Should I Pay Off My Student Loans Early Or Invest My Money?


You might be in a situation where you can pay a little extra on your monthly student loan debt. Should you try and pay down your debt so you pay less interest overall or invest that extra money into something else for your future?

I was in a similar situation and learned some interesting things about myself and how I view debt as I went through the process.

The mistake you are probably making

When I first graduated from college and went through my standard 6 month forbearance period and after that I could barely pay my student loan bills. I would get two checks a month, one for rent and one for my student loans. It sucked.

But as I made more money I had the ability to make an extra $100-$200/mo payment on my student loan.

So I did that. I would pay ahead (principal payment) so I could pay less interest and get the student loan off my plate early. Most millennials will probably think this is a great idea, but I was being short-sighted.

Something didn’t feel right. I felt like I was “wasting” my money by paying off a debt that would be around for a while. I knew I should be investing for my future and it was still going to take me 7-8 years at the rate I was going to pay off my loans. I really didn’t want to wait another decade before I started saving for retirement.

My mental shift

I have always viewed debt as this annoying thing that we are forced into using to live in this world. But now I see it slightly different. I still see it as something that is (at times) unavoidable but I also see it as an everyday part of life. Embrace your debt.

That extra $100-$200 no longer goes to my student loan payments but into my 401k. Why? Because it has a chance to grow, and return money to me. I see the error in my ways of thinking I had to get my debt paid off early. I will always have debt. It will be student loans, then a house, and then my kid’s student loans, etc. Instead of worrying about it, I accept it and find ways to deploy money so it can work for me and cash flow and grow.

Think about it, in 20 years you will have your student loans paid off but the money you invested 20 years ago has a chance to make more for you then the money you put into your loans today. It’s not worth the stress of trying to pay off loans early.

Going forward

From now on, whenever I look to invest my money I try and find things that will return 6%-8%+ that meet my investing principles. I no longer want to worry about being debt free but rather have money out there working for me. The ultimate goal is something that has a healthy and consistent cash flow like a business or real estate. But until then I am happy to park my money in my 401k and services like Betterment.


About The Author – Alex

I am on a journey of personal growth. I love learning about investing strategies and ways to actively improve my life. Follow along and connect with me if you are looking for a path to financial freedom and becoming the best version of yourself.

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