Should I Pay Off My Student Loans or Invest in Stocks?

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If you have student loans, you might wonder whether you should prioritize paying them off or invest any extra money you have. In the past, traditional advice advocated investing whenever possible — but if you have high-interest student loans, it might not be the right financial move.

Here’s how to decide whether to pay off student loans or invest:

• Prioritizing your financial goals
• Compare the interest you spend with the interest you could earn
• Consider tax deductions for student loan interest
• Know your federal student loan benefits
• Tips for investing with student loans

Prioritizing your financial goals

Before you choose whether to pay extra money toward your student loans or your investment portfolio, there are a few financial milestones that should likely take priority. These include:

• Making a budget: Tackling your financial goals is much easier with a budget. First, make sure you know how much money you’re earning as well as how much your bills and discretionary expenses add up to. Then you can figure out how to allocate any extra funds.
• Building an emergency fund: Before you pay money toward student loans or investing it’s a good idea to set money aside to cover any unexpected expenses you might face. It’s usually recommended to save up enough money to cover three to six months’ worth of expenses.
• Focusing on high-interest debt: It’s usually better to prioritize paying off debt with high interest rates — such as credit cards — over repaying student loans or investing. This is because getting rid of that high interest will likely be a bigger return on your investment than either student loan payoff or traditional investing.

1. Compare the interest you spend with the interest you could earn

A common strategy for deciding between student loan payoff and investing is comparing the interest rates: Your student loan interest rate determines the cost of your debt while the interest rate on investments impacts how much you might earn.

One way to potentially lower your student loan interest rate is through refinancing your loans. This could save you money on interest charges and even help you pay off your student loans early. In this case, getting out from under your loans before investing might be a good idea.

If you decide to refinance your student loans, be sure to consider as many lenders as possible to find the right loan for you. Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in two minutes.

