Pay Off Student Loan Debt Or Invest? | Which Comes First? 

I had a $10,000 guaranteed student loan with 6 months of no interest after graduating in 1990. I paid that thing off in the six month period to avoid any interest at 9% when I got the loan. Probably not as easy these days. but I have to say, to me the keys to success is not having credit card debt, or an expensive car and investing the max you can in tax sheltered index funds. Oh and not having too large a home. A super large home might seems like a good investment but if you are not utilizing the size, you are paying extra taxes, utilities, insurance cleaning and upkeep.

Congrats on the baby!!

I did both. Invested 8% to get my 4% Match and then used the rest to pay off loans

My method: I started working when I was 13, saving most of it towards college. Worked as much as possible during college...and came out debt free. Lived with my parents for about 5 years after college, and bought my house (duplex) with 50% down and paid the remainder off in about another 5. Debt free at 30.

Thanks!

This is a nice moderate take on the student loan issue.

Thank you for the video. My answer: it depends on the interest rate.

I like that Dave Ramsey system but it needs to be modified the seven steps!!❤😊 1st should be to invest Then emergency fund then start on debts If you do it Dave's way investments are last losing all the compound interest If you start with investment 1st you lose none of that compound Love Erin and the channel ❤

I'm taking the full ten years to pay off my student loans. My job is in healthcare so it's considered a nonprofit and they pay my loans for me (I have read the fine print) and I would rather shovel my money towards my mortgage and pay it off early since the interest rate is higher on that than the loans. Technically, through my job and PSLF I wouldn't have to spend any of my own money on my loans.

I’ve always been debt adverse. Paid off student loans in around five years, paid off small auto loans in under a year and am on track to have the mortgage paid in 14 years. I feel like being debt adverse has always encouraged me to maintain sizable emergency and savings accounts, with fair room for discretionary spending.

I think slow and steady. Do all of it because life happens during this process always happens. And as you get pay raises keep at it. Staying focus and live a little.

My two sons are in college now. I am cash flowing all expenses other than tuition, which is being paid from their 529 plans. They both started at community college and are transferring to state universities to keep expenses down. They will both get a bachelor's degree with no more than 50k spent each and no debt. When I went to college I served in the military and they paid for 4 years of college tuition while I worked to support myself. I did also have the GI Bill which provided some spending money for college related expenses also.

The answer is to this question is never easy, and there is never a definitive answer for everyone because it depends heavily on your goals, preferences, etc. If someone is on the path to early retirement, then the better choice would be different than someone looking to retire around the regular age because the regular age goal has a much longer time horizon, and the difference of investing makes a bigger impact over a long time period.

As a physician this is an oversimplification of typical finances. The specialties with 3 year training typically have lower salaries. Higher salaries come later in life with either more training or experience. So initially wind up with lots of debt and just starting to get a good salary in early 30s. A big thing to keep in mind with paying student loans vs saving is rates. That changes the calculations.

Wow, what a video. Grateful to my parents that I graduated law school with only a few thousand dollars of debt, so I paid it forward and put my kid through college with zero student debt.

Not sure if you included interest or not Erin, but for grad loans its about 6-7%. Also for other professional degrees average salary is probably around 120 to 170k. Brutal when your interest payments are 12-15k per year depending on your principal loan balance.

The sooner you invest the most you can its done. Life happens and expenses can be rationalized. Better to buckle down now and hopefully you will continue

What kind of financial training is available to Coast Guard personnel and their dependents? In the Navy, the Fleet and Family support centers offer, budgeting, car and home purchases, investing and more. Have you attended any Coast Guard provided training programs?

Currently I’m trying split any extra income between student loan pay off and savings. Trying to do more than the average on both, though!

Hi Erin, great video! Your looking beautiful 😊 Hope you have a blessed weekend and hope your pregnancy is going smoothly and the baby is healthy. P.S. just between us (lol) what was the name you decided on?

My oldest daughter graduated in December from college with her degree in engineering. She initially wanted to ignore investments and sink everything she could into paying off her school debt. The company she works for matches retirement contributions dollar for dollar up to 5% of her pay. I did convince her to put in 5% of her pay so she gets the full dollar for dollar match. Instantly making 100% return on your investment is a very good deal. The rest of her discretionary money is going to pay off debt. She should accomplish that in 2 to 2 and 1/2 years 😊

Although zero pay raises isn't going to happen, most pay raises through a career are simply cost of living increases. There will also likely be some years without pay raises. If I was starting out with student loan debt. I would contribute to my workplace 401k, enough to get the company match. Then, I would look at the interest rate of the loan versus the historical market return. Likely the market return will be higher. Think that's why the model comparison showed $150k more in the model that took ten years to pay off the debt. But, to be honest, I was making extra payments on my house to get rid of the debt when it would have made more financial sense to invest that money. Sometimes peace of mind is more important.

