This question comes from Cory on Mint’s Facebook page.
And this is Cory’s question.
What is the best way to pay off $32,000 of student loan
Cory that’s a very good question.
It really depends on the interest rate
that you’re paying on that student loan debt.
There are certain types of student loans that have very,
very good interest rates– 2 1/2%, 3 1/2% and in many cases,
that interest is tax deductible.
I would not accelerate a pay back of those loans
by taking money out of another type of investment,
and especially I would never break into a 401K
to pay off that kind of loan.
However, there are types of student loans
that have fairly high interest rates,
so really it’s a matter of budgeting.
You put more of your discretionary funds
at the end of the month towards the principle of that student
loan and you’d be surprised just how
quickly you could pay it off.
I’ll give you a great example to quantify it.
$32,000 is not terribly different than what
you would pay for an auto loan, and most auto loans
can be paid off in 36 months to 60 months,
so you should be able to knock that debt off
within the next five years.