Many financial experts will tell you that student loan debt robs your present and steals from your future. While paying off debt is the ultimate goal, making small contributions to your savings and building wealth while reduce debt is not only achievable — it’s recommended.
“I used to say pay your loans off first, but I learned something about this with my students,” O’Leary said. “You have to do both, pay your loans off and invest a portion of your income every year. That’s the only way to get into the discipline of doing this every single month. That’s how you succeed into retirement.”
Having the money to invest after paying monthly loan payments and basic necessities might be seem unrealistic and unattainable to many students, but not putting aside some funds for insurance, retirement and other things might hinder your financial success in the future.
As Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, told the New York Post, “It’s certainly possible to work toward multiple financial goals at the same time. Doing so is a personal decision that will vary for each borrower.”
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How To Pay Off Your Student Loans and Invest For Your Future
According to the Education Data Initiative, 45.3 million Americans have student loan debt — and the average federal student loan debt is $37,338 per borrower. Student loans are no joke, but by considering a number of factors, including student loan rates and your current financial responsibilities, you can begin your journey toward financial freedom (and have some funds to your name when you’re finally free of debt).
Your Student Loan Interest Rates
Obviously, the terms and rates on your current student loan will dictate how much money you can keep aside for investments. If your rates are high, it might be wiser to pay off the debt and free up more cash down the road.
Your Type of Loan
As Forbes noted, private loans are riskier than public federal student loans. Federal loans issue more protections and repayment options than private loans, and with President Biden still working to provide forgiveness on a large amount of student loans, who knows what the future holds for paying off student loan debt?
Young graduates have, seemingly, all the time in the world to pay off their student loans. However, older borrowers with outstanding debt might need to prioritize retirement savings.
Your Employer Contributions
According to CNBC Make It, the SECURE 2.0 Act of 2022 will make it possible for employers to match a worker’s student loan payment by contributing to their workplace retirement plan starting in 2024. If a company agrees to match a certain percentage of your salary in contributions, you should seriously consider your approach to investing while you prioritize paying down high-interest student debt.
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This article originally appeared on GOBankingRates.com: Kevin O’Leary: You Should Pay Off Your Student Loans and Invest a Portion of Your Income — How To Do Both