Should I try to pay off grad school loans this year (~email@example.com%) or should I invest ?
I was a little inspired by the story on the blue
about a guy who paid down over 100k of Harvard debt in less than a year.
I've been hoping to pay them off completely within the next 2 years. Lot's of reasons to do it so quickly but the $250 I lose each month on interest alone is enough.
But then a quote from the Harvard guy's blog
made me wonder if I should re-think my strategy:
Along this same vein, one might say that at the end of September, instead of paying down $30k on my loan like I did, I could have invested the money in something as simple as a Dow Jones index, which had nowhere to go but up, and ridden the 21% gravy train from September 26th to March 23rd to net $6k.
Did he say 21%? That's way more than 6.55%! So is it smarter for me to invest than to pay off debts?
I have three main questions with this though. First, if I'm somehow able to find 2k per month to put either into loans or into investments, I will be paying 6.5% interest on the full amount for the first month, but receiving 21% on only 2k. It will take some time for the investment interest to trump the loan interest. How do I do the math on this? Does it always work out to just pay off the loans first?
Secondly, I wonder how reliable that 21% figure he mentioned is. Is he right? Would the number stay accurate for the next 3 or 4 years? Is there a risk that I'll actually lose money? (And while we're on the topic, how easy is it to invest 2k a month into this index and then cash it all out when it equals my total debt payoff amount?
Lastly, if investing is somehow smart at this stage, is the Dow Jones index really the best investment? Would it be better to invest heavily in a 401k? Is some other strategy better, e.g. splitting my monthly 2k into investments and debt payoff?