hi /biz/, if I have $40k in federal loans at ~3% interest, what's the smartest way to pay them back?
>inb4 stupid to take on this kind of debt for college, I agree, it was a mistake
How much can you spare? 3% interest at 40k is 1200 a year to break "even". If you can spare 2400 dollars a year, you are paying off the interest + another 1.2k
Next year you will pay off the interest + 1200 + the balance. So you will pay the same amount every year, while at the same time paying it of faster than the year before without really feeling it, this will amplify itself as time passes and before you know it you are debt free
1. How did you get student loans are only 3%? Feds are charging 6% for that crap.
2. 3% fixed interest is pretty much the inflation rate. Pay as little as possible, lots of investments will do better than that. Find an ETF with 3+% yield, like VYM. Invest $40k in it, pay your loan off just from the dividends. Plus whatever growth you'll get after this latest market drop.
The only logical reason to pay this back, is that you refinanced for a significantly lower rate, or you need to play some games with a debt-equity ratio to secure a cashflowing asset.