Invest or Pay Off?

Dave tells Michael to be done with the student loan ASAP, not to keep it around like a pet.

QUESTION: Michael has $120,000 in student loan debt and makes $45,000 a year. He wants to know if he should make payments on the student loan and invest instead. The rate on the student loan is only 2.6% ... is it worth it?

ANSWER: I strongly believe you need to be done with the student loan as soon as possible, regardless of the interest rate. If you were debt free, I wouldn’t go borrow $120,000 to invest. I know that there’s a spread there, but you are adding risk and strain to your life that you wouldn’t have if you were rid of the student loan.

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