Is it smart to pay off your student loans early?
Yes, paying off your student loans early is a good idea. Paying off your private or federal loans early can help you save thousands over the length of your loan since you’ll be paying less interest. If you do have high-interest debt, you can make your money work harder for you by refinancing your student loans.
Can I invest if I have student loans?
Investing student loan money is not illegal. Borrowers of government-subsidized loans could face legal action if they invest the money, which may include repaying subsidized interest. Private student loans have fewer restrictions and students likely won’t face any recourse for investing that money.
Should I drain my savings to pay off student loans?
It’s best to avoid using savings to pay off debt. Depleting savings puts you at risk for going back into debt if you need to use credit cards or loans to cover bills during a period of unexpected unemployment or a medical emergency.
What should I pay first subsidized or unsubsidized?
If you have a mix of both unsubsidized loans and subsidized loans, you’ll want to focus on paying off the unsubsidized loans with the highest interest rates first, and then the subsidized loans with high-interest rates next. Once these are paid off, move on to unsubsidized loans with lower interest rates.
Should I pay off debt first or save?
Our recommendation is to prioritize paying down significant debt while making small contributions to your savings. Once you’ve paid off your debt, you can then more aggressively build your savings by contributing the full amount you were previously paying each month toward debt.
Should you invest while paying off student loans?
As the rate on your student debt converges with your expected investment return, the value of investing while you take longer to pay off your loans diminishes. Still, as long as your expected investment rate of return exceeds the interest on your loans, you should start investing, right? Again, not necessarily. Risk-driven versus risk-free returns.
Should you pay off student loans or buy a house first?
Personal finance isn’t always about numbers; it can also be very emotional. If your student loans cause you significant stress or hold you back from lifestyle goals like owning a home, it may be worth paying off your loans first just to get some peace of mind.
Is it better to invest or pay off federal loans?
Federal loans generally have lower interest rates than private loans and come with more benefits, like income-driven repayment options. If you have only federal loans, investing rather than paying them off likely makes more sense.
Should you refinance your private student loans?
If you have private student loans, you have less to lose by prioritizing their repayment — and potentially more to gain by refinancing. Student loan refinancing can decrease your interest rates, letting you pay loans off faster and free up money for other financial goals, like saving or investing.