Med stud.- is it better to pay interest on school loans while in school or invest that money?

Question

I am a med student, whose wife works. We don't have enough to pay for school, but are tyring to pay the interest on the un-sub. gov. loans. Would it be better to invest this money, we are getting ready to open a ROTH IRA and roll over previous 401k(s).

Answer 1

Normally I would say pay off the loan first. Right now I think it depends on the interest rate. If your loan is at an interest rate of 5% or less, and is fixed, I would suggest paying off the minimum for a while. The reason is - interest rates have been moving up lately, and you are locked in at a great interest rate. If you were to pay off your loans, but need to take out a loan to buy a house, the interest rate on that money would be at above 6% now, and moving up.

As for the ROTH IRA, definately invest in that right now. Once you graduate, you will definately be making too much to invest in this in the future.

The real key is to live well below your means right now. The rest of it all depends on what your future plans are. If you are looking to buy a house in the future, start building up a nest egg for that (invest in a few short term CDs if you have enough savings).

Answer 2

I think investing would be best - the roth IRA, held the minimum required time, will be tax free and the interest on the loan will be tax deductable.

Answer 3

I think you should pay the student interest back as soon as possible because that will be one last thing that your credit needs to worry about.

Answer 4

Since you're in school, you can apply to have your student loans deferred. During deferral, you don't have to make payments and no interest accrues. Contact your lender.

Answer 5

don't invest money that's not yours, don't just pay interest, you'll be in debt forever