For context: I am about to be 27 (M) and am starting a job later this month. I have been considering various different methods to attack my debts, which are below:
Student Loan - $24,288.77 @ 5.75%
Car Loan - $7,749.51 @ 3%
Here is what I'm thinking: I consolidate my student loan to be a 5-year payment term with a variable interest rate of around 3.25% (this is around what I am getting offered). Since both of my debts are now low interest, I can afford to max out some retirement vehicles (401k, Roth IRA, maybe HSA). I got offered a 6% full match on my 401k from my employer, which is very generous and will help a lot. I will be making a 90k salary at this job as well. I don't have many expenses, so I will throw any extra money at my debt instead of investing in any after-tax accounts.
This sounds good in my head, but the only caveats I see are:
- The stock market is risky - It's been good for the last half-decade or so, but if it drops I'm going to lose out big time where I could have made a guaranteed 3% ROI on my debt.
- The Federal Reserve may be raising interest rates soon - This will increase the cost of my debt and may add risk if I lose my job or something.
My alternative idea is obviously to contribute to the match, pay down the rest of my debt as fast as possible, and then once all my debts are paid, to max out my retirement. However, this seems a bit like I'd be sacrificing a lot of future money due to compound interest.
So PF....how does this sound?