I (26 y/o) currently have $140k in student loans through SoFi (private). The rate is 4.36% and the monthly payment is $1812 per month (about 8 years of payments to go). It's a steep loan but helped me land a solid job where I net about $150k/yr.
Rather than pay off the loan, I've been dumping extra cash into the market. I follow a Boglehead philosophy and have invested about $100k in VTI and $50k in VEU over the past four years. About $12k in unrealized gains. My reasoning has been that the amortized rate of return in the market is expected to be higher than the amount in interest I pay on the loan, especially since I locked in a rate lower than the current fed rate and since we've been experiencing high inflation.
I'm wondering if you all agree with my reasoning. The only way I see a benefit to paying off the loan is if it frees up the monthly payment as cash flow, and the only way I could do this is if I pay off the loan in one fell swoop.
So what would you do? Let's say you were magically gifted 150k in stocks, but to receive them you needed to take on this $140k loan at 4.36% with a required monthly payment of $1812 until it's gone. Pay off the loan, let the stocks ride, or something else?
original posted by fa13119311 to r/personalfinance on Thu, 29 Feb 2024 01:34:53 GMT.