txengineer
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Post by txengineer on Mar 26, 2011 20:33:11 GMT -5
Repay 7.9% Interest Rate Student Loan vs. Taxable Investing
Does anyone see reasons for not repaying the 7.9% interest rate student loan, and instead using the money for taxable investing?
FYI - I can't deduct student loan interest for tax purpose
Thanks for any input!
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formerexpat
Senior Member
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Post by formerexpat on Mar 26, 2011 20:37:44 GMT -5
nope - I'd pay the student loans down.
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schildi
Well-Known Member
3718 and no text
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Post by schildi on Mar 26, 2011 20:43:05 GMT -5
Yeah, me too!
Pay it off!
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SVT
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Post by SVT on Mar 26, 2011 21:05:15 GMT -5
It's not even close. Pay the student loans RIGHT AWAY.
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phil5185
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Post by phil5185 on Mar 26, 2011 21:32:26 GMT -5
Not much that you can do with 7.9% capital. My current limit is <6% - back when the Market was returning 17% or 18%/yr and mortgages cost 7.5% to 8%, I used 8% capital, that's all I could get. And it worked out well - the spread was 8% or 9%. And in my case the loans (rentals) were deductible.
What field of engineering? (I'm Mech). Fresh out? - job? - big/little student loan? A big part of investing is risk quantification, evaluation, and mitigation. Probable outcomes, rate of change, exponential growth. The rule of 72 - ie, your investment doubles when YI = 72. Eg, 8 yrs @ 9%. Derivation 2 = e^(YI).
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Gardening Grandma
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Post by Gardening Grandma on Mar 26, 2011 21:41:33 GMT -5
Does anyone see reasons for not repaying the 7.9% interest rate student loan, and instead using the money for taxable investing?
Unless you can get a guaranteed 7.9% return on your money, I'd pay off the student loan.
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txengineer
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Joined: Feb 3, 2011 17:14:01 GMT -5
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Post by txengineer on Mar 26, 2011 21:42:13 GMT -5
Thanks to everyone for the help. I'm thinking about paying the student loan, but wanted to see if there is any unconventional wisdom out there.
Phil, I'm an electrical engineer working for an oil company. I've been working for a few years. The student loan is for my MBA, and is quite significant. I'm trying to pay down as much as possible before the interest starts to capitalize (by end of year). The particular payment I'm basing my question on is about 20 - 30 k.
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❤ mollymouser ❤
Senior Associate
Sarcasm is my Superpower
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Post by ❤ mollymouser ❤ on Mar 26, 2011 22:29:11 GMT -5
I'd pay it down/off.
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azphx1972
Familiar Member
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Post by azphx1972 on Mar 28, 2011 0:07:25 GMT -5
I'm an ME too, and I'd pay off the loan tomorrow if I were in your shoes.
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Peace77
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Post by Peace77 on Mar 29, 2011 10:46:37 GMT -5
I'd pay it down/off too.
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thyme4change
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Post by thyme4change on Mar 29, 2011 10:50:30 GMT -5
Do you have enough other savings? Sometimes cash in the bank is worth it. But, yeah, at 7.9% it would be some kind of security thing - not a math problem.
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txengineer
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Post by txengineer on Mar 29, 2011 20:51:41 GMT -5
Do you have enough other savings? Sometimes cash in the bank is worth it. But, yeah, at 7.9% it would be some kind of security thing - not a math problem. Well, "enough" is up to individual interpretations. If talking about emergency fund, I have about 4 months living expenses in cash in the bank, and another month in short term bond which I consider back-up to my emergency fund. I also max Roth IRA and 401k. |
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