Ask HN: Loans as a Limit to Innovation

[weems]

The ~$40,000 in Student Loans that I currently owe is a limit to the amount I can innovate. Professionally in the form of language learning as well as in general. I was wondering if anyone has any experience or ideas about investing in mutual funds or other trading items to shorten loan payback time. (Currently I am looking at 10 Years!) [Tuition.io](http://tuition.io) has been invaluable in this effort to answer the questions of how much I actually owe, how much is reasonable as a montly payment, etc.

[brudgers]

The beauty of student loans (from a bank's perspective) is that they are hard for the loanee to discharge and (these days) carry rates well above market with very little risk.

Maybe you can get lucky and out invest financial institutions. But it will be almost certainly be both lucky and unlikely.

The typical way debtors win is via inflation which allows old expensive dollars to be paid down with inflated dollars. Since US monetary policy has kept inflation low (actually just wage inflation) for decades, don't bet on this happening either.

During adulthood ten years turns out not to be that long after all.

[jacquesm]

The best way to get rid of that loan is to cut down your expenses while holding down a well paying IT job. You should be able to get rid of it in a year or less, investing in mutual funds is not going to make a huge difference until you've amassed more than enough capital in order to pay back the loan, so until then you're much better off simply paying off the loan (less risk too!).

[weems]

I have the job, its the resources. Right now at ~450/mo, I am still at 10 years payback time, according to http://tuition.io/.

[Spoom]

How much are you spending per month? Surely there are things you could cut.

I recommend setting up a Mint.com account and taking a look at your monthly expenses. You might be surprised at how much you're spending on, say, restaurants or fast food per month.

In general, I would also recommend reading http://mrmoneymustache.com/ for good ideas on ways to lower your expenses. Here's the uber-post containing the most basic (and most effective) ideas: http://www.mrmoneymustache.com/2013/02/22/getting-rich-from-...

Any savings can be paid right toward the loan as additional principal. (Note that your loan may have a prepayment penalty; you'll want to check before you begin sending in more than the expected payment.)

Edit: According to https://commonbond.co/blog/the-truth-behind-student-loan-pre... , no federal student loans have prepayment penalties, and it is illegal for private student loans to charge them as well as of 2008.

[jacquesm]

Don't they allow you to pay back faster? 450/month is 100 months, surely if you have a well paying IT job you can do a lot better than that?

[seekingcharlie]

Surely you can afford more than $450/mo ??

[weems]

If I paid everything I made every month it would be $1584 /mo. 40 months. 3 years 4mo.

[seekingcharlie]

Why? Is that actually what you get paid each month or are there are issues (family, medical etc)? If not, you can definitely get a better job than that, especially in IT!

[jacquesm]

You need a better job.