Is it better for a new grad to pay off loan debt or invest with their money?
Posted in Investing on 03/03/2010 09:59 pm by
johnlert22 asked:
I just finished grad school and I’m in debt about $80,000. I make about $65,000 per year. I got a letter from my loan company saying that in 2005, I paid $1700 just in interest. Seems like so much. I was wondering what is better long term: reduced loan debt or investing and taking the tax deduction from student loan interest?
I think my interest rate on
Stafford loan is about 2.5% and private loan at Great Lakes is 6%. I never got around to refinancing but I think I will now
Frances
I just finished grad school and I’m in debt about $80,000. I make about $65,000 per year. I got a letter from my loan company saying that in 2005, I paid $1700 just in interest. Seems like so much. I was wondering what is better long term: reduced loan debt or investing and taking the tax deduction from student loan interest?
I think my interest rate on
Stafford loan is about 2.5% and private loan at Great Lakes is 6%. I never got around to refinancing but I think I will now
Frances
03/04/2010 at 10:19 pm
Maurice
I think your best option is to refinance the debt to a lower interest rate. And invest with the bulk of your money.
03/08/2010 at 6:09 am
Hazel
if the interest is low, you’ll end up paying more if you pay your loan, and then put your purchases on a high interest credit card.
if the interest is high, pay it off as soon as you can.
I’m pretty sure, with school loans, the interest for the term is charged regardless of how long it takes you to pay the loan.
03/09/2010 at 7:21 am
Ruby
I would say that it is best to d a little of both actually. However the intrest on those loans is going to kill you if you don’t get them paid off. Keep in mind that you were not living on $65,000 a year before you graduated, and you can spare some extra to pay off loans and make a few investments in stocks and bonds that intrest you (find a good broker). I wish you luck, and if you find yourself a rich rich person in the near future please remember me, my name is Kelly and I want my PhD, lol.
03/09/2010 at 9:11 am
Jacob
Definately pay off your loan. However with that said, you should not deplete all of your cash either. ex: your loans = $60,000. You have in savings $25,000. Take 1/2 and put towards your debt, take the rest and put at least 3 months salary in an emergency savings, take remainder and put towards anyother debt you may carry. You really do need to establish a budget. Good luck and God bless
03/09/2010 at 9:07 pm
Audrey
Anything that has to do with your paying interest, pay those school loans off. If you have credit card debt which has a higher interest rate, pay off which ever has the higher interest rate first. Then after you are “debt free”…start socking away your money in divisified investments and savings. Here is a web site you may enjoy: It has a ton of info on a ton of different topics having to do with finances and personal consumers. Congrats on your new degree and fine job!
03/10/2010 at 5:53 am
Lisa
Whoa! Think twice about paying off the loans. You are never going to get money at Stafford subsidized rates again. The other loan is at a decent rate although higher than the Stafford rate..
1) Make the full contribution to your Roth IRA for 2005 and 2006. Do it now before you file your 2005 Tax return.
2) Are you planning on buying a home? It a terrific investment, but to get a decent rate you should have 10-20% to put down. Save that before paying off the low rate loans.
3) Do you have a high-interest car note? Pay that off before the student loans.
4) Do you have health insurance? NO? Get some.
5) Do you have a wife and kids? Yes, get term life insurance.
6) Finally, start paying more on your student loans than the minimum amount if you have some money left over from steps 1-5. It will still take years to pay off, but you leave your options open.
03/12/2010 at 11:17 pm
Franklin
I suggest you to get a credit card with 0% “Introductory Rate for the First Year” and take all the money and use it to pay your loan
03/14/2010 at 3:34 am
Melanie
It depends on how risk-tasking you are. To be safe, you should pay off the loan first because it is hard to guarantee your investment make the money for you. Also, remember your investment incomes are pre-tax money. The after-tax income may be lower than the interest that you need to pay for the loan.