Originally Posted by TeeKay
Okay finance brahs...I could use some advice if someone would be so kind.
I owe 26k in undergrad debt at an interest rate of 6.50%
Next year my fiancee will be starting a job with access to a 403b and a starting salary of 51k. If she contributes nothing, the university automatically puts in 5% of her gross income. If she contributes 3% of her pay, the university puts in additional 5% for a total of 10%
My question is does it make more sense to contribute that 3% of her income 51k salary to her 403b, or would that money be better spent helping pay off my loans?
Do tax shields exist on personal debt or is it only corporate debt? I don't actually know what a 403b is, but I assume it's just some investment vehicle.
If you pay down your debt you get a return of 6.5% times 1 minus the tax rate assuming there is a tax shield. If she puts in 3% of her income and gets 5% you get a return of 66.7% multiplied by the return of 403b. You should put the money in the 403b.