My student loans have a 2.9% interest rate. Wouldn’t it be best for me to pay the minimum amount on that loan and invest the rest in a low-risk account?

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Yes. With that low of a rate you’re probably better served investing extra cash in a similar manner as your retirement portfolio then paying extra towards the loan.


The only perk of graduating into the nadir of the Great Recession was that my student loans were tagged to Treasury rates, and hovered between 1.25% and 1.5% for the entirety of their terms. You can bet I paid the minimum for many years while I built up retirement accounts and savings for purchases like a home. Only when the balances got low enough that they were annoying did I finish these babies off.


People always justify not paying debts with this logic. Often times it’s fine. However remember this, when in debt you are guaranteed to have compound interest work against you, while with investing there is no guarantee compound interest is working for you


One thing I think that gets lost is the value of not having/having lower debt. You might be able to get a few percent more returns on XYZ. But there is also something to be said for having no/less debt. The freedom to be able to quit a job, or go back to school or take a sabbatical, etc that are all impeded by having a large debt. Even if you know you won’t, knowing you could might be worth a lot to you. The other huge thing is no/less debt means less concern if you are suddenly unemployed. If you are laid off, the monthly bills will be a bit smaller. Your safety slush fund will last a bit longer and you might feel less stress. But you will overall, have to work a bit harder to retire. Additionally, consider the mental health benefits of less stress and less worry about the debt. Only you can decide this for yourself but it’s something to consider. Edit: having a safety slush fund is critical and 1000% a terrific idea I fully support.


I’ll add in a point for paying off the loans*. Yes, it’s mathematically clear that assuming you can average a greater return that you’re better off investing. However, I like to separate debt by good debt and bad debt. Good debt is things like your home, an investment property, etc Bad debt is CCs or student loans. Deciding whether you should pay off CC debt is usually more obvious because the APR will be so high. Student loan debt is a little more grey. Personally 2.9% is high enough for me that I want to get rid of it even though we agree your money is better leveraged else where. However, if that 2.9% is for something like a home, your home is building up equity, there’s an asset behind the house, your house hopefully increases in value. There’s nothing backing your student loan in the event you can’t pay it if you lost your job or something. However if your income is stable, and you have excess well beyond what your minimum loan payments are then I’d say definitely invest over paying extra if you’re comfortable with that. But if we’re talking only a marginal amount over the minimum then I would be more comfortable getting rid of the debt as soon as I can.