Little Rock, AR · Member since 2016 · 13 posts · 3 votes
I know similar questions have been asked before, but feel my situation may be a little different. I m trying to decide whether to pay off 300k of student loans over 3 years or stretch it out to 10. If I stretch it out to 10 years, I would have a lot of income to put towards investments. I know the student loans are bad debt, but feel that 3 years wasted not investing could put me behind a lot. I am very interested in multifamily home b/c I think they will be much easier to scale. Any advice would be much appreciated!
Three years is nothing, pay off the loans first and then start to save for investing.
Starting to invest now is going to financial bury you if you face any slight obstacles down the road. You will be forced into bankruptcy and that will put you 20 years behind.
Do both if you can. Try to leverage other people's money where you can but still have a piece of the deal. $300k is a LOT. Don't want to miss out but also don't want $300k to be compounding at 6.5%.
Also, what's the math on the amount of interest you pay in 3 years vs the amount you pay over 10? If it's an extra $50k, could you make that and more by investing first? That's the question you need to answer.
Keep in mind, the debt to income ratios for any loan you try to get are going to be severely weighed down by the minimum payments on $300k. That's another factor.
@Daniel Emison 300k in Student loans is a lot. I would recommend listening to 3 people and you deciding on which route sounds best for you. Dave Ramsey, Robert Kiyosaki and Grant Cardone. All three of those guys has helped me a ton! They all shoot different messages. But by deciding which route you will head could help you out a ton! As Mentor the Great Jim Rohn Stayed "Don't be a follower, but rather be a student"
I would pound out your student loans as much as you can while you are still learning about REI. A lot of people don't realize it takes some time to "study up" before getting your first investment. Let's say it takes you 6 months to be at a good place, that's a solid 6 months of you attacking your loan full force which can really help.
When I graduated college, I had $75k in student loans. I worked a full time office job and a weekend restaurant job for about a year and applied 90% of both incomes to my student loans. Being that all my interest rates were relatively the same, I attacked my smallest loan first and used the snowball effect. Now 3 years later, I have about $15k left and plan on being done with my payments before 2017 ends. This has worked for me but is not the only method.
At the end of the day, $300k is a lot of debt to have so my personal opinion is to focus on getting that to a more reasonable number before investing. That $300K will likely affect your credit and/or DTI ratio which are important in REI. Also, sometimes waiting is better (potential correction of the market.) Remember you're in this for the long haul.
@Daniel Emison Excellent question! The wife and I are in the same boat as you as far as student loan totals are concerned (she is an attorney). I'm at least a couple of years away from really digging in and looking at properties, but I have always wondered if it is wise with so much student loan debt hanging out there. I will be following this post.
@Account Closed Great advice! I am extremely familiar with Dave Ramsey and believe most of his teachings and beliefs are rock solid. However, I have never heard of Robert Kiyosaki or Grant Cardone. I will definitely check them out.
Three years is nothing, pay off the loans first and then start to save for investing.
Starting to invest now is going to financial bury you if you face any slight obstacles down the road. You will be forced into bankruptcy and that will put you 20 years behind.
Just out of curiosity, what and where did you study in order to get such a high student loan debt? Hopefully a career that pays well? (Medicine, Law, etc)
My personal belief is that you should pay off your debt. Such a large debt can hang over you for years. My student loans only totaled $30,000, but it took 8 years of my life to pay them off.
Imagine 10 years from now still making $1000+ month payments.
Thanks for all the replies again! I have actually just finished reading 10x by grant cardone and read total money makeover a couple years ago. The 10x book is what kinda got me wanting to kick it into gear.
The loans are actually combined between my wife and I. I am a CRNA and she is a pediatrician. My gut does kinda direct me to get rid of the loans first, but I feel like 6k/month going toward investments for the next 10 years could be a much better pay off. Only other debt I have is my house, which I owe around 130k and it worth around 155k. Thanks for all the feedback!
I'm with @Thomas S. and others on this one. Debit in itself is not bad. But it needs to produce a benefit. With real estate it would be a mortgage which allows you - if you do it right - to make money off that debt, all things considered. The benefit of your debt is over now. You graduated (presumably) and will now benefit from the education you obtained making use of debt. Your student loan, therefore, has reached the end of its usefulness. Something that isn't useful is something that one should get rid of, especially if it costs money. And the student loan certainly does. And yes, using money you save to invest to generate income is obviously a great idea. But only if it makes you more money than what you have to pay for your debt. Get rid of it as quickly as possibly and, if at all possible, try to save a bit on the side to acculate money as a cushion (emergency fund + potential downpayment fund). Every bit counts.
Oh, and besides all this: don't foget to live! Life is too short...
I'm in the "pay off your loans ASAP" camp. I paid off mine in under three years; it's been almost nine since then and the amount of financial freedom we have is amazing. Most of my friends are still struggling. We just used our first year of married life to live on his income (the smaller of ours) and I tutored kids on the weekend. We ate out less than a dozen times; I sewed my own maternity clothes; we only left town once (to get a check to mail back to Sallie Mae). Last payment cleared the day our son was born!
I tell them my story to encourage them, not to brag and they know that, but their response is "but we only live once..we need vacations...the baby needs a cute nursery..." I like Dave Ramsey and his saying, "Live like no one else now, so later you can live like no one else" is a huge inspiration for me.
We still live on his income; the job market for me in this city is too unstable to rely on my larger paychecks. This has allowed us to save up lots of cash, learn all we can in the process and we're closing on our first rental in about four hours!
Years ago I had the same question. The first thing you have to examine is yourself. then the deals you getting into. Do you have the discipline to pursue real estate with full force until your income out ways the penalty or size of the debt. For me I choose to invest now it is my investment that pays back my loan. It was a big risk but you have to be ready to do all you can.