Money·4 min read

This vs. That: Should You Pay Off Student Debt Fast or Take Your Time?

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Design: theSkimm | Photo: iStock
August 24, 2022

Any kind of debt can be a drain on your budget. But student loans weigh extra heavy, especially for millennials. So you might wonder: Is it better to do everything you can to say 'bye' to student loans ASAP? Or is there a benefit to sticking with the minimum payments?

Yes, I'm wondering.

There's a lot at stake. It takes borrowers an average of 20 years – and $26,000 in interest – to pay off their debt. In the meantime, that can keep you from hitting other money goals, like buying a home, starting a family, and saving for retirement. But the typical student loan payment is $393 per month. Not cheap. So speeding up your payback can hit your budget hard in a different way.

The good news: there are real benefits to both choices. And you can switch up your strategy later if your financial situation changes.

So how do I decide whether to pay my student loans faster or just pay the minimums?

First, get to know your overall financial picture and consider your priorities. Example: without a financial safety net, you could rack up more debt in case of an emergency (think: layoffs, car trouble, a global pandemic). So it's smart to prioritize building your emergency fund no matter what. Other money to-dos to keep in mind: saving for retirement and short-term goals.

Once you get a handle on all that, let's break down your options for how repaying your student debt fits in.

The benefits of only paying the minimums on your student loans:

  • Focusing on higher-interest debt. One way to get out of (any kind of) debt is the avalanche method. That's when you prioritize payments on balances with higher interest rates first, which saves you money over time. It may not feel like it, but federal student loans are relatively cheap. As in, they typically come with lower interest rates than other loans, like credit cards. Sticking with the minimum payment on student loans means you can direct more money toward your more expensive balances.

  • More money to invest. Investing and paying off debt both grow your net worth. But investing could do it faster. That's because, over the long run, stocks tend to have better returns than you typically pay in student loan interest. And more time in the market = even more time for your money to grow. 

The benefits of paying off your student loans ASAP:

  • Getting out of debt sooner. Say you owe $10,000 at 4% interest and have 10 years to pay it off. By bumping up your monthly payment from $101 to $150, you’d shave three years and eight months off your repayment schedule.

  • Paying less interest over time. Using that same example, you’d also save $828 in interest over the life of your loan. That would give you and your future budget the breathing room to fund some of your other money wants and needs. 

  • Relieving money-related stress. One study says nine in 10 borrowers experienced significant anxiety due to their loan burden. So paying down your student debt faster could = better mental health.

  • Lowering your DTI. Aka debt-to-income ratio, which measures how much of your gross (or pre-tax) monthly income goes toward debt obligations. Getting rid of debt lowers your DTI – and gives you space to borrow for other reasons (like buying a house).

Is it true that student loan debt is getting canceled?

President Joe Biden announced a plan to cancel student loan debt, which includes up to $10,000 of forgiveness for federal student loan borrowers earning less than $125,000 ($250,000 for households), and up to $20,000 for Pell Grant recipients. If that doesn’t take care of your loans, there have also been changes to the income-driven repayment plans, capping the total monthly payment amount at 5% of a borrower’s discretionary income instead of the previous 10%. 


Aggressively paying down your student loans can mean saving money and stress. But it’s not necessarily the right move, especially if you’re behind on savings or working to pay off other, more expensive debt. Which option works best depends on your unique situation.

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