Pay off $80k+ study loan asap or invest simulatenously with dollar cost average? - Seedly
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Andrew Tan

Asked on 03 Aug 2020

Pay off $80k+ study loan asap or invest simulatenously with dollar cost average?

I have a $80+k study loan at 4.75%PA. My take home is about 4k with year end bonus. I estimate if I were to fully devote my priority to repaying my loan, I can do so in about 3-3.5 years (ave pay back 2k/month)

Should I

Option 1) pay back my loan asap and don't invest any money at all for the 3-3.5 years

Option 2) invest small amounts ($400 maybe) in my portfolio of local/US ETF, S-REITS, equities every month (DCA) and to rebalance biannually. But take 3.5-4 years to pay off my loan

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Hi Andrew,

Explore with our local banks on whether you are able to refinance your student loan. If you are able to refinance your 80k, to present day interest rates of 1.5% p.a. You should be able to pay back your principle + interest within 5 years.

If you use an amortization calculator, based on your 2k budget per month, you could be paying of around 1.4k of your principle + interest, with a budget of 600 to invest monthly still.

You should try and spread out the loan as much as you can, as student loans are considered a good kind of debt. As you progress in your career, you would be able to pay off your loan as a small fraction of your take home income.

With some planning you can do both,

Based on your 2k budgeting,

  • 16.8K for Loan repayment yearly

  • 7.2K annually for investment

  • At a conservative 6% ROI yearly, over the next 5 years, if you invest your 7.2k yearly, your investment portfolio could be around 40.5k, from the invested 36k.

As much as possible, if your situation allows for it, stay invested at an early age. You will thank yourself for it in the future.

Hope i was able to answer your queries!

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Andrew Tan
Andrew Tan

04 Aug 2020

Thank you for the very insightful answer. I have always wondered about refinancing my student loans but I always assumed it was for housing loans only. I will go read up more about what are my options . Thank you once again
Duane Cheng
Duane Cheng

04 Aug 2020

You're most welcome! Banks can consolidate debt also, should that facility be required.
Thank You!
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