Ramit Sethi’s 3 Choices for Paying Off Student Debt | I Will Teach You To Be Rich

August 10, 2010 by Paul Richlovsky

We’ve talked before about student debt in the context of national skyrocketing default rates, but today I’d like to cite personal advice from the author of The New York Times bestseller I Will Teach You To Be Rich and founder of iwillteachyoutoberich.com, Ramit Sethi.

First, I must say that this book is an excellent manual for how to deal with money—for students, young adults, or people at any stage of life who want to be conscious of their spending and investments.  It combines accessibility with practicality and is structured in a way that you can take each chapter by itself as a full lesson. At the same time, the book progressively builds into a seamless whole, and the sharply humorous tone throughout actually makes personal finance warm and interesting.

This being said, here are the three options Sethi presents in the book (pp. 220-221)  for those who struggle with the question of whether to eliminate student debt or make more investments:

• Pay the minimum, invest the rest simultaneously.
• Pay more than the minimum, then wait until the loans are paid off before you start investing.
• Take a 50-50 split: half goes to students loans, half goes to investments.

He argues that your decision should be based on interest rates.  Namely, if the student loan interest rate is very low, then put more money toward tax-advantaged investments, as these can get you a greater return. See the book—again, which I highly recommend—for more details:

I Will Teach You To Be Rich Ramit Sethi

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Our financial aid section contains information about the different ways to pay for higher education, including scholarships, grants, loans, and advice for filling out the FAFSA.