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  • Analyst 1 in IB-M&A
Sep 16, 2020 - 2:06pm

Magic City

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  • Analyst 2 in IB-M&A
Sep 16, 2020 - 7:21pm

If you have regular school loans why would you pay them off instead of investing the funds? Why not pay minimums and get a higher return from some other investment?

 

Edit: Ok I get it guys.

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  • Analyst 2 in IB-M&A
Sep 16, 2020 - 7:33pm

A lot if reasons actually:

1) person doesnt want to be in debt (psychologically feels good to be debt free)

2) guaranteed return, by paying down your student loans you’re guaranteed to save that 3-5% (not sure the exact rate) of interest payment down the road

3) ties to #2 but risk averse, sure historically stock market is 7-8% so you would be right but in a risk weighted basis it may make more sense to just paydown debt 

 
Sep 16, 2020 - 7:38pm

It makes way more sense to pay down a high interest student loan debt. 4-6% is what student loan debts run nowadays. These are NOT tax deductible

Your 8% average gain on investments is so wrong if you think that's what you'll get

- Cap gains under biden jumping to 39.6%. If this happens you are royall screwed. that 8% is cut smack in half. Even if it isn't you need to factor in taxes so it's morel ike a 6% gain on average and keep in mind this average is anythign > 5 years. Don't look at the last 10 year bull market. For every 10 yr run you show me like the we've driven post 08, i'll show you 10 others when you may have wanted to pull your money out but were shit out of luck

 

If this is a mortgage, then maybe don't pay it down. rates are incredibly low, around 3.5% for a 30 year fixed -- that's tax deductible up to first 750K in loans.... 

 
Sep 16, 2020 - 7:36pm

Depends on the interest rate of your debt vs the market returns in however risky the assets you invest in; personally I don't have student loans, already have low interest rates on real estate loans so I'm going to invest in the markets or put it towards put it towards investing in a passive income business.  

 
  • Summer Associate in IB - Ind
Sep 16, 2020 - 7:53pm

I'm going to owe an average amount (around $100k) but hope to refi around 4% after graduation. Can easily afford to pay it over 10 years but was curious if others just paid it down asap. What type of business are you looking at?

 
Sep 16, 2020 - 8:32pm

I don't think you like my answer but i am paying it down asap. student loan is a rip off and the rate is ridiculous as compared to your mortgage these days. If you are a fan of paying monthly due to a financial institution, you are better off paying it off and get a mortgage instead. At least that way you will build some equity along the way and the mortgage interest expense is at least deductible for tax purpose. 

After-tax, It's such a small amount of money (~$30k) it was not something I even care to talk about. I wish they could have offered an option to pay down my second year b-school tuition directly instead. That would have been on a pre-tax basis and make a much bigger personal financial impact. btw, why don't they do that?? anybody knows? 

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Sep 16, 2020 - 9:58pm

I got mine kinda early in my 2nd year soooo blew every penny traveling in South America, Europe, Australia, and New Zealand “networking” with classmates. Then did the fiscally responsible thing of taking loans out about 4 months after I got the bonus with the intention of paying them down rather aggressively once I started getting paid. However, first republic let me refi to 1.9% so I’m paying as little as possible back. My only regret is not taking out more since I didn’t know the refi rate would be so fucking low. First republic is no longer focusing on Mba student refi aggressively so not sure what rates they have now. There are a handful of other lenders out there though that cater to certain education backgrounds and should give you decent rates.

Unfortunately this is all pre-COVID, so I guess not much on the travel front for you. If I had a gun to my head, I’d probably put it into a down payment on a rental property if you can find one that isn’t getting bid up and I’d probably factor in property mgmt fees into my long term math on that

 
  • Summer Associate in IB - Ind
Sep 16, 2020 - 11:38pm
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