I recently graduated college with about 14,500 total in student loans. I have a Stafford loan, which is about 4500 dollars, and the rest is a private loan, about 10 grand.
Both loans are in their grace period until November. I know the private loan has a variable interest rate which hovers between 2.9 and 3.2 percent. I’m unsure about the Stafford loan’s interest rate. Anyways, I’d like to pay these loans off quickly. I’d also like to open a Roth IRA and contribute $5,500 per year until I retire.
I earn around 58,000 per year, and I could pay off my loans entirely this year before January 1st, 2014 but I wouldn’t be able to contribute to my Roth IRA until next year. Since I began my job in June, I’ll earn around 28K this year.
I’m also in desperate need of a newer vehicle, as my toyota corrolla is about to shit the bed. I’m looking to purchase a vehicle for around 20K this year or the next, so its an anticipated expense that’s coming up fast.
So is it better to pay some interest on the loans and contribute to the Roth IRA? I don’t want to miss a year of the effect that compounding has on a Roth IRA, but I don’t want to lose money paying interest on student loans either.
Could anyone provide some insight on what’s best to do? I appreciate your help!