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Paying off school loans vs Investing
Posted on 6/18/13 at 3:23 pm
Posted on 6/18/13 at 3:23 pm
I recently bought a house and plan on living in it for 7-8 years before I want to build my forever house. Question is do I work on paying off all school loans in the meantime, or take that money and invest it so I will have more money to put down on loan/construction loan?
9
Posted on 6/18/13 at 3:28 pm to tdavi48
My student loans are at 6.8%. That's more money than I can reliably make in the market, therefore I put all my extra money toward my loans.
Posted on 6/18/13 at 3:32 pm to tdavi48
CAn you make more than the interest on the loan is? if yes, invest, if not, don't.
Posted on 6/18/13 at 3:41 pm to tdavi48
How much in loans we talking? Because that can change this exercise.
Posted on 6/18/13 at 3:50 pm to tdavi48
Eh. Just pay it off.
Posted on 6/18/13 at 4:00 pm to Teddy Ruxpin
About 50k, I think around 4.5%
Posted on 6/18/13 at 4:49 pm to jimbeam
quote:
CAn you make more than the interest on the loan is? if yes, invest, if not, don't.
And don't forget to subtract capital gains taxes when figuring your return. Or income tax if you sell before a year.
Posted on 6/18/13 at 5:06 pm to tdavi48
I like the idea of compounding interest, i say invest pretax and when you sell pay off the rest of your debt.
Unless you plan on buying 50k worth of furniture or a 40k car on a credit card. Then my advice is pay off debt.
Know thy self
Unless you plan on buying 50k worth of furniture or a 40k car on a credit card. Then my advice is pay off debt.
Know thy self
Posted on 6/18/13 at 5:07 pm to ItNeverRains
My vote is pay off those loans.
Posted on 6/18/13 at 5:36 pm to jimbeam
quote:
CAn you make more than the interest on the loan is? if yes, invest, if not, don't.
Not in this case. Student loans aren't like a mortgage. He's not going to, in the short term, reliably make enough in the market after taxes to offset the interest rate.
Invest pre-tax dollars, get the damn things paid off, then invest towards the dream home would be my advice.
Posted on 6/18/13 at 6:49 pm to DontTazeMeBro
Ya, I vote pay them off too.
If he had a ridiculous amount of debt then we get into the whole IBR and 25 year forgiveness territory and talk about the income tax bomb, etc.
I might offer up my finances to the Money Board one day on that subject as I find it to be financially interesting and a clusterfrick personally.
If he had a ridiculous amount of debt then we get into the whole IBR and 25 year forgiveness territory and talk about the income tax bomb, etc.
I might offer up my finances to the Money Board one day on that subject as I find it to be financially interesting and a clusterfrick personally.
Posted on 6/18/13 at 8:16 pm to GaryMyMan
quote:
My student loans are at 6.8%. That's more money than I can reliably make in the market, therefore I put all my extra money toward my loans.
Same here. I still pay a meesly $300 per month to my 401k, but I am paying those loans off ASAP.
Posted on 6/18/13 at 10:57 pm to tdavi48
If you get employer matches on stock plans or a 401 that would probably be better, but a guaranteed 6.8% post-tax return is pretty nice these days.
Posted on 6/18/13 at 11:55 pm to tdavi48
quote:
I recently bought a house and plan on living in it for 7-8 years before I want to build my forever house. Question is do I work on paying off all school loans in the meantime, or take that money and invest it so I will have more money to put down on loan/construction loan?
The reason I say to pay off student loans is they are non-dischargeable, so they will continue to haunt you should something unfortunate happen.
Posted on 6/19/13 at 5:07 am to DJ Smudge
quote:
The reason I say to pay off student loans is they are non-dischargeable, so they will continue to haunt you should something unfortunate happen.
That's my feeling as well. Student loans and IRS debts are about the only things that cannot be forgiven in a shite hits the fan situation. Student loans are a HUGE problem in this country, the Government needs to stop insuring these fricking things.
Let the flaming begin
Posted on 6/19/13 at 7:54 am to Vols&Shaft83
quote:
Student loans are a HUGE problem in this country, the Government needs to stop insuring these fricking things.
Interesting concept. Free market would dictate interest rate. I'm sure banks would give engineering majors and students in med school low interest rates, while the liberal arts majors would have higher interest rates. Banks could also do a variable rate based on GPA.
Posted on 6/19/13 at 8:08 am to Ric Flair
Student Loans blow arse. They usually do simple daily interest so it fricking accrues interest everyday. With a big balance, it really sucks, you end of paying alot more towards interest than principal if you can only pay the minimum payment each month. Best is to pay it all off as fast as you can.
This post was edited on 6/19/13 at 8:10 am
Posted on 6/19/13 at 8:36 am to AUtigerNOLA
quote:
They usually do simple daily interest so it fricking accrues interest everyday
Yeah, it's depressing to look at. Wife has a large amount from PT school and the interest comes out to $18 a day. A day!!
Posted on 6/19/13 at 8:50 am to CQQ
quote:
the interest comes out to $18 a day. A day!!
So sorry man. I feel ya.
It is depressing. Posted on 6/19/13 at 11:24 am to Ric Flair
quote:
Interesting concept. Free market would dictate interest rate. I'm sure banks would give engineering majors and students in med school low interest rates, while the liberal arts majors would have higher interest rates. Banks could also do a variable rate based on GPA.
They could also choose to not issue a loan at all if they don't feel the borrower is credit worthy.
"BUT SHAFT, fewer students will get loans and won't be able to afford an education."
If they really want the education, they'll find another way. My grandma used to say if you need money to get something you want, there's a great place to go: TO WORK!!!
Besides, there are too many people in college that don't belong there anyway. Not everyone is meant to go to college, and fricking trade school is an affordable option for just about anyone.
Let the flaming begin
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