Save money until you have a reserve set aside for an emergency. That should be at least 6 months of living expenses. Then start investing in a Roth or SEP IRA and pay down debt. At some point, try to set up a longer-term savings account to help with larger purchases, like a down payment on a car. A good rule is that if the interest rate on your debt is higher than the expected rate of return on your investments, then you should pay down debt first. Never, never use a debit card. The convenience makes it too easy to spend money on things you don't need and the risk of fraud involving your checking account is not worth taking the risk. Another thing that has helped me is that I do not spend money on "wants" very often, usually I delay buying want items to only once a quarter, or maybe longer. I put all purchases on a credit card that has a grace period and I pay the bill in full before the due date to avoid any interest charges or late fees. I only buy what I can afford to pay in full when the bill comes due.

Was very fortunate, paid all my loans after graduation day one

I'm not sure where people are finding this table of salaries for all majors but it's hard to predict how much you'll make at graduation _before_ you take out loans. It also depends on the economic situation post-graduation. Ask a lawyer in 2009 about that... Most majors aren't vocational, so you can really only estimate based on the roles you were interning for while in school, _after_ you've taken out the loans. For federal student loans your principal ends up being more than what you borrow when you graduate due to interest capitalization, so you would have to borrow even less than you think.

I agree with much of this video. We paid off our debt asap after college and used Dave’s snowball philosophy to do so. My son graduates in a few months and I continue to teach him these same principles, but I’m wondering if rather than taking every dollar possible to pay off debt, he should make sure he gets the full match from his employer. I’ve been telling him to never miss this free money, and after getting that free money then pay off the debt asap. I’d be curious what you think about that Erin.

I am completly and utterly stuck in a feeling of hopelessness. I have 182 thousand in school debt. I am a Chiropractor and it is a shit career by and large for being able to pay back such a large amount of debt.

If your Loan's APR is above 6%, it's pretty obvious what to use your extra money towards

Yup Healthcare’s professionals have alot of debt 😔$250k

From the perspective of someone in their 50s, paying off any kind of debt creates new investment opportunities going forward. Think student loan debt, car debt, mortgage debt. Another HUGE factor is the lower stress level in which you can live your life after that debt is paid. Too many people have died too early from taking on more and more debt, and in coping with those consequences.

Great video erin and congrats on the baby coming. I dont feel 22 year olds are going around listen to videos about saving. Im sure people will debate it but most not even average but most wouldn't be listening to internet advice. So personally hearing video's telling 20 years how to save seems crazy. The problem is the mid 30s mid 40s people who are running around getting in debt. Those could use serious advice on how to change their life around and start the process. As far as which one to pay first. Get a bigger income and pay both. If you 45 like me you dont have time for compound interest to work as well as a 20 year old. So drive uber or start a side hustle pay on that student loan while setting aside money in your 401k. Plus the match it in most places so its free money. A lot of low expense ratio Vanguard accouns can get well over 12% on return. Vs my 5 percent student interest rate. And again with the 5 percent added from matching thats a lot of compound interest. Again paying both is not s problem.

The huge part that so many don't get is that college isn't for everybody !! As a doctor, I don't do plumbing, electrical, HVAC, carpentry, etc. and I appreciate the people who have these skills. I know all of there guys can make a decent living because I get their bills. LOL There is nothing wrong with going to a trade school if college isn't your cup of tea. Most people aren't going to make $150,000 a year. Ok pre-recorded stuff is nice but how about a Jr. update ?

The majority of my generation went to school for the sake of going to school. Not because it would improve their lives later in life. We were brain washed into thinking it was necessary for everyone. I did no higher ed, my wife got a phd. We both have made 6 figures, it's not about the degree, it's about the salary that goes with it. PS 1/4 mil in debt to no debt within a few years.

I drop out of college in 2008 without any student loans and I retire at 35 years old. For me college is a scam, once people borrow student loans they cannot escape the student loans it follows you until you died.

Some of us made better decisions. I worked full time to pay my way through college. I did both full time. Yes, it took me 5 years to graduate but I did so with ZERO debt. Then, I got a career job and continued my college job part time after graduation. That allowed me to maximize retirement savings right from the start. All that allowed me to retire early at 52. These days it seems everyone wants everything given to them. My mom's philosophy was to work hard and keep trying to better yourself. She taught me well. Hope you are doing well. Maybe a baby has appeared? Hope you'll let us know on here soon.

If only dental school didn’t cost so much 🙃

Loving the sneering condescension of people in the comments here.

But Dave Ramsey first prioritizes the smallest amount of debt, even if it’s the smallest interest rate.

Just pay it off as fast as possible

No student loan for me at age 54/60 we are paying our chunk of last ARM mortgage 🎉🎉🎉