Pay Off Student Loans Or Invest? You Might Not Have To Choose.

By Sasha Bulatskaya | Published on November 19, 2025

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Many college graduates struggle with the dilemma of whether to pay off student loans or invest. While paying off debt should always be a top priority, you might be wondering if you’re missing out on potential stock market gains by focusing more on student loan payments.

In this guide, we’ll go over each choice and discuss how it’s possible to do both in a way that will support your financial goals.

Student Loan Payoff: Why It’s Important

Paying off your student loans as quickly as possible has many benefits. It takes the financial burden off your shoulders, freeing up your income to take care of other priorities – including saving or investing. You should focus on paying off high-interest debt first, which is debt that has an 8% or above interest rate.

Lower Interest Rates: More Money For Your Goals

IDRs For Federal Student Loans
Consider your options for lowering your student loan interest rates, especially if your rates are above 8%. If you have federal student loans, an income-driven repayment plan (IDR) could help you decrease your payments and possibly interest rates.

Refinancing Federal And Private Loans
Refinancing your private student loans can help you pay off your debt faster or bring down your monthly payments¹. Getting a lower interest rate, especially below the 8% mark, can make a real difference in your budget. You’ll have more money to put towards your debt or invest the savings².

To see how much you could save with refinancing, you can use the Earnest Refinance Calculator to find out.

Pros and Cons of Refinancing Student Loans | Earnest - YouTube
You can also check your refinancing rates with us. It takes 3 minutes and there’s no hard credit pull or obligation.

Investing Responsibly: How To Do It

When it comes to investing, the earlier you start, the more time your investments have to grow, thanks to the power of compound interest. But, not all investments are created equal. Tools, like a 401k or Roth IRA, are the foundation of any solid investment strategy.

Even if you have student loans, you can still take advantage of a 401k offered by your employer and contribute to a Roth IRA. It sounds less exciting than investing in a stock, but it’s more secure and makes the decision to invest or pay off student loans less stressful.

Best Of Both Worlds: Student Loan Pay Off And Investing

Rather than struggling with the question, “Should I pay off my student loans or invest?” consider finding the middle ground. If you haven’t yet done so, look into a federal repayment plan and learn more about refinancing.

At the same time, you can sign up for a 401k with your employer. If your job will match your 401K contributions, you’re essentially getting free money. If you’d like to invest in addition to a 401k, a Roth IRA is another great option.

Tailor Your Financial Strategy

The decision to pay off student loans or invest is ultimately a personal one. Before you make any financial moves, it’s important to understand where you are, set realistic goals, and make choices that align with your long-term plans. Whether you think it’s better to pay off student loans or invest, it’s about crafting a financial strategy that gives you the financial freedom you want.

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About the Author

Sasha Bulatskaya

Sasha is the Senior Manager of Brand and Content at Earnest. She has been writing for ten years and has been focused on educational finance and financial aid for over three. Her passion for mission-driven companies brought her to Earnest in 2020, and she's been helping make student finance more accessible ever since. She strives to demystify personal finance and student loans to help borrowers make the best decisions for their financial situation.

Disclaimer

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice

1 As was announced by the U.S. Department of Education (ED), federal student loans have resumed accruing interest starting September 1, 2023, and federal student loan payments were reinstated starting in October. Please note that you may lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans (an example of which is the SAVE plan), Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan. See https://studentaid.gov for more information.

2 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.