forreala said:
Couldn't disagree more. You get to write off your student loan interest on your taxes and you get a very low interest rate for 30 years. If anything you should pay off your mortgage as this will build equity and net worth.
Of course you should talk to a financial advisor and run some numbers once your final S.L. interest rate is determined. Even if you earn a moderate return of 6% on your investments it's better to keep your student loan for full term and invest instead or paying down the loan (remember your tax writeoff). Just don't go out and use your extra $$ to buy a Porche and bling bling.
these interest deductions are not automatic. you have to have income qualifications to take the credit. here is the relevent info from the irs:
the maximum deduction is $2500 if you are married filing jointly and are making less than $100K; the deduction is reduced if you are married filing jointly and make between $100K-130K. if married and filing jointly and making more than $130K, there is no deduction.
if you're single, head-of-household or a widow(er), the maximum deduction is available if you make less than $50K. between $50K-65 the deduction is phased out. if you make more than $65K, there is no deduction.
the average salary (based on
http://www.physicianssearch.com/physician/salary1.html) for docs in their first year of practice in all specialties is a little bit more than $150K. and that salary information was based on 2002 data. my assumption is that once we're out of our residency, we're not going to get the tax deduction.
i understand the idea of investing in the market and getting a better return on my money... but it makes more sense to me to pay it off if 5 years, minimizing my paid interest and then take money and invest it in whatever i want. i'm then in a position of freedom in that i don't have to work anywhere i don't want to work for anyone i don't want to work for when i don't want to work for them... my oncologist friend has been out for about 7 years and has an entire year's salary in liquid assets. he has no debt (no even his houses - two of them). he calls it his "---- you account" and says that the level of freedom that it affords him is unbelievable. he goes to work because he loves it, not because he has to make money to pay bills. he paid off his loans during residency/fellowship and first couple years of practice
i have a hard time believing that dragging $200K dollars out over 30 years is the best idea. a loan at 4% on $200K for 30 years is going to cost $343,738.80 to pay off (payments of $954.83/month). adding about 72% onto the principal in interest. the same loan over 5 years will cost $220,998.26, an increase of 10.5% on the loan (payments of $3683.30/month).
if we are unable to consolidate loans when we graduate, this is all a moot point anyway. it looks like we're all going to be facing variable rate loans, in which case, no one in his/her right mind would tell you to stretch it out.