If you’re a new college graduate and have student loans to pay off, you may have difficulty prioritizing your loan payoff vs. saving for retirement. Money Magazine’s personal finance expert Walter Updegrave tackles the topic in his latest Q&A video for CNNMoney.
Updegrave suggest that once a new college graduate gets a job, they need to focus first on legally binding obligations like student loans. Once you are able to meet this obligation then focus on building up an emergency fund. Any money above and beyond this should go into long-term or retirement savings for the first two or three years until you’ve settled into your new career. At this point, Updegrave’s advice is to consider putting this extra money towards your student loans to expedite the payoff.
While Updegrave’s advice is sound, I have a different suggestion. Don’t use student loans to pay for college and then you won’t have to worry about choosing between retirement savings and debt payoff. Although this may sound difficult, it is doable. There are students at universities across the nation that are paying for their college education without taking out any loans. Imagine what your long-term savings would look like if you were able to save your student loan payment every month instead of sending it off to your loan servicing company.
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