‘Paying back student loans slowly would eat away at whatever gains I’d get from putting things into savings now’: Should I prioritize paying off student loans or start saving for the future with my current salary of $62k/year?

Hi Money Minder,

Hey there, I’m 24 and just started my job. I don’t have any credit card debt, but I do have 38k in student loans. I’ve got around 3k in a Roth IRA and 500 bucks in bonds. My current salary is about 62k a year. Should I be hammering down on those student loans ASAP and then start saving, or should I pay the minimums (or double them) and save/invest the extra cash?

I’d really appreciate your advice!

Update: I do want to save for the future, but I’m not sure if slowly paying off my student loans will eat into any gains I could make by putting money into savings now. Oh, and my job gives an 8% match on the 401k, so I’ll be putting money into that.

The interest on my student loans ranges from 6.5% to 8%.

Thanks again for your help,

Response from THE MONEY MINDER:

Hello There,

Congratulations on starting your career and being proactive about your financial situation! It sounds like you are off to a great start with no credit card debt, some savings in a Roth IRA, and bonds. With $38k in student loans and a salary of $62k a year, it’s understandable that you’re wondering how to prioritize paying off your loans versus saving for the future.

Given that your student loans have interest rates ranging from 6.5% to 8%, it may be prudent to focus on paying them off aggressively. High-interest debt can accumulate quickly, potentially outweighing any gains from saving or investing elsewhere. By paying off your loans as soon as possible, you can save on interest payments in the long run.

However, it’s also important to consider other factors such as your 401k match at work. With an 8% match, it could be beneficial to contribute enough to maximize this benefit while still putting a significant portion of your income towards paying off your student loans.

A balanced approach could be to allocate a portion of your income towards paying off the loans (perhaps more than the minimum) while also contributing to your 401k to take advantage of the match. Once your student loans are paid off, you can redirect those funds towards saving and investing for the future.

Remember that personal finance is just that – personal. Consider your own financial goals, risk tolerance, and comfort level when making these decisions. Take the time to create a detailed budget and financial plan that works for you. And remember, progress is progress, no matter how small. Keep up the good work, and all the best from THE MONEY MINDER!