Paying off your student loans quickly can certainly be worth it, but only if you’re financially prepared to pay them off. Even then, you cant always count on paying the entire balance off at once. If you do, you might not realize how much you’re paying over the life of your loan and you could end up paying more over time than you’ve saved.
A big part of the problem with paying off student loans too quickly is that it forces you to live within your means. When you’re paying off your student loans and not saving for retirement, you don’t have much extra money left over. This isn’t great if you’re in a position to save for retirement, but it also means that you don’t have a lot of cash to spend when you’re really enjoying yourself and living the life you want to live. With a few exceptions, it does”t make much sense to live the life you want to live and pay your student loans off early.
Now, this doesnt mean that you shouldnt save as much as possible for retirement, you simply need to put your savings in a place that makes the most sense for your financial goals. Student loans arent a big deal, you can live for the next 30 years without paying them off, but if you want to retire early, you’re going to need a place to park your money in as well as a retirement plan that you know will be there.
Student Loans vs. Investment Accounts Here are some good places to invest your money: 401k Money that you earn goes straight into the accounts. This can pay you a great rate on your savings. You get to put your money where it belongs. Traditional IRA You have to pay taxes on the money that you put in, but that money grows tax free. You only pay a 0.9% of your income in taxes, on top of your normal tax rate. If you invest in an eligible 401k and contribute the maximum amount, then after a set period of time (say 10 years), you’ll have money left over to spend. If you’re younger, you can put in up to $17,500 of your own money per year. If you’re under 30, then you can contribute up to $5,500.