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If we go into a recession.. invest or pay off student loans?

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  • If we go into a recession.. invest or pay off student loans?

    Just wondering what the consensus is IF we go into a recession. Currently have 230K of student loan debt at 5.6% interest. Right now I am maxing out 401k and Roth IRA but if we go into a recession should I put all that extra money into student loans and wait for the bottom?

  • #2
    why is your interest rate so high?
    fix that regardless of what market cycle you might think may happen.....

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    • #3
      Originally posted by Peds View Post
      why is your interest rate so high?
      fix that regardless of what market cycle you might think may happen.....
      I just got out of school and haven't refinanced yet

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      • #4
        I would recommend: refinance loans to lower rate then debt repayment and investing in accordance with your investment policy statement. Your time horizon is long, and plans should not change based on trying to time recessions.

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        • #5
          A 5.6% after tax guaranteed rate of return is a decent investment. It is a nominal investment in an up market, and a great investment in a down market. I don't know what the market will be while paying off your loans so I agree with above, just pay off your loans while putting some away in your tax advantaged accounts.

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          • #6
            Originally posted by DDStigers View Post

            I just got out of school and haven't refinanced yet
            well hurry up since you can control that and not global pandemic events.....
            efund
            20% to retirement.
            the rest to loans, savings, whatever you want. determine a plan to pay them off in 3-5 years.
            cont other boglehead steps, etc etc

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            • #7
              Refi
              retirement Savings at 20+%. (401k+Roth, might need Taxable too)
              then it’s a tossup. How soon do you want those loans paid off? Probably a good thing to work on.

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              • #8
                Why not split the difference? After you refi, that is.

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                • #9
                  Takes money to make money. Paying down a fixed loan isn't an investment but a variation of a cash equivalent (like CD). For those with big shovels, recessions are BUYING investment opportunities were taking on debt is actually encouraged.

                  OP, IF you a really interested in investment with an aggressive outlook --- refinance into longest and lowest rate and bring that shovel and buying power opportunity into your plans.

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                  • #10
                    Refinance
                    max tax advantaged accounts
                    Use taxable account if needed to get to 20%
                    Extra money can go to loan or the taxable account. We have not even dropped 10% yet but if it does continue to fall the further down it goes the more I would lean towards putting that extra money in the market.

                    The nice thing is you have two really good choices. One is better then the other but we do not know which. But by doing either or some combination of both your will secure your financial future.

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                    • #11
                      If you can lower the interest rate, I'd invest. "Equities on clearance! (Prices subject to change without notice.)"
                      "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. βœ“βœ“βœ“

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                      • #12
                        Originally posted by DDStigers View Post
                        Just wondering what the consensus is IF we go into a recession. Currently have 230K of student loan debt at 5.6% interest. Right now I am maxing out 401k and Roth IRA but if we go into a recession should I put all that extra money into student loans and wait for the bottom?
                        I dont get it.

                        One, refinance.

                        Two, why stop buying when the market is on a better sale? If anything, increase buying.

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                        • #13
                          Did you just graduate in December or last June? Time is money.

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                          • #14
                            Are your loans private or federal? If federal, the recent news about suspending interest would make me think that investing makes more sense at the moment, since your loans won't be growing for the time being.

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