{ "media_type": "text", "post_content": "3 years out of school. $30k in student debt at 4.2% fixed. Making enough money to max out 401k and IRA and save on top of that. Thoughts on paying off my debt fully or investing elsewhere?", "post_id": "5a3190f5d5c0bc0013977eb5", "reply_count": 12, "vote_count": 4, "bowl_id": "599feb177c057d0010be0554", "bowl_name": "Financial Advisors", "feed_type": "crowd" }

3 years out of school. $30k in student debt at 4.2% fixed. Making enough money to max out 401k and IRA and save on top of that. Thoughts on paying off my debt fully or investing elsewhere?

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Milk the deduction

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Pay it off and be free....

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R&r here's another way to think about that. Paying aggressively on your debts can make things worse when hard times hit. Think about this. If I have 6 months of emergency fund money and I throw everything else at my mortgage I'm at risk. If I lose my income source i only have 6 months before I default on my mortgage and potentially lose the house. If I focus on increasing my investments and then lose my job I would have years worth of money saved and could hopefully have plenty of time to get another job.

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Max out savings. You may not always be in a position to do so, and you can't beat time and compound interest. That said, use that "save on top" money to pay off the debt ASAP.

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FA1 if he’s making enough to max out a 401k and ira then he’s probably making too much to utilize the student loan interest deduction.

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Good point I was thinking more for married couple. If you can't deduct I'd say max 401k first then put excess funds on the loan.

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R&R you can’t spend or invest your lack of debt. Do the math. Necessary Long term debt with interest below an achievable rate of return is not bad if you invest $$ you could have used to accelerate the payoff. Even while inflation erodes the real value of the debt it can help drive the value of the investments.

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4.2% is fairly low when compared to most credit card debt. Cash is king & depending on your short - to- mid term goals (e.g., home ownership?) I say save save save while u max out 401k [esp if employer match is in play]

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I thought you could make like 200k and still deduct

@ 4.5 I would not accelerate the principal reduction. Buy some variable senior loan cef’s and let inflation help you.

If Single, interest deduction starts to phase out at 65k and after 80k can’t deduct any. Double that if married.

Hard to believe there are so many fa out there that feel that debt is ok. Debt, even at 0% interest makes you a slave to your creditors. Do all the math you want, it does not change that simple fact. Save up an emergency fund (as large as you feel you need, I can’t give you a number it’s just what makes you comfortable) then STOP SAVING and attack that debt as aggressively as you possibly can. The emergency fund is not to be considered an investment. Don’t tie it up and don’t risk it. When your debt is gone, THEN you can really start saving at an incredible rate. Fa and most people will try to rationalize they’re use of debt by using words like leverage and delta and just rates and compounding , but a slave is a slave. And when hard times hit, the master don’t care. He must be paid.

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