Dear Quentin, I am a single 35 year-old with $40,000 remaining in federal student loans. In early 2020, I was super lucky to land a great new job that significantly increased my income. This was the middle of the pandemic so my loans were, and still are, deferred. During this time, I decided not to make payments and worked really hard on saving money.
The plan has always been to pay the student loans off and keep the rest as the emergency fund, but I guess I’m just looking for confirmation that this is the most sound plan and that I’m not missing something. I haven’t had the opportunity to save money like this in the past so now I need to figure out the next steps, both with this question and what to do after the loans are paid.
In the meantime, consider your interest rate on your federal student loan. With the annual rate of inflation running at 6.4% in January, how does your interest rate compare? Are you paying 3.73%, the rate on federal student loans for undergraduates dispersed between July 2021 and the end of June 2022, or 4.99%, or more? Graduate students and parents who took out loans between July 2022 and the end of June 2023 could have loans with interest rates as high as 7.54%.
When you enter your 40s, most financial institutions recommend you start investing outside of a 401 or IRA, try to keep a lid on your expenses as your salary rises, and save 2-3 times your income. Again, that may be a high bar given that we are coming off a period of four-decade-high inflation, and the rise in house prices over the last three years.
Owning your own home may indeed remain out of reach for you at this moment, but I believe it can be on your journey if you keep doing what you’re doing: thinking ahead, saving and planning to continue to work hard and improve your salary as you get older, continue with your 401 with an employer match. A mutual fund provides access to a broad range of equities.
Rather than investing in an effort to beat the rate on your student loans, invest with a long-term view. This money and the money you earn on that initial investment will continue to work for you over the next three decades. The average federal student loan in the U.S. hovers at around $37,574, so you’re not alone, and you’re broadly in line with the average.You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.
Begin to payback and invest
Boycott Tesla
Don't tell anyone from Asia that you have it.
in this case, waiting for final Supreme Court decision makes sense.. if they write the student loan debt off- then you can think about other investments
Go to your bank & buy CDs (guaranteed)- Make payments to your student loan or Loans - Calculate how long you want to pay on them & make that payment