I have a bit of a dilemma. I have student loans totaling roughly 28k in principal at 4.2% interest on a 10 year repayment plan. I'm currently in my first of two post graduate years in which I plan on working, saving, and traveling before returning to grad school and pursuing a career in academia. At the end of the two years I project to have saved roughly 30k.
I'm conflicted about whether it is wiser to directly pay off my loans completely or invest the money. In grad school, which will take me roughly 7+ years to complete for a PhD., I won't have to make payments (and wouldn't have the income to anyway) but the loans will continue to accrue interest. After graduation I will have approximately 10k in interest plus the principal to pay off over 8 years. Young academics don't make much money, and even if I've been investing the 28k over the same time and made 4% more interest on it than the loan accrued, I'm concerned my gains will be eaten up in taxes and I will struggle to pay off my student loans in addition to the other life expenses associated with starting a family and settling down. I'm also concerned it may force me to turn down better career opportunities for higher paying ones.
My other option is to just pay off the loan in full after 2 years and move on from it. It feels like this is the better psychological option as it would free me up to pursue low paying but career enriching opportunities as I wouldn't have any financial obligations holding me back. On the other hand, I'm afraid about leaving money on the table that could be gained by investing. Assuming I had an 8% yield and reinvested my earnings, it could be around 10k I'd be sacrificing by not investing. Of course, my previous concerns could negate some of these gains.
So, which option sounds like it is the better one? I honestly don't know a whole lot about investments and I'm afraid the appealing thought of going debt free may be clouding my judgement. I should also note that I'm assuming I will have both a funded MA and PhD and so will be living on a stipend, but not taking on more debt during this time. Any advice on what I should do or consider would be appreciated.
Submitted March 28, 2019 at 02:01AM by christhetank5 https://ift.tt/2JUGt4u
