Let’s say that you are a recent college graduate and that you’re trying to determine how you can save for retirement while paying down your student loans. Most advisors seem to agree that at any given moment, you should be doing a bit of both – paying down your loans while saving for retirement. One of the first things you’ll want to consider is the interest rate on your student loans. When you pay down your debt, essentially, your rate of return is guaranteed. If you pay down your debt by let’s say a thousand dollars, it means that you won’t have to pay any interest on that amount into perpetuity. Still, the math is complicated.
Anirban tells us why.