Lender	Fixed rates from (APR)	Variable rates from (APR)	Loan terms (years)
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.94%+	N/A	10, 15, 20
Fixed APR: 2.94%+ Variable APR: N/A Min. credit score: Does not disclose Loan amount: $7,500 up to $500,000 Loan terms (years): 10, 15, 20 Max. undergraduate loan balance: $250,000 - $500,000 Time to fund: 4 months Repayment options: Immediate repayment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Must be a resident of Kentucky Customer service: Phone Soft credit check: No Cosigner release: After 12 months Loan servicer: Kentucky Higher Education Student Loan Corporation Max. graduate loan balance: $250,000 - $500,000 Credible Review: Advantage Education Loan review Offers Parent PLUS Refinancing : Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.15%+	1.83%+	5, 7, 10, 15, 20
Fixed APR: 2.15%+ Variable APR: N/A Min. credit score: Does not disclose Loan amount: $10,000 to $400,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Military deferment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must have a credit score of at least 720, a minimum income of $60,000, and must be a resident of Texas Customer service: Email, phone Soft credit check: Does not disclose Cosigner release: No Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 - $149,000 Max. Graduate Loan Balance: $200,000 - $400,000 Offers Parent PLUS Refinancing: Does not disclose
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.59%+1	1.99%+1	5, 7, 10, 15, 20
Fixed APR: 2.59%+1 Variable APR: 1.99%+1 Min. credit score: Does not disclose Loan amount: $10,000 to $750,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay, loyalty Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $150,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.99%+2	2.94%+2	5, 7, 10, 12, 15, 20
Fixed APR: 2.99%+2 Variable APR: 2.94%+2 Min. credit score: Does not disclose Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 12, 15 Repayment options: Military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay Eligibility: All states except for ME Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: College Ave Servicing LLC Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $300,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	3.65%+	3.6%+	5, 7, 10, 15, 20
Fixed rate: 3.65%+ Variable rate: 3.6%+ Min. credit score: 680 Loan amount: $5,000 to $500,000 Cosigner release: Yes Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Academic deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay Eligibility: Available in all states, except MS and NV Customer service: Email, phone, chat Soft credit check: Yes Loan servicer: FirstMark Max. undergraduate loan balance: $500,000 Max. graduate loan balance: $500,000 Offers Parent PLUS refinancing: Yes Min. income: $65,000 (for 15- and 20-year products)
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.91%+5	2.77%+5	10, 15, 20
Fixed APR: 2.91%+5 Variable APR: 2.77%+5 Min. credit score: 700 Loan amount: $7,500 to $200,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and submit two personal references Customer service: Email, phone Soft credit check: Yes Cosigner release: After 36 months Loan servicer: Granite State Management & Resources (GSM&R) Max. Undergraduate Loan Balance: $150,000 to $249,000 Max. Graduate Loan Balance: $150,000 to $199,000 Offers Parent PLUS Refinancing : Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.47%+3	1.86%+3	5, 7, 10, 12, 15, 20
Fixed APR: 2.47%+3 Variable APR: 1.86%+3 Min. credit score: 680 Loan amount: $15,000 to $250,000 Loan terms (years): 5, 7, 10, 12, 15, 20 Repayment options: Forbearance Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident, have at least $15,000 in student loan debt, and have a bachelor’s degree or higher from an approved school Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: Mohela Max. Undergraduate Loan Balance: $250,000 Max. Graduate Loan Balance: $250,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	3.47%+4	2.44%+4	5, 10, 15, 20
Fixed APR: 3.47%+4 Variable APR: 2.44%+4 Min. credit score: 670 Loan amount: $5,000 to $250,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Academic deferment, military deferment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must be U.S. citizen or permanent resident Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: Yes Max undergraduate loan balance: $250,000 Max graduate loan balance: $250,000 Offers Parent PLUS refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.49%+	1.9%+	5, 7, 10, 15
Fixed APR: 2.49%+ Variable APR: 1.9%+ Min. credit score: 700 Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 15 Max. undergraduate Loan Balance: $125,000 Time to Fund: 10 to 30 days Repayment options: Immediate repayment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from an eligible institution Customer service: Email, phone Soft credit check: Yes Cosigner release: After 12 months Loan servicer: LendKey Technologies Inc. Max. graduate Loan Balance: $175,000 Credible Review: LendKey Student Loans review Offers Parent PLUS Refinancing: No
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.68%+	N/A	7, 10, 15
Fixed APR: 2.68%+ Variable APR: N/A Min. credit score: 670 Loan amount: $10,000 up to the total amount Loan terms (years): 7, 10, 15 Repayment options: Military deferment, loans discharged upon death or disability Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: AES Max. Undergraduate Loan Balance: No maximum Max. Gradaute Loan Balance: No maximum Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.89%+	N/A	5, 8, 12, 15
Fixed APR: 2.89%+ Variable APR: N/A Min. credit score: 670 Loan amount: $7,500 to $300,000 Loan terms (years): 5, 8, 12, 15 Repayment options: Does not disclose Fees: None Discounts: None Eligibility: Must be a U.S. citizen and have and at least $7,500 in student loans Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 12 months Loan servicer: PenFed Max. Undergraduate Loan Balance: $300,000 Max. Graduate Loan Balance: $300,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.69%+	N/A	5, 10, 15
Fixed APR: 2.69%+ Variable APR: N/A Min. credit score: 680 Loan amount: $7,500 to $250,000 Loan terms (years): 5, 10, 15 Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Available in all 50 states; must also have at least $7,500 in student loans and a minimum income of $40,000 Customer service: Email, phone Soft credit check: Does not disclose Cosigner release: No Loan servicer: Rhode Island Student Loan Authority Max. Undergraduate Loan Balance: $150,000 - $249,000 Max. Graduate Loan Balance: $200,000 - $249,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	2.49%+ 6	1.74%+ 6	5, 7, 10, 15, 20
Fixed APR: 2.49%+ 6 Variable APR: 1.74%+ 6 Min. credit score: Does not disclose Loan amount: $5,000 up to the full balance Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Academic deferment, military deferment Fees: None Discounts: Autopay, loyalty Eligibility: Available in all 50 states Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: No Max undergraduate loan balance: No maximum Max graduate loan balance: No maximum Offers Parent PLUS refinancing: Yes
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures | 6SoFi Disclosures

2. Consider tax deductions for student loan interest

Depending on your tax situation, you might qualify for a student loan interest deduction that could help you decide how to prioritize your financial goals.

