Should I Pay Off My Student Loans Early?
The Money Class You Never Got in School
Should I Pay Off Loans Early or Invest?
It’s a common money question with zero hype: You’ve got some extra cash. Should you crush your student loans faster? Or put that money to work and invest it?
Let’s break it down—Gen Z style. No fluff. Just real math, solid analogies, and how to make it make sense for your life.
Know the Game: Debt vs. Growth
Paying off loans early is like trying to drain a leaking bucket as fast as you can. Investing, on the other hand, is like planting a money tree that grows bigger the longer you leave it alone.
Here’s how to decide:
- Loan interest rate higher than 7%? Probably better to pay it off early.
- Loan interest rate under 5%? Investing likely wins long-term.
- Between 5–7%? Could go either way—this is your “grey zone.”
Why Paying Off Loans Early Feels Good
- You free up monthly cash sooner
- Less mental clutter—especially if you hate debt
- You’re guaranteed to “earn” whatever interest you’re avoiding
Why Investing Might Win Long-Term
- Compound growth = more money over time
- Potential for bigger gains than your loan’s interest
- More flexibility if you need your money later
Investing doesn’t always beat debt payoff in the short term, but it stacks up huge if you start early and stay consistent.
Let’s Look at the Numbers
You’ve got $200/month. You can either use it to:
- Pay off $10,000 in student loans at 5% interest
- Invest in an index fund averaging 7% return
Here’s what happens over 10 years:
| Year | Loan Paid Down (Early) | Investment Value |
|---|---|---|
| 1 | $2,280 | $2,484 |
| 2 | $4,560 | $5,137 |
| 3 | $6,840 | $7,972 |
| 4 | $9,120 | $10,999 |
| 5 | $10,000 | $14,231 |
| 6 | $10,000 | $17,679 |
| 7 | $10,000 | $21,356 |
| 8 | $10,000 | $25,277 |
| 9 | $10,000 | $29,457 |
| 10 | $10,000 | $33,912 |
By year 10, investing has grown to over $33K, while loan payoff caps at $10K (once paid off). So if you’re not losing sleep over your debt and the interest rate is low-ish, investing gives your money a longer runway to grow.
But What If You’re Stressed About Debt?
If just seeing your balance gives you anxiety or you’re struggling to stay motivated, don’t ignore that. Financial peace matters too. This is where a hybrid plan slaps:
- Make your minimum payments
- Split your extra: 50% to extra loan payments, 50% to investing
You build momentum and wealth at the same time.
Want Help Deciding? Use This Prompt:
“Here’s my loan amount, interest rate, and extra monthly cash. Should I pay off debt or invest? I’m [your age] and want to [financial goal].”
ChatGPT can walk you through the pros and cons based on your actual numbers.
Final Take
If your loan rate is high, crush it. If it’s low, grow your cash. If you’re not sure, do both. Just don’t sleep on the decision—you could be leaving thousands on the table.
You’re in MoneyMode now. Make your money choices hit long-term.
