Are there good investment options to pay off student loans?
Paying off your student loan is an investment, and a completely risk-free one.  Every payment of your loan is a purchase of debt at the interest rate of the loan.   It would be extremely unusual to be able to find a CD, bond or other low-risk play at a better rate.  Any investment in a risky asset such as stocks is just leveraging up your personal balance sheet, which is strictly a personal decision based on your risk appetite, but would nearly universally be regarded as a mistake by a financial advisor.  (The only exception I can think of here would be taking out a home mortgage, and even that would be debatable.) Unless your loan interest rate is in the range of corporate or government bonds -- and I'm sure it isn't -- don't think twice about paying them off with any free cash you have. What you're getting at is the same as investing with leverage. Usually this comes in the form in a margin account, which an investor uses to borrow money at a low interest rate, invest the money, and (hopefully!) beat the interest rate.  is this approach unwise? That completely depends on how your investments perform and how high your loan's interest rate is. The higher your loan's interest rate, the more risky your investments will have to be in order to beat the interest rate. If you can get a return which beats the interest rates of your loan then congratulations! You have come out ahead and made a profit. If you can keep it up you should make the minimum payment on your loan to maximize the amount of capital you can invest. If not, then it would be better to just use your extra cash to pay down the loan.  [are] there really are investments (aside from stocks and such) that I can try to use to my advantage? With interest rates as low as they are right now (at least in the US) you'll probably be hard-pressed to find a savings account or CD that will return a higher interest rate than your loan's. If you're nervous about the risk associated with investing in stocks and bonds (as is healthy!), then know that they come in a wide spectrum of risk. It's up to you to evaluate how much risk you're willing to take on to achieve a higher return.
Is there anything here I should be deathly concerned about? A concern I see is the variable rate loans. Do you understand the maximum rate they can get to? At this time those rates are low, but if you are going to put funds against the highest rate loan, make sure the order doesn't change without you noticing it. What is a good mode of attack here?  The best mode of attack is to pay off the one with the highest rate first by paying more than the minimum. When that is done roll over the money you were paying for that loan to the next highest. Note if a loan balance get to be very low, you can put extra funds against this low balance loan to be done with it. Investigate loan forgiveness programs. The federal government has loan forgiveness programs for certain job positions, if you work for them for a number of years. Some employers also have these programs.  What are the payoff dates for the other loans? My inexact calculations put a bunch in about 2020 but some as late as 2030. You may need to talk to your lender. They might have a calculator on their website.  Why do my Citi loans have a higher balance than the original payoff amounts? Some loans are subsidized by the federal government. This covers the interest while the student is still in school. Non-subsidized federal loans and private loans don't have this feature, so their balance can grow while the student is in school. For the sake of sanity, pay off your debt maybe not all but some part of it. You never know what the monster, the stock market may turn out to be. It may gobble up all your money without belching or it may gift you with a bounty. But if you pay off all your debt and the stock market monster is rewarding everybody else, you may rue your decision. So put some part of it the markets too, but a more safer one would be a good bet. The proportions of money for loan repayment and for investing in markets is your decision, after you evaluate all your future predictions. What is my best bet with the 401K? I know very little about retirement plans and don't plan to ever touch this money until I retire but could this money be of better use somewhere else?  You can roll over a 401k into an IRA. This lets you invest in other funds and stocks that were not available with your 401k plan. Fidelity and Vanguard are 2 huge companies that offer a number of investment opportunities. When I left an employer that had the 401k plan with Fidelity, I was able to rollover the investments and leave them in the existing mutual funds (several of the funds have been closed to new investors for years). Usually, when leaving an employer, I have the funds transferred directly to the place my IRA is at - this avoids tax penalties and potential pitfalls.   The student loans.... pay them off in one shot?  If the interest is higher than you could earn in a savings account, then it is smarter to pay them off at once. My student loans are 1.8%, so I can earn more money in my mutual funds. I'm suspicious and think something hinky is going to happen with the fiscal cliff negotiations, so I'm going to be paying off my student loans in early 2013.  