Student Loan Debt vs Investments

You would be insane to continue to pay on student loans right now. Invest and wait for it to be forgiven

My loan bill is about $250 per month. Haven’t made a single payment since last March

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Why would you leave political considerations out of this when that may very well determine the best decision to make?

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If you are referring to potential forgiveness, I would not consider that political considerations.

I'm taking about, "damn socialists want everything for free" type discussions.

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I think taking the money and investing it is a solid strategy and if the investments beat the student loan interest rate it’s a win.

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This is the right answer, but you can't fault someone that just wants to go ahead and get the debt paid off. That really is worth its weight in gold for that relief for some people.

I think if you got plenty of money, waiting and using that money in the stock instead would be the best answer. If money is tight, reduce your debt.

I don't think you have to worry about this thread going off the rails and devolving into political bickering...seems most folks are here to make money and leave that crap for the political board.

Amen!

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Does the fact that when the interest calculation turns back on, it's on now a lower balance, become a part of this decision?

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If this was a concern for the person then they could theoretically continue to invest until the interest is turned back on. When the interest is turned back on they could pull all of the investments and make a lump sum payment. If the investments gained value then this was the better approach. I say theoretically because investing for a short time period (<3-5 years) is still pretty risky and the investments might have actually lost money. During this paused period, it doesn't matter if they pay monthly or lump sum at the end it will yield the same result going forward.

The math checks out that as long as your returns are greater than the loan interest rate then it was beneficial to invest versus pay down (during the pause) or pay extra (ignoring any potential tax implications).

This question is the same concept as paying off the mortgage early. The only difference is the mortgage probably has a lower rate but has a lower probability of being forgiven. I personally think that if student loans are forgiven the actual implementation will be very watered down compared to campaign promises (lower forgiven amount, income limits, etc.)

All of this is predicated on future returns which no one knows. If the future follows a similar path to the past then the math supports investing. The important thing to remember is that this scenario is generally part of a bigger picture that is all part of an individuals personal finances. Personal finances involve more than math. The personal value someone puts on being debt free is different for each person and isn't easily calculated.

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If you are referring to potential forgiveness, I would not consider that political considerations.

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then why would you even consider making a payment on a loan that might get cancelled?

I would put some of those payments into a liquid account in case I need next year to pay taxes on the loan that was forgiven.

My monthly payment was about $280/month. I paid around $300/month. This was for roughly $26,000 in student loans.

When the payments became deferred, I was about 5 years into the standard 10 year repayment plan.

I immediately called and got the payments restored as I wanted to make sure that my principal would go down.

Then I chanced into a large sum of money from a death in the family. I was hesitant at first to pay of the student loans entirely with this amount of money given there was alot of discussion at the time that loans would be forgiven.

However, I then realized that I would probably be over-income for any student loan forgiveness and instead decided to pay of the remaining 13K in principal that I owned.

I then took that money I would have been paying on student loans and started building up an even bigger emergency savings fund. After about a year, I will transition that saved monies (plus other loans I paid off) to retirement.

The rule of thumb I go by is I invest money if I don’t need it for the next 5 or so years. Given the volatility of the market anything less than a 5 year investment has a higher risk of yielding a negative return. I know this argument is weak when looking at the past few years but go look at annual historical s&p returns and you will see some periods which lost money. But as they say no risk no reward