Post: #1

Given the lack of a stable investing environment and the possibility of hanging debt over your heard moving into the future due to economic uncertainty, do you guys recommend aggressive repayment of large (6 figure) student loans if you can do it fairly quickly?

I used to think that given 30 year terms with low interest rate (I'm a bit luckier than most in my consolidation not being too recent) that riding it out long term might be smarter. Then I started to see how paying off even 3-5% loans was essentially it's own investment, in a sense, since it's so hard to get that investing on any open market without substantial risk.

Thoughts?

I'm not a conservative guy, but I think a big market shakedown is coming within a year or two.

Post: #2

I've carried around the exact same question in my head the whole day as well. Hope you don't mind me joining in with my situation. Can't offer you guidance yet as I'm having similar questions.

My only debt is a student loan at 0,6% interest. I don't have a fat salary after graduating, but with aggressive monthly paydowns on the student loan I'll be debt free in 24 months. With that route I'll be putting 42% of my monthly paycheck towards the loan while saving 10% monthly and having a little money over for fun. Have some savings invested in index funds and Mid Cap stocks (dollar cost averaging into the market monthly).

Question is, with the current negative rates around the world, it's not expensive holding a student loan in my part of the world right now. That is of course liable to quick change should the shit hit the fan, and we've been living on the edge market wise for a few years now (from my limited perspective at least, most market fundamentals are out of whack).

Is it worth being this aggressive paying down student loan one year out of college? From a psychological standpoint it will be awesome to be debt free, as student loan is nothing but a shackle. It will be 2 lean years, but I think I have the guts for it. It will be a heck of a learning experience.

Post: #3

My advice is pay the debt off as soon as possible, but prioritize saving a decent emergency fund first so you're not immediately screwed if you lose your job. You have no idea what the future holds, and if there's anything I've learned in the last few years of getting assfucked by the bad economy, it's that even wise decisions sometimes result in a fucking train wreck through no fault of your own.

Lots of traditional financial advice is built on the foundation that the future is more or less predictable. There will be ups and downs, but things will generally stay pretty good. Point 1: that is incredibly foolish because they are basing such ideas off a mere two generations of experience, and point 2: the way the world is going you're a lot better off planning for instability right now than just hoping things will continue more or less the way they have for the last 50 years.

Just my opinion. I would give a great deal to be debt free right now, and as soon as I figure out how to convince someone that I have a clue and they should give me big piles of money again that's priority #1.

Post: #4

This is a rather simple process to follow: 1)What is the rate on your debt? Blended or otherwise?

2)What is the rate(explicit or implicit) on your investments, average or otherwise?

3)Is 1 > or < than 2? If 1 > 2, pay off debt. Reverse if the opposite.

If you don't know what to do, the default is always pay off debt 1st.

Post: #5

If it were me, I'd pay off the debt as soon as possible unless I could get a guaranteed return rate with a higher interest rate than the interest on my loans.

Savings accounts (FDIC insured) seem to be peaking out around 0.75% or so.

Save enough to cover 2-3 months of emergency expenses first

Post: #6

I'm in the same boat. I was thinking the same thing about student loans.

What if the next president has a program to forgive student loans? What if you get a job that helps pay off your student loans?

For those two reasons I'm going to keep my money in my savings account and use it to come up on another venture in the future to make some money.

Post: #7

If your interest rate is fixed and on the order of 2.5% or less, inflation is working in your favor. You basically have an (almost) free loan. Hence, if you can find a more productive investment, sit on your loans and use the money wisely.

Buy assets, things that will make you money in the long run. Don't spend on more liabilities (things that will require more outflows than inflows, like cars and their depreciation and maintenance). Don't sit on the spare cash, and certainly don't sit on your loans and plow all of the money into an unnecessarily higher standard of living.

Post: #8

I graduated school at the age of 25 with about $15K in debt (school, car and credit card) and as soon as I started working, I lived like a monk and threw all of my spare money on the debt and paid it off in no time (<one year). Today, the only debt I have is my mortgage but I also realize that this is detrimental in today's age where my low variable interest rate on my mortgage (2.15%) barely beats inflation and my money would be better invested elsewhere. Honestly, I'm pretty ignorant when it comes to investing and am a bit risk adverse so continue to dump my money on my mortgage.

Post: #9

It's easy and popular to say "pay off all your debts as fast as you can" like those personal finance gurus spout.. But it's simply not a good idea at 0.6% interest. That's below inflation. You're being paid to hold that debt.

Just worry about your net worth. If you have $10,000 debt but $50,000 assets, it's no different to $40,000 assets.