Disclaimer: I have IRA accounts with both Fidelity and Vanguard. My current 401k plan is with Vanguard. Obviously, you should not buy stock when the option is to pay down your debt. However, your question is different. Should you sell to reduce debt. That really depends on your personal situation. If you were planning to sell the stock anyway, go ahead and reduce your loans. Check out how the stock is doing and what the perspectives are. If the stock looks like it's going down, sell... Do you have savings? Unless you do, I should advise to sell the stock at any rate. If you do have savings, are they earning you more (in percentage) than your loans? If they are, keep them... "they said the expected returns from the stock market are around 7-9%(ish).  (emphasis added) The key word in your quote is expected.  On average ""the market"" gains in the 7-9% range (more if you reinvest dividends), but there's a great deal of risk too, meaning that in any given year the market could be down 20% or be  up 30%. Your student loan, on the other hand, is risk free.  You are guaranteed to pay (lose) 4% a year in interest.  You can't directly compare the expected return of a risk-free asset with the expected return of a risky asset.  You can compare the risks of two assets with equal expected returns, and the expected returns of assets with equal risks, but you can't directly compare returns of assets with different risks.  So in two years, you might be better off if you had invested the money versus paying the loan, or you might be much worse off.  In ten years, your chances of coming out ahead are better, but still not guaranteed. What's confusing is I've heard that if you're investing, you should be investing in both stocks and bonds (since I'm young I wouldn't want to put much in bonds, though). So how would that factor in?  Bonds have lower risk (uncertainty) than stocks, but lower expected returns.  If you invest in both, your overall risk is lower, since sometimes (not always) the gain in stocks are offset by losses in bonds).  So there is value in diversifying, since you can get better expected returns from a diversified portfolio than from a single asset with a comparable amount of risk.  However, there it no risk-free asset that will have a better return than what you're paying in student loan interest." As weird as it seems, 5 years is not a long term investment.  Furthermore investing is about accepting risk.  Based on your criteria for the alternative to a down payment, I think your only choice is to make the larger down payment. If however, you were willing to invest that money for the long term (in a retirement account or an educational account for example) then I would definitely encourage you to invest.  I think the chance that a long term investment in a diversified investment account will exceed 3.25% is pretty high.  However, that is only my opinion, and I am not clairvoyant, so your let your personal tolerance to risk be your guide. But again, based on the way you asked it, down payment all the way.  Your time frame means you are not an investor.  Therefore your only option for risk free storage of money is an FDIC insured account, which might pay a little less than 1% for the next 5 years.  A bigger down payment will have a 3.25% return in this case. In that order.  #4 and #5 could be swapped if the interest rate on the loans is really low. Just for another opinion, radio host Clark Howard would suggest killing the private student loans as quickly as possible.  The only reason is the industry around private student loans has fewer rules as to how they interact with you, and they have historically been very unpleasant if you have to deal with them in bad financial times. As a safety net, get rid of the private student loans as your main focus while you have the money and rates are low.  Not for financial reasons per se, but for peace of mind. The other advice in this question are great, but nobody mentioned the potential dark side of private student loans. "Mathematically, the wisest choice is to invest your extra money somewhere else and not pay off your 0% loan early. An extreme example highlights this. Suppose some colossal company offered to loan you a billion dollars at 0 % interest. Would you take it? Or would you say ""No thanks, I don't want that much debt."" You would be crazy not to accept. You could put that money in the safest investments available and still pocket millions while making the minimum payments back to them. Your choice here is essentially the same, but unfortunately, on much smaller scale. That said, math doesn't always trump other factors. You need to factor in your peace of mind, future purchases, the need for future borrowing, your short term income and job security, and whether you think you can reliably make payments on this loan without messing up and triggering fees that wipe out the mathematical advantage of slow paying the loan. You are fortunate because you really can't make a wrong choice here. Paying off debt is never a bad choice IMO. However, it may not always be the best choice." Forgive me as I do not know much about your fine country, but I do know one thing.  You can make 5% risk free guaranteed.  How, from your link: If you make a voluntary repayment of $500 or more, you will receive a bonus of 5 per cent. This means your account will be credited with an additional 5 per cent of the value of your payment. I'd take 20.900 of that amount saved and pay off her loan tomorrow and increase my net worth by 22.000. I'd also do the same thing for your loan.  In fact in someways it is more important to pay off your loan first.   As I understand it, you will eventually have to pay your loan back once your income rises above a threshold.  Psychologically you make attempt to retard your  future income in order to avoid payback.  Those decisions may not be made overtly but it is likely they will be made. So by the end of the day (or as soon as possible), I'd have a bank balance of 113,900 and no student loan debt.  