If you do have to weigh one financial priority against another, compare the interest rate you are paying on your student loans versus the return you would expect to earn on your retirement investments.
If the after-tax interest rate on the loan is higher than the expected return on the savings, you may want pay more attention to paying down debt.
For the 2018-2019 academic year, rates run from 5.05 percent for direct loans for undergrads to 6.6 percent for direct unsubsidized loans for graduate and professional students.
If the interest on your student loans is 5 percent, it might be hard to match that return on an after-tax basis through your investments.
You may also be able to lower your interest rate on your student loans substantially, even as low as 3 percent or 4 percent, by refinancing.
But in this case, weigh your options carefully.
Refinancing a private loan will not provide options that come with a federal loan, including income-based repayment programs and loan forgiveness, for those who would qualify.
Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.
— CNBC’s Lorie Konish contributed to this report.
“On the Money” airs on CNBC Saturdays at 5:30 a.m. ET, or check listings for air times in local markets.
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Source : CNBC
