faster.

Option 1 will set you up way better to pay off your loans, learn from this mistake, and not find yourself in the same situation again. It’s easy to waste a lucky break, so take the pain now while you’re young and set yourself up for a much better future.

I would 100% put all the money straight into the loans, move home, save money, and move out again later.

Assets = Liabilities + Equity. By reducing your liabilities (the debt and rent), you’ll be in a better position financially.

I ran some numbers: with $75K in loans at 7% interest over 10 years, your monthly payment would be around $870. If you keep the $30K payment, you would pay off your loans 5 years earlier and save $20,538 in interest. Your loan would be paid off by March 2030, with just $8,959 in interest left.

Plus, living at home will save you money. It’s easier to stay out of trouble with partying and other things that could rack up your costs.

https://www.calculator.net/amortization-calculator.html?cloanamount=75%2C000&cloanterm=10&cloantermmonth=0&cinterestrate=7&caddoptional=1&cstartmonth=1&cstartyear=2025&cexma=0&cexmsm=1&cexmsy=2025&cexya=0&cexysm=4&cexysy=2025&cexoa=30%2C000&cexosm=1&cexosy=2025&caot=0&xa1=0&xm1=1&xy1=2025&xa2=0&xm2=1&xy2=2025&xa3=0&xm3=1&xy3=2025&xa4=0&xm4=1&xy4=2025&xa5=0&xm5=1&xy5=2025&xa6=0&xm6=1&xy6=2025&xa7=0&xm7=1&xy7=2025&xa8=0&xm8=1&xy8=2025&xa9=0&xm9=1&xy9=2025&xa10=0&xm10=1&xy10=2025&printit=0&x=Calculate#calresult

@Kit
Also, your credit score should improve as your debt falls significantly.

Clarke said:

Respectfully, don’t give tax advice if you’re not qualified. Neither the person who posted this nor their parents would have to pay taxes unless they’ve given millions in gifts. Even if they did, the person giving the gift would be the one to pay the tax.

Clarke said:

The financial advisor will help sort this out. Although there is gift tax, I don’t think the person who posted this has received anywhere near $13.61 million in lifetime gifts. They would only need to report it if it exceeds $18,000, and they probably wouldn’t end up paying any taxes.

Clarke said:

No, the reporting limit is $18,000, but you don’t get taxed until you go over millions. Here’s a good overview:

The annual gift tax limit is $18,000. It’s $36,000 for married couples. Exceeding the limit doesn’t mean you pay taxes, just that you need to report it to the IRS. The lifetime gift limit is $13.61 million, so unless the gift is huge, there won’t be any taxes owed.

Clarke said:

Rule 7: forum rules / illegal / off-topic

Clarke said:

Thanks, that’s good to know. My parents have a meeting with a financial advisor in two weeks, but until then, we’re not sure how best to manage this big sum of money.