This amounts to a net increase in net worth of 1900. It is a great, safe, first investment. "The rate difference between your student loans and the historical yearly average growth in the S&P500 isn't large enough for me to play the ""pay minimums and invest the rest"" strategy.  If your loans were 2%, I might think about it. However, the 4% loans are guaranteed and mandatory expenses; discharging them even in bankruptcy is unlikely.  The quicker you pay them off, the sooner you won't have them hanging over your head in case of a ""financial setback"" (job loss, large expense uncovered by insurance, etc). (One good reason to pay the minimums, though, is to build up a $1K emergency fund.  When your debts are paid, then you can increase its size.)" "I agree with @Pete that you may be well-advised to pay off your loans first and go from there.  Even though you may not be ""required"" to make payments on your own loan based on your income, that debt will play a large factor in your borrowing ability until it is gone, which hinders your ability to move toward home ownership.   If you are in a fortunate enough position to totally pay off both your loan and hers from cash on hand then you should.  It would still leave you with more than $112,000 and no debt, which is a big priority and advantage for a young couple. Mind you, this doesn't keep you from starting an investment plan with some portion of the remaining funds (the advice to keep six months' income in the bank is very wise) through perhaps a mutual fund if you don't want to directly manage the investments yourself.  The advantage of mutual funds is the ability to choose the level of risk you're willing to take and let professionals manage how to achieve your goals for you.  You can always make adjustments to your funds as your circumstances change. Again, I'd emphasize ridding yourself of the student loan debt as the first move, then looking at how to invest the remainder." Please direct personal finance questions to /r/personalfinance  However, my opinion is that you are unlikely to earn more than 7% annualized returns from any combination of asset offerings in your 401k over the next several years; therefore, you should pay off your student loans first. I am ignoring tax consequences, but /r/personalfinance may be able to provide a more quantitative answer. while not stated, if you have any debt at all, use the $3000 to pay it off. That's the best investment in the short term. No risk and guaranteed reward. College can invite all sorts of unexpected expenses and opportunities, so stay liquid, protect working capital. "There are several ways you can get out of paying your student loans back in the USA: You become disabled and the loan is dismissed once verified by treating doctor or the Social Security Administration. You become a peace officer. You become a teacher; generally K-12, but I have heard from the DOE that teachers at state schools qualify as well. So the ""malicious"" friend B is prescribing to the theory that if one of those conditions becomes true, friend A will not have to pay back the loan. The longer you drag it out, the more chance you have to fulfill a condition. Given that 2 of these methods require a commitment, my guess is that they are thinking more along the lines of the first one, which is horrible. Financially, it makes no sense to delay paying back your loans because deferred loans are only interest-free until you graduate and are past your grace period, after which they will begin accruing interest. Unsubsidized loans accrue interest from the day you get them, only their payback is deferred until you graduate and exhaust your grace period. Anytime you ask for forbearance, you are still accruing interest and it is capitalizing into your principal — you are just given a chance to delay payback due to financial hardship, bad health, or loss of job. Therefore, at no point are you benefiting beyond the time you are in school and getting an education, still looking for a job, or dealing with health issues. In the current market, no CD, no savings account, and no investment will give you substantially more return that will offset the loss of the interest you are accruing. Even those of us in the old days getting 4.X % rates would not do this. There was a conditional consolidation offer the DOE allowed which could bring all your loans under one roof for a competitive 5.x-6.x % rate allowing you a single payment, but even then you would benefit if you had rates that were substantially higher. From a credit worthiness aspect, you are hurt by the outstanding obligation and any default along the way, so you really want to avoid that — paying off or down your loans are a good way to ensure you don't shoot yourself in the foot." Something you may want to consider if you are still choosing a bill-paying service is the contingency policies of the service.   I just suffered an extended stay in a hospital and my officially (in writing) designated Power of Attorney was NOT granted access to my PAYTRUST account.  Thus they could NOT take care of my finances easily.  After my discharge, I contacted PAYTRUST and they had canceled my account and would not reactivate it.  This is after over fifteen years of loyalty.  Needless to say there was much financial chaos in my life due to their negligence.  They were staunch in their policy and said officially that if they need to acknowledge a Power of Attorney, the ONLY thing they will allow the POA to do is close the PAYTRUST account.  How's that for customer service?!  Caveat Emptor. I am now seeking another service and will be asking about their POA policies.