1. Student loans are at 6.55%. To pay them down faster or to invest more in moderate risk mutual fund?
2. Going back to school in early 30's for about 2 years. Will be taking out student loans to cover tuition and a small portion of living expenses. Is it better to stop contributing to retirement during this time, or better to take out additional student loans to cover retirement savings. Assume student loans likely at 6.8 or 6.55% and retirement savings are moderately behind for my age already.
I have a lot of questions. Will you have income while you are in school? Do you have other debt at higher interest than the student loans? How far behind do you feel you are in retirement savings?
My wife will be working and her salary will cover the majority of our living expenses (we're also cutting back). No other debt beyond student loans. At 30 I have about half a year's salary in retirement savings.
1. Student loans are at 6.55%. To pay them down faster or to invest more in moderate risk mutual fund?
Would you do this by borrowing more or are extra payments in the budget? Could you borrow less while going back to school and just pay the regular payment? I'm not sure I'd borrow extra money to put towards retirement
When you are out of school, are you willing to continue living with the cut back budget and contribute a large part of your new income to debt/retirement for a few years?
1. Student loans are at 6.55%. To pay them down faster or to invest more in moderate risk mutual fund?
Would you do this by borrowing more or are extra payments in the budget? Could you borrow less while going back to school and just pay the regular payment? I'm not sure I'd borrow extra money to put towards retirement
When you are out of school, are you willing to continue living with the cut back budget and contribute a large part of your new income to debt/retirement for a few years?
I have some extra money now I need to decide what to do with it.... if I put in mutual fund, I guess it will indirectly go towards reducing how much I need to take out in loans for the new degree (the rest of this fund is a mix of down payment savings and savings for new degree expenses).
We're willing to keep trying to be frugal to prioritize retirement when I finish school again, but we do hope to have a child then and will also need to pay those extra expenses and start saving for college, etc. Etc.
Are you doing income-based repayment and Public Service Loan forgiveness? Just wondering as I know you work in the non-profit world. This is what I am doing for my student loans, so I'm not paying them off any faster than necessary. We can chat offline if you have more questions - it gets a little weird and complicated to figure out if you benefit once you factor in DOMA.
If you're doing standard repayment, I'd only pay down the loans if you are paying more than $2500 in interest a year. That's the max deduction, so if you are under that, your effective interest rate is 4.9% when you factor in the tax deduction.
I'd probably put the extra money into some sort of retirement account now so it can be earning returns when you are in school. Then take a break from retirement contributions when you are in school, and start making them again after graduation.
Are you doing income-based repayment and Public Service Loan forgiveness? Just wondering as I know you work in the non-profit world. This is what I am doing for my student loans, so I'm not paying them off any faster than necessary. We can chat offline if you have more questions - it gets a little weird and complicated to figure out if you benefit once you factor in DOMA.
If you're doing standard repayment, I'd only pay down the loans if you are paying more than $2500 in interest a year. That's the max deduction, so if you are under that, your effective interest rate is 4.9% when you factor in the tax deduction.
I'd probably put the extra money into some sort of retirement account now so it can be earning returns when you are in school. Then take a break from retirement contributions when you are in school, and start making them again after graduation.
I'm doing standard repayment. For the amount I had/have it didn't seem like it was worth the gamble on IBR and hoping the whole forgiveness thing worked out. (From what I've heard if you're not employed continuously in an eligible field you're out of luck - and I knew I wanted to go back to school, might want to switch fields, might want to be a SAHM, etc.) I don't even know how DOMA factors in to this particular situation, but I effing hate DOMA. Ha.
Good point about the tax deduction though, I had totally forgotten that it factors in.... we're not paying more than that now, but holy shit I just did the math and we will be after I finish this damn degree. Yikes. I am so mad at myself for not doing this degree in the first place.
And of course your suggestion is good about saving for retirement now rather than then....argh.... it's hard to let go of the money being liquidizable...
You can put the money in a Roth IRA. It's post-tax money so you can pull out your contributions without penalty. You can also pull money from a Traditional IRA for school expenses - you pay taxes but no 10% penalty.
IBR/forgiveness is actually a financial wash for us, but it improves our cash flow. But I have ~$57k in student loans.