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A good return on investment

Question: Hello -- My wife and I together have ~$330,000 in student loans from professional school. I have $2,000.00 every month to save / invest / blow after all bills are paid. If I put that toward principal payments on the student loans, can I view that as being an investment with a return equal to the interest rate on that loan? Or should I think about it in some other way.

Example: The student loan with the highest interest rate bears interest at 8.5%. If I put $2,000 toward that, can I view that as making a $2,000 investment that returned 8.5% this year? If I can view it that way, that seems like a pretty good guaranteed rate of return, since those debts aren't going away until I pay them. Thank you for your time. Tad, Georgetown, TX

Answer: I had to look several times to make sure I had read the student loan debt number right. You and your wife owe a lot for your professional education. Clearly, you're also making the kind of income that justifies an investment of that sort. Good for you.

Your intuition is right. You're earning an 8.5% return on investment when you pay down that particular loan. It's a good use of the extra money every month, assuming you've set aside money for unplanned and planned expenses--the so-called emergency fund.

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Chris Farrell is the economics editor of Marketplace Money.
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I'm guessing you and your wife both went to law school and now have jobs at big law firms. Is this right?

Hi --
I'm 55 years old and recently divorced.
my earnings a year are 35,000.00 and I only have 5,000.00 on my 401.K
I have 100,000.00 after the divorce settlement but no home, so I rent for 1,650.00 a month. I don't know what I should do with the money. I rent in a nice affluent neighborhood where I want to stay, and to buy a house in this area for the money I have is out of the question. Some people tells me I should buy an investment home and rent it out so I can have some income instead of having the money on a savings account. My credit score is a shameful 450 after a bad divorce. My friend has an investment home and she clear 900.00 a month.
I have 100,000.00 in saving doing nothing in the bank except for the security of the available cash.
Should I invest in a home part of the money or keep in the savings or any other advice?
thank you in advance
Susy

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