Starting out with student debt

[Sarah Baniewicz]

Hello,

I am new to real estate investing, but I have quite a bit of student loan debt. I was wondering if anyone else has had the same experience and if it would be better to pay off some debt before starting to invest or to start investing before paying off my school loans?

[Nathan Gesner]

Quote from @Sarah Baniewicz:

Hello,

I am new to real estate investing, but I have quite a bit of student loan debt. I was wondering if anyone else has had the same experience and if it would be better to pay off some debt before starting to invest or to start investing before paying off my school loans?

Most people will tell you to pay the minimum on the debt and use your extra cash to invest. If you pay 5% debt but have a rental making a 10% return then you will be 5% ahead, right? Wrong! Do the math with two different scenarios and you'll see that the best option is to focus your effort on paying off the debt first, then investing.

Calculate the results on two scenarios:

1. You pay the minimum on your student loans and put anything extra into investments. After the loans are eventually paid off, then add that to your investment plan. Where do you end up in 20 or 50 years?

2. Pay the debt off like a madman. If you work extra hours, get $20 in your birthday card from Aunt Gertrude, or pick up a nickel off the ground, you put it toward the debt. After you've paid off the debt completely, start using that same hustle to invest. Where do you end up in 20 or 50 years?

Math don't lie. Debt will result in less wealth, and it holds you down in a variety of other ways. True wealth - like anything of value - comes with hard work and sacrifice. Don't think you can shortcut your way to success.

Proverbs 22:7 The rich rule over the poor, and the borrower is the slave of the lender.