I am curious how some of you guys approached paying down student loans vs. saving more early on. I just graduated college with ~35k in student debt with an average floating rate of ~6%. I am working in New York and my base salary is 70k before signing and year end bonuses. I live close enough to my office that I am able to live at home rent-free and commute to work and have no other major expenses. Ideally I will live at home until I save enough money to buy a place either alone or with a friend.
I am pretty set on maxing out my IRA and 401k contributions early on, but beyond that I am debating what to do. Would it be better to save more early on and be able to invest it and then knock my debt out later on when I am making more and it isn't such a burden? Or to knock out all the debt when I have no real expenses so that I can begin the next stages of my life debt free? I'm open to any suggestions or advice or approaches that you guys have taken personally. Thanks!
ps: wasnt sure where to post this so i just put it in the IB forum
When I was in IB, I maxed out my 401k and built up an emergency fund and used anything I had left over to make principal payments in addition to the minimum payments required on my student loans. Generally speaking, you should make the minimum payment required and forego additional principal payments if you can get a higher rate of return by investing the money, but I decided to pay my student loans off earlier because that helped me sleep better at night.
I think down the road if you're serious about getting your own place it's just gonna be harder with those expenses and can drag down your credit. Maybe make whatever monthly payments you can handle and put either entire signing or year end bonus right into principle and the other into ira/401k/savings acct. It's better to live cheap now than have those loans be a burden into your 30s.
If you can get over that 6% by saving, then save it and just make the minimum payment to avoid fees and what not. If you can't, why would you spend more money on interest just to get feeling of having more discretionary income.
Being debt free is freedom. Pay them off.
Agree with paying off debt first.
If the theory of making more in savings vs paying off was valid, why won't you borrow $100mn and invest?
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