Ask YOUNG MONEY: Pay student loan or invest?

Related Articles

• Bank of America Customers Beware: Your Credit Card Penalty Rates Could Soar
• Experts Advise How to Make Instant Improvements to Your Credit Score
• Home Equity Loan Defaults Soar as Housing Values Drop

Rate Center

Today's Average Rates Across the Country*

Savings / MMA CDs Refinance Auto Insurance

Min Balance APY Trend < $10k 0.26% $10k - $24.9k 0.33% $25k - $49.9k 0.43% COMPARE RATES Savings Accounts and Money Market Rates provided by Term APY Trend 6 Month CD 0.41% 1 Year CD 0.64% 5 Year CD 1.80% Compare Terms: - - Select One - - 6 Month CD1 Year CD2 Year CD5 Year CD CD Rates provided by Product Today Last Week 30 Yr Fixed 3.93% 4.62% 15 Yr Fixed 3.54% 4.07% 5/1 ARM 3.10% 3.55% COMPARE RATES Refinance Rates provided by Vehicle Type Yearly Premium Cars $1,544.58 Trucks $1,419.25 SUVs $1,346.76 See Your Rate: - - Select One - - AlabamaAlaskaArizonaArkansasCaliforniaColoradoConnecticutDelawareDistrict of ColumbiaFloridaGeorgiaHawaiiIdahoIllinoisIndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNew HampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWest VirginiaWisconsinWyoming Car Insurance Rates provided by

By
16 November 2006

Dear YOUNG MONEY,

I am going to be a college senior and currently I have $11,800 worth of student loans. My internship this summer is paying me very well and I would like to start investing in a Roth IRA. I would also like to take this last year loan-free. However, with investing in an IRA I won’t have as much to pay for this last year, which will possibly mean that I have to take out my loan. What should I do, take out the loan and invest in a retirement account or pay the year off? (The loan would be for $5,500 and the initial retirement investment would be $1,000).

Thanks,

Tim

Tim,

My advice is standard when asked whether to start saving or pay off currently held debt. Always pay off the debt first. Especially taking into account the way the stock market is acting these days, if I were in your position I would attack debt now and avoid taking on additional debt if I could.

There will be plenty of time in the future to begin investing. In the meantime, if you want to start to save some money at a decent interest rate, plenty of online banks are paying 4.5% or more interest on savings accounts.

Good luck and please keep us posted.

Mike Schiano

"The DebtBuster"

Listen to a Money Minute with Mike at: http://www.inchargeradio.com/MoneyMinutes/default.aspx

Visit www.inchargeradio.com and read Mike’s book, "Spend Your Way to Wealth."

© 2008, Young Money Media, LLC. All rights reserved.

Share this Page

Comments

One Comment »

George said: Bonita clients in America gets pretty “beat”. Many poor stop their houses under favorable mortgage loans, but soon achieve an executor rather than conveniently visit the repayment of loans. About Loan to learn that a little bit here. # 11 September 2010 at 7:41 AM

Leave your response!

Add your comment below, or trackback from your own site. You can also subscribe to these comments via RSS.

Be nice. Keep it clean. Stay on topic. No spam.

Comment

(Will not be published)

Anti-spam text: (Required)*
To prove you're a person (not a spam script), type the security text shown in the picture.