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Subject:  Re: Student Debt Date:  7/20/1999  8:59 PM
Author:  Bob78164 Number:  12403 of 88766

gapdvm writes:

My husband and I have combined student loan debts of over 70K (medical school) financed at 7.5%. Should we wait to invest until we have paid off all our debt? That would take us a while. Or should we invest now and take advantage of the time value of money (we are in our late 20s)?

We are currently only contributing to a 401K, at the maximum amount.

I reply:

From a strictly economic standpoint, the analysis is straightforward. Is the interest on your student loan debts tax-deductible? Whether it is or not, decide what rate of return you would expect on your investments, after taxes. (If you're eligible for a Roth, the tax rate you should expect for your first $4000 is 0%.) If that rate exceeds the after-tax rate of interest you're paying (I suspect it will), then you'll maximize your expected value by investing now. My wife and I still owe about $30,000 in student loans at 8% and 9%, but we're investing every chance we get. Good luck! --Bob
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