I have 150,000 in low interest student loans (4%). I don't have any other debt. I have nothing saved for retirement. Just finished school and am now earning 130K which becomes 86K after taxes. My cost of living is low -I spend a total of 3000 in living expenses a month (includes mortgage).
How much should I pay towards my loan versus saving it? I think I can invest the money and earn more interest, but I feel funny about not paying off debt.
I'm single in my early thirties, so one day I'll have kids (hopefully) and will need to start saving for their college too!
2007-02-16 10:37:12 · 5 answers · asked by violetkites 3 in Business & Finance ➔ Personal Finance
As others have said, don't be in a rush to pay off your student loan.
Save your money and invest it. Remember if you pay off most of your student loans and you lose your job, you can't call up the student loan company and ask for money to cover your mortgage or living expense.
However, if you saved your money and you lose your job, the money is there ready for you to be used. The student loans can be deferred until you start working again.
Good luck,
El
2007-02-16 11:38:32 · answer #1 · answered by El_Nimo 3 · 0⤊ 0⤋
I agree with everyone. Don't pay off your student loans right away. The rates are so low and besides, the interest you pay on it is tax deductible.
I'd recommend investing it in mutual funds or real estate. If having a rental property might be too much for you, try buying some long term real estate, like 2.5 acres piece of vacant land or more. Good luck!
2007-02-16 19:38:41 · answer #2 · answered by Oliver 3 · 1⤊ 0⤋
A significant amount of the interest on a student loan is tax-deductible.
A 4% student loan is cheap money. There's no need to pay if off quickly. And starting a retirement account early is probably one of the smartest investment moves you can make.
Just my opinion; I'm no expert.
2007-02-16 10:51:46 · answer #3 · answered by Anonymous · 1⤊ 0⤋
4% is a very low rate. Don't be in any hurry to pay those loans off. In fact, take as long as possible.
Just taking the extra money and investing it in bank CDs will get you over 5%. Other investments may yield much more, but do involve some risk of losing some of your principal.
2007-02-16 10:53:40 · answer #4 · answered by Uncle Pennybags 7 · 1⤊ 0⤋
if you are good at investing, get 12% and pay the interest on the student loans, just make sure you tell Sallie Mae what you are doing. They are happy if you are paying them interest.
2007-02-16 10:43:00 · answer #5 · answered by agropelter 3 · 0⤊ 0⤋