Student loan interest rate is lower than risk free rate
My 2 private loans from the past 2 years are at an interest rate of 2.8% and 3.5% which is very low.
Very low-risk investments such as High Yield Savings Accounts, and Treasurys offer a higher rate of return than my interest rates. Corporate bonds which are obviously more risky, can offer an even fatter spread between the two.
Should I even make the payments directly to the loans? Why wouldn't I just invest in the very low-risk bonds or savings accounts and pay it off in the end?
The advantages to this would be more liquidity and a reduced net payment on the balance of the loans. The only disadvantage I see is the risk of the investment failing.
Am I delusional?
Don't miss any payments or do anything that would hurt your credit score, but certainly don't make extra payments in this environment. Take the extra money you would have paid and put it into high yield savings, and if/when that interest rate drops you have the option to plow that money back to your loans. Paying extra money to 3% loans when savings accounts are giving you 4% is leaving free money on the table.
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