I therefore attended graduate school and owe over $270,000 in student loans. I was only making between $65-75k annually until this year, and I’m now making about $140,000. In order to conserve money, I’ve been living with my in-laws. We have approximately $115k in savings. Having said that, should my debt be paid off or should I invest the money I saved in a CD or other profitable venture if the SAVE plan is cancelled and I have to switch to the IBR plan? At the end of the day, I want to pay it off, but it feels so hard!
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Given your higher income and savings, you might want to split your focus. Keep enough savings for emergencies, but consider paying extra on your loans if they have high interest. Investing some of your savings could also be a good idea, especially if you’re worried about changes in your loan plan.
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I was in a similar boat sometime back, making a decent salary but not enough to feel like I could tackle the debt quickly.
Here is my advice based on what I did to get through:
- Savings: I used some of my savings to pay down high-interest debt first because it was costing me the most in the long run.
- Debt vs. Investment: When deciding whether to pay off debt or invest, I considered interest rates. If the interest rate on your loan is more than what you could receive from a CD or other investments, you should consider paying it off. Paying off the loan made me feel more comfortable because it ensured a return (the interest I would no longer have to pay).
TIP:: If you’re not sure, maybe split the difference? Put some of your savings towards your loan and some into a low-risk investment. This way, you’re tackling the debt but also letting your money grow a bit.
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I realise the SAVE plan has been beneficial for many people, and switching to IBR may affect your payments. Transfer plans. While the payments may increase slightly, attempt to pour any extra money at the principle.
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