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Be Debt Free, or is there such thing as "good debt"?

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    #16
    Me too, I've been using this method to fight my debt!

    Yeah I also think the greatest approach is an aggressive set of extra work (not an un-reasonable amount, just a few hours a day) is the best thing that has allowed me to fight my debt. In a strange way it came from a place that I never thought it would because I HATE with a passion all the online marketing "systems" and all that garbage. But I'm so glad I found one I actually trust and gave it shot, it's been a big deal to me to do it from home

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      #17
      Originally posted by Newguy99099 View Post
      I have a full time job, and have paid off all debts with the exception of my student loans. I make $60k per year and I am 28. I have $50k left in student loan debt at 3.5% interest rate. I rent an apartment. I still have another 26 years left to pay off my loan. I put away the full $5,000 - $5,500 in my Roth IRA each year.

      I am wondering if I should be throwing all "extra" money at the student loan to pay it off, or if that interest rate is so low (not only today but also in 10 or 20 years from now, with inflation), that I should be using extra money to invest in a low risk mutual fund, investment real-estate, index funds or put away for other retirements. I am getting married this March and would also like to have money saved to make a good down payment on a home in the next 6-18 months.

      I hope I answered the questions needed for you to offer me help but if not, please ask. Thank you.
      Mark
      Personally, I don't think any kind of debt is "good" debt.

      This is the definition from http://www.investopedia.com/terms/d/debt.asp:

      Definition of 'Debt'

      An amount of money borrowed by one party from another. Many corporations/individuals use debt as a method for making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

      What I've highlighted above in bold definitely sticks out to me as a negative thus eliminating any idea of "good" debt. I don't like the idea of borrowing money and paying interest to someone else when you're debt-free, you can pay interest to yourself.

      Again, this is my personal opinion as I try to become debt-free.

      Sorry for getting off topic...

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        #18
        Personally, I believe there is no such thing as "good" debt.

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          #19
          Originally posted by autoxer View Post
          Make sure you look specifically at your tax situation. The loan interest may be deductible, but it only really helps by the amount it is over the standard deduction. If you don't have enough deductions to itemize taxes, then there is no tax benefit to paying loan interest.
          Student loan debt interest is not deducted on Schedule A, but directly on Form 1040. In other words, you do not have to itemize to deduct it.

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            #20
            Originally posted by Petunia 100 View Post
            Student loan debt interest is not deducted on Schedule A, but directly on Form 1040. In other words, you do not have to itemize to deduct it.
            Ah, that is interesting, but I just noticed that it also gets phased out with higher incomes.

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              #21
              Originally posted by Newguy99099 View Post
              Thank you for your answers. May I ask another way - if I have the $50k already saved in a CD which offers a 1-Time withdrawal without penalty, should I take that money and pay off all my student load debt, or still just pay half and invest the other half? My question isn't so much about "all or nothing" as it is about the idea of "good debt".
              Is there ever an interest rate percentage where it's better to just make regular monthly payments and use the other money to invest in something that offers a higher interest rate?
              I'm not sure if this is as simple as mathematics or if its a philosophy or how to move forward but thank you for your help
              As a general rule you never want to make just a minimum payment on anything. Paying even $50 or $100 more than the minimum payment is boost your credit and get rid of the debt a lot faster since the amount over the minimum payment will go mostly on the principal balance. So your "regular" payment should always be more than the minimum. So to answer your question if you find an investment option that you can contribute to monthly that earns a higher rate than the interest rate on your debt then you should absolutely invest in it. So long as you make the payment every month it will slowly bleed away the debt while increasing your credit and you will have a great investment to throw that extra money into once all is said and done.

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