By David Price
more info at
www.100dayloans.com 
The new Health Care and Education Reconciliation Act will overhaul the existing student aid system and should help future
students not to get themselves in such a financial bind many current students and alumni now face. That is all fine and great but what about all those people who currently have a load of student loan debt? After all, two thirds of all college students borrow money to get their education and their average debt last year was over $23,000. There are many decisions on how to tackle that debt as one embarks on a new career fresh out of school. One decision involves choosing how much to invest in retirement savings as opposed to quickly paying off the education loan. There are three choices: first pay off the loans and then save for retirement, start saving for retirement now and only make the minimum payment for each student loan, and finally proceed in the middle splitting your expendable money between retirement savings and loan payback.
Immediately paying off the
financial aid to get the monkey off the back is a popular and seemingly prudent choice. Often though, this is not the best plan. Eight percent is the magic number to consider. This is currently the average long term return the stock market has been yielding. If the student loan is costing more than eight percent, it would be wise to direct disposable income towards loan repayment rather than investing for retirement.
If a loan is less than eight percent, the second option of saving for retirement and making minimal
loan payments may work best. One will have more money in the end because they will earn more from their retirement account than they would have paid in loan interest.
Of course, there are other things to consider. The average stock market return is variable. The housing market bubble over the last couple of years caused a decrease in that rate of return that the world is still recovering from. So, that eight percent should really be considered a fuzzy magic number. Also, one may consider the peace of mind in retiring a student loan worth the extra cost.
David Price gives
student loan advice at studentloanadvice.blogspot.com
Linkback:
https://tubagbohol.mikeligalig.com/index.php?topic=26893.0
