Student Loans and Getting Started

[tweedledee26]

Age: 25
I am new to this site, but I feel as though I have a decent grasp on investing, though nothing insane. My questions pertain to (1) how quickly I should pay off my student loans and (2) asset allocation. Regarding student loans, I do not want to merely pay them off to get the weight off my shoulders. I want to do what makes financial sense. If that does mean paying off ASAP, I get that, but I do not want to do it simply for that reason. Regarding asset allocation, when I graduated from high school, I got a decent amount of money, and I invested in IXUS, IJR, and ITOT. However, as I grew older, I read books that said simply invest in a stock similar to VTI. Thus, since that initial investment, I have only invested in VTI. I wonder if this is correct, or should I be diversifying more? I will graduate school in May; thus, I do not have substantial income until then, nor do I need to start paying off my student loans until November. I am more looking how I should deal with my finances once I start my job. Thanks for the help! I am excited to be here!

Investments

Brokerage
VTI: $1,667
IJR: $108
ITOT: $9.215
IXUS: $223
RSPS:161

Roth IRA
VTI: $1,372

Money Market
VUSXX: $4,423

Student Loans
$16,542 @ 8.08% interest
$20,907 @ 7.04% interest
$22,074 @ 6.504 intrest

Salary
Starting in September $145k

[toddthebod]

Age: 25
I am new to this site, but I feel as though I have a decent grasp on investing, though nothing insane. My questions pertain to (1) how quickly I should pay off my student loans and (2) asset allocation. Regarding student loans, I do not want to merely pay them off to get the weight off my shoulders. I want to do what makes financial sense. If that does mean paying off ASAP, I get that, but I do not want to do it simply for that reason. Regarding asset allocation, when I graduated from high school, I got a decent amount of money, and I invested in IXUS, IJR, and ITOT. However, as I grew older, I read books that said simply invest in a stock similar to VTI. Thus, since that initial investment, I have only invested in VTI. I wonder if this is correct, or should I be diversifying more? I will graduate school in May; thus, I do not have substantial income until then, nor do I need to start paying off my student loans until November. I am more looking how I should deal with my finances once I start my job. Thanks for the help! I am excited to be here!

Investments

Brokerage
VTI: $1,667
IJR: $108
ITOT: $9.215
IXUS: $223
RSPS:161

Roth IRA
VTI: $1,372

Money Market
VUSXX: $4,423

Student Loans
$16,542 @ 8.08% interest
$20,907 @ 7.04% interest
$22,074 @ 6.504 intrest

Salary
Starting in September $145k

Welcome to the forum!

It does not make sense to me for you to have a single dollar in a taxable brokerage account invested in equities.

Review the funding priority chart on the wiki: https://www.bogleheads.org/wiki/Priorit ... nvestments

Your taxable brokerage account is 8th on the list. If I were you, I would liquidate your brokerage account, decide how big of an emergency fund you want, put that amount in VUSXX, and put the rest towards your 8% student loan.

Come September, you should max out your retirement accounts (pre-tax 401(k) and Roth IRA), then put the rest towards your student loans to pay them down as fast as possible.

[Carl53]

Consider what your near term expenses might be. Moving costs, household setup costs, deposits, vehicle purchase are other items that you might want to get covered before you aggressively attack the loans. You don't want to set yourself up to need to use credit because you have no liquidity. I agree with todd that other than playing with the markets, you'll be better served by keeping things simplified.

[WinstonTeracina]

Congratulations on your upcoming graduation!

I agree with toddthebod—reviewing the Bogleheads wiki on investment priority is a great starting point. You don’t have to follow it exactly, but it will give you a solid foundation.

To address your questions specifically, I would prioritize paying down your student loans before investing in a taxable account. The historical return of the U.S. stock market is around 9% before taxes. By paying off your highest-interest student loans, you effectively secure a risk-free, after-tax return of 8% or 7%, which makes it a no-brainer. Some may reasonably debate whether paying off a 6% loan should take priority over investing, but personally, I’d pay it off as quickly as possible since I’m extremely debt-averse.

If I were in your position, I’d take the following approach:

1. Keep living costs low

• Limit housing expenses and avoid lifestyle inflation (e.g., new car, designer clothes, unnecessary purchases).

• By maintaining a frugal lifestyle, you can pay off your debt quickly—potentially within a year.

2. Simplify your taxable investments

• Sell any losing positions in VTI and ITOT.

• Sell your small positions in IJR, VXUS, and RSPS to streamline your portfolio.

• Keep your asset allocation simple—100% stocks (excluding emergency savings) via a total U.S. market fund and a total international fund, or opt for a one-fund solution like VT.

3. Build an emergency fund

• You can use your Roth IRA as an emergency fund since contributions can be withdrawn tax- and penalty-free.

• If you contribute $7K this year, consider keeping it in a money market fund like VUSXX rather than immediately investing in stocks (if you're using your Roth as your emergency Fund.

4. Contribute to your 401(k)

• Sign up for your employer’s 401(k) and contribute just enough to get the full company match.

5-7. Pay off student loans in order of interest rate

• Pay off the 8% loan first.

• Pay off the 7% loan next.

• Pay off the 6% loan last.

8. Maximize tax-advantaged accounts
Once your debt is gone, maximize contributions to tax-deferred and tax-advantaged accounts:

• HSA (if available)

• 401(k) and Roth IRA (which shoudl be prioritized depends on available Funds in your 401k Plan and your expected income growth during your career)

Taxable Investing

• Invest any additional funds into your taxable brokerage account and/or Series iBonds

Best of luck!

[steadyosmosis]

I agree with toddthebod.

