Pay off $15k in college debt, or invest it?

Question

probably a dumb question, but i’m stuck and need some help. as the title says, i have $15k in college debt that i am comfortably paying back each month (~$250). i have enough saved up to pay it off in full, but i’m 100% ready to jump into buying a fix and flip house, this spring if possible.

where i’m struggling at is pay off the debt, start over saving and go from there or continue pay monthly, invest my saved up money now and start my journey right away.

i know there isn’t a right or wrong answer, but more so looking for experience and some honest advice. i’m open to either. for what it’s worth, i’m 24 working full time and saving as much as i can.

Kimberly Kesterke · Answer

@Alex Johnson- Hey Alex- I'm not a financial adviser, and take this with a grain of salt:

Here is a rule of thumb I make when it comes to investing:   Will this investment's cashflow outweigh the cashflow of the other option?

So- you mentioned the loan is -250/ month.

I would look for investments that would cashflow MORE than 250/ month. Say you got a SFH, or a duplex that cashflowed $400 after expenses, etc- Your initial principle payment would more than cover your student loan. As you get more established you can throw even more money towards the student loan- almost like the famous Dave Ramsey snowball effect.  Or, you can choose to househack- rent out rooms or rent another side of a duplex. The extra money you get from the rents could pay for mortgage and some living expenses- which means you could throw all of the money you would be paying for those things to your debt.

Again, I'm not a financial adviser, but positive cash flow is the way to build wealth overtime and you can use that same money to pay off your loan faster, while having a cash flowing asset.

Jason Perez · Answer

Good advice from the others, and you (@Alex Johnson) are right that there isn't a right or wrong answer. If you can get a rental that cash flows for more than your current student loan payment that would be nice since in effect you would be having your tenant pay your student loan off (and mortgage as well). But you mentioned pursuing fix and flips, so you could throw a portion (or all) of the presumed profits if you want to pay down your loan through investing as well. Either way, perhaps ask yourself: "How can someone else pay for my student loans?"

Given your intent to pay off your student loan balance, you may want to consider refinancing the loans to a lower interest rate as that could save you a little bit every month and you might be able to get a few dollars from the lender as a sign up bonus to be applied to the loan (i.e. free money). Check out studentloanplanner.com as that site discusses refinancing student loans in more detail, and it's also worth mentioning that the owner of the site, Travis Hornsby, was on the BiggerPockets Money podcast. I have heard Mr. Hornsby mention that you can refinance every year, drive the interest rate lower and lower, and receive sign-up bonuses along the way as well.

I have 6 figures of student loan debt and constantly think about the pros and cons of investing vs. student debt payoff. However, if stroking a check for $15k will help you sleep better at night and give you peace of mind then that is also worthy of strong consideration. Whichever journey you choose to take, good luck!

@Alex Johnsonundefined

Theresa Harris · Answer

I agree with the others.  Use the money to buy a place if the numbers make sense.  You can use any extra money to either pay down your debt or save for another investment.  Buying a house or duplex to live in and renting out a room or the other half is a great way to start.  Depending on the costs, it may lower your living expenses as well.

Nicole Heasley Beitenman · Answer

I'd invest. That's such a small amount of debt. You're the perfect age to house hack. Get yourself into a house, rent out the spare bedrooms or units, and hang out there until you pay off the debt. It'll be gone in a year.

Kiera Underwood · Answer

@Alex Johnson I love @Kimberly Kesterke's advice. I did the same thing post-college. I bought a duplex, lowered my living expenses and was then able to pay more toward loans. I say pay yourself first! have you read rich dad poor dad? It's simple, but drives this home.

Pay off $15k in college debt, or invest it?

Most Popular Reply