The IRS lets student loan borrowers deduct up to $2,500 in interest paid per year for taxpayers with a modified adjusted gross income (MAGI) of $70,000 or less — or a MAGI of $140,000 or less for borrowers who file jointly.

This interest deduction can help reduce your taxable income, leaving you with a smaller tax burden — and possibly more money to put toward your student loans, cutting down your repayment time.

3. Know your federal student loan benefits

Federal student loans offer valuable protections, such as access to a variety of repayment options as well as student loan forgiveness programs. These benefits could help you decide whether aggressive student loan repayment is the right move.

Additionally, you might be able to refinance your federal student loans for a lower interest rate if you have excellent credit. However, doing so will cost you your federal protections, so be sure to weigh your options carefully.

If you decide to refinance, remember to consider as many lenders as you can to find the right loan for your needs. This is easy with Credible — you can compare your prequalified rates from multiple lenders in two minutes.

Learn More: How to Pay Off Student Loans in 5 Years

Tips for investing with student loans

If you have student loans, here are a few tips that could make it easier to invest at the same time:

1. Decide how much you can invest

By creating a solid budget, you can figure out exactly how much you can afford to set aside for investments.

1. Start by comparing your income and expenses. To have a balanced budget, you need to spend less than you bring in.
2. Add up both your fixed and discretionary expenses. For example, fixed expenses would include rent and car insurance while discretionary expenses would include entertainment and travel.
3. Subtract your expenses from your income. This amount is how much you can afford to invest. Finding ways to lower your discretionary spending — such as eating at home and cutting down on entertainment — can help increase the money much left over to invest.

2. Lower your rates

Depending on your credit, you might be able to lower your interest rates by refinancing your student loans. The money you save on interest this way can then be put toward your investments.

If you’re wondering how much you can save by refinancing your student loans, use our calculator below.

3. Max out your 401(k) employer match

A 401(k) is a retirement plan sponsored by an employer that offers tax-deferred investing that grows until retirement. In many cases, opening a 401(k) account is the best way to start investing.

This is because a 401(k):

• Reduces your tax burden
• Helps you prepare financially for retirement
• Is eligible for company matches from many employers

If your employer offers 401(k) matching, it’s a good idea to contribute enough to receive the full matching contribution so you can save as much as possible for retirement.

Check Out: Beginner’s Guide to Investing in 4 Steps

4. Open an IRA

Another investment option is opening an individual retirement account (IRA). Like a 401(k), an IRA helps you save money on taxes while making contributions toward your retirement.

There are several types of IRA accounts, the most common being:

• Traditional IRAs, which have you deduct contributions while paying taxes on your withdrawals
• Roth IRAs, which require you to pay taxes on contributions but allow for tax-free withdrawals

Because an IRA provides tax advantages to investors and helps encourage setting money aside for retirement, opening one could be a good option for student loan borrowers who want to get started with investing.

Learn More: Pay Off Mortgage or Invest: What Should You Do?

5. Do your research before investing

No matter what type of investment vehicle you choose — 401(k), IRA, or another kind of account — make sure to do your research before putting any money toward it. There’s an inherent risk in any investment, and it’s up to you to understand the risks and potential rewards of your investments.

Keep Reading: How to Pay Off $100,000+ in Student Loans

About the author

Emily Guy Birken

Emily Guy Birken is a Credible authority on personal finance. Her work has been featured by Forbes, Kiplinger’s, Huffington Post, MSN Money, and The Washington Post online.

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