[RetiredAL]

1. Keep living costs low

• Limit housing expenses and avoid lifestyle inflation (e.g., new car, designer clothes, unnecessary purchases).

• By maintaining a frugal lifestyle, you can pay off your debt quickly—potentially within a year.

I will graduate school in May; thus, I do not have substantial income until then, nor do I need to start paying off my student loans until November. I am more looking how I should deal with my finances once I start my job.

tweedledee --- Daughter-in-law graduated Law School 15 years ago with 8x that debt. They continued to live like poor starving students and she paid off her loans in less than 5 years.

[retired@50]

Regarding student loans, I do not want to merely pay them off to get the weight off my shoulders. I want to do what makes financial sense. If that does mean paying off ASAP, I get that, but I do not want to do it simply for that reason.

Student Loans
$16,542 @ 8.08% interest
$20,907 @ 7.04% interest
$22,074 @ 6.504 intrest

Welcome to the forum.
I agree with the others about the debt. Pay it off.

The reason to pay off the student loans is that you'll be earning a guaranteed no-risk return of 8.08%, 7.04%, and 6.504%. Guaranteed returns that high are difficult to come by.

Regards,

[breakfastinbed]

Basically going to echo what everyone else said. In my opinion:

1) Sell everything except VTI in taxable and invest no other money until you get your first paycheck.

2) Contribute maximally to your 401K through job, especially if you get a match. Try to contribute as close to the maximum annually as you can. That includes this year. So if you are going to make $12,000/month, I would figure out your cost of living and contribute everything else to 401K for the rest of 2025. Side note - technically doing Roth 401K contributions would be best for these three months, but you can keep it simple and do traditional.

3) My general recommendation would be to budget annually to contribute to the max to you 401K (traditional) then after taxes and cost of living, divide your remaining money like so:
-Save 20% of your cost of living into a high-yield savings account. This is to build up your emergency fund. So if you cost of living is $3000/month, you'd save $600/month. Do this until you get to 6 months' worth of living expenses.
-Of the remainder, save 20% for fun. You want to live frugally but also want to enjoy life, especially in your 20s.
-Remainder goes into "investments" bank. This can be for Roth IRA contributions, taxable contributions, paying off loans, or reasonable "investments" in yourself (new car, new couch, whatever).

So if after taxes, 401k contributions, and cost of living, you have $5000 left, I'd recommend
-20% ($1250) to emergency fund
-20% of leftovers (20% of $4000, or $800) for fun specifically.
-Everything else ($3200) for investments

The best/safest investment for you at this time is not stocks, but paying off your loans.

[HIMcDunnough]

1. Keep living costs low

• Limit housing expenses and avoid lifestyle inflation (e.g., new car, designer clothes, unnecessary purchases).

• By maintaining a frugal lifestyle, you can pay off your debt quickly—potentially within a year.

Going to echo this one. With that kind of starting income and any meaningful salary growth over the start of your career, you can knock out your loans and amass considerable savings in less time than you think. Once the loans are gone and you're used to saving, you're probably going to find that so long as you keep your housing and vehicle expenses under control, you won't even have to think about budgeting. I know housing has become a lot more expensive in a lot of the country in recent years, but there's always a spectrum of cost options. If you can find a place that's acceptable on the lower end of that spectrum, you're going to be in much better shape than if you splurge for the bigger or more desirable place that's a stretch for your income.

EDIT: There's a better way of saying this. "Living frugally" is less about finding a cheaper streaming service and avoiding Starbucks than it is about having a paid-off car you drive into the ground and a place with rent or a mortgage that's $500 or $1,000/month cheaper than what others say you can afford. There's always going to be situations where practical considerations effectively require you to have a car payment or live in a place that's more expensive than you'd like, but at your income level, that's where the real savings is, not in brewing your coffee at home or watching free TV.

[tweedledee26]

To all,

Thanks so much for all of the helpful information! Now, I have a plan moving forward (I even created a document as a roadmap), and I understand the importance of prioritizing paying off my student loans. I am excited to be a part of the community!

[Cautious Investor]

Your interest rates are rather high. Chancing that the market will consistently see a higher rate of return than the >6% interest rates is a gamble.

Are you a US public servant, or employed in the US by a non-profit (anything public or labeled as a 501(c), this can be a hospital, university, etc)? If so, after 10 years of consecutive payments while working your FEDERAL student loans are forgivable. I am a public servant and this is my personal route because my minimum payments after 10 years will be less than my principal. Let’s just hope the program remains.

If not, I would build up an emergency fund and invest in a work sponsored retirement plan up to employer match (if applicable) but other than that I would focus on paying off debt.

While paying off debt, any student loan interest you pay annually up to $2,500 is a tax write off in the US.

[retired@50]

While paying off debt, any student loan interest you pay annually up to $2,500 is a tax write off in the US.

The ability to claim the $2,500 student loan interest deduction is based on MAGI and filing status.
https://smartasset.com/taxes/student-lo ... -deduction

OP should be able to make this work in 2025 but probably not beyond that based on the income in the first post. I'm assuming the OP is not married, filing jointly.

Salary
Starting in September $145k

Regards,

[Cautious Investor]

While paying off debt, any student loan interest you pay annually up to $2,500 is a tax write off in the US.

The ability to claim the $2,500 student loan interest deduction is based on MAGI and filing status.
https://smartasset.com/taxes/student-lo ... -deduction

OP should be able to make this work in 2025 but probably not beyond that based on the income in the first post. I'm assuming the OP is not married, filing jointly.

Salary
Starting in September $145k

Regards,

Oops. I missed the high salary.