Although I personally believe you’ll do better than 5 percent investing in stocks over the long run, many people may disagree.In this case, whether you invest or repay the loan early, you come out even.What they’ve done seems cool so far; I’m not sure it’s necessary if you only have a couple of loans, but if you have a half dozen or more this may definitely help keep them straight. You probably know by now that if you stop paying a credit card bill, your credit score goes down and it will be difficult to get new credit when you need it.The bank will send your account into collections and you’ll get lots of phone calls and letters until you pay up.This is another reason I prefer hanging onto extra cash and investing instead of paying off a student loan early.There is, however, one big advantage to Investment B: The return is guaranteed.shows you charts of your loans by balance, payment, and APR, so you know where to focus your payments.You can also get targeted advice on applying for options like deferments, payment plans, forbearance, or consolidation.
In some cases, you may also be eligible for partial or complete loan forgiveness if you work in public service. However, in an effort to make sure everybody “gets it,” we’ve oversimplified the equation. “Good” debt is “good” because it’s used by appreciating or income-producing assets like a business, real estate, or an education.
Although you might squeeze average annual returns of 12 percent or more out of the stock market, you can’t count on it.
This is where the decision gets tricky: It all depends on the average annual return you expect to earn from your investments and how that compares to your student loan interest rate.
You can even be taken to court and a judge can order your wages garnished.
If, however, you get into such serious financial straights that you need to declare bankruptcy, a judge may rule that you do not have to pay credit card debts and you get a fresh start.