Save, invest, & take out student loans for college costs OR pay cash for college expenses?
Question:
I believe that I can earn greater returns on my money than I would be paying in student loan interest. If I defer my student loan payments, and take out additional loans to pay for my future college expenses (probably about $7,000-$10,000), I estimate that I could save about $400-600 per month. Would it be wise for me to take on additional student debt to start investing, or should I pay my expenses with cash?
Answer:
Personally, I would probably take out new loans for your MBA, but only if you can get them at 7.5% or lower. The interest is tax deductible, so you'll really only be paying 5.63% or less when you start making payments (5.63% assumes 25% tax bracket).
You're right that you can probably do better with your investments than 5.63%--but thats beside the point. You need cash savings and you need to be able to at least get your company match (free money) in your 401k. You don't want to have to take on additional debt if you hit a financial snag down the line (which is inevitable), so it's important to have a cash cushion and add to it every month.
Either way, I'd defer payments on your previous loan. Take advantage of this "free" money as long as you can. Save what you'd be paying in payments and earn interest on it.
Why pay for it if the Air Force will give you the money?
Air Force is not combat trained so you'll never be thrown out in a tent or sleep in a foxhole for weeks. Everything is paid for, you GET paid to learn AND get experience on top of it.
Air Force is the 8-5 M-F job of the military, the weekends are usually yours.
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