Balancing Investing and Student Loan Debt

Saving for your future when you have day-to-day expenses can be hard. It can be especially tricky when you are still paying off student loans.

On the one hand, conventional wisdom says you should pay off all your debts as soon as possible. On the other hand, the sooner you start investing, the more time you give your investment dollars to potentially reach your financial goals, and the sooner this practice will become almost second nature, like brushing your teeth or exercising regularly.

Rest assured, you’re not alone. Many of us face the same dilemma. According to the New York Federal Reserve, student loan debt totaled $1.46 trillion in 2018.1

So, Should I Start Investing Now?

Over time, you’re likely to benefit from investing a small portion of your income now, even if you still have student loans. However, as the graphic below shows, there are other important factors to consider, such as the interest rate you pay on your loans, your risk tolerance and investment timeline.

Investing while paying off student loans

Some things to consider


Compare the interest rate on our student loan to potential returns from investing.


Can you handle the ups and downs of the market while you still have loans to pay off?


Consider investment based on your risk tolerance and investment timeline.


Monitor your portfolio regularly to see how your are progressing on your plan.

Review the Interest Rate on Your Student Loans

Many financial experts recommend paying down debt before investing, especially if you are paying an interest rate in the double digits. That means you or your financial professional should likely do some number crunching that takes into account your current interest rate, and the potential return of your investments, among other considerations. If you have—or are able to refinance to—a low-interest student loan, you could be better off investing than currently sending more cash to pay down your student loan.

Know Your Tolerance for Risk

Many individuals have found developing an investment portfolio with both a goal in mind, and with the degree of risk they find comfortable, can help them reach their goals. That typically means investing in a diversified portfolio of stocks and bonds.

Of course, even a well-diversified portfolio can be volatile, especially in the short term. Are you prepared to weather volatility while you still have debt? Or will you be tempted to sell some of your investments after a significant market decline?

Stay Focused on the Long Term

For many individuals, a diversified portfolio can help alleviate the need to constantly adjust investment positions to chase market trends.2 It may also reduce the urge to buy or sell in response to the market’s short-term ups and downs.

What’s more, if you are a younger investor many years away from your financial goal, market volatility can be your friend. You have the potential to increase your holdings at lower prices when markets decline so you have more shares at a lower total cost, and can thus benefit if and when prices rebound. This is a concept called “dollar cost averaging.3

Tying it All Together

No one has a crystal ball to see how markets will perform over the long run. However, if you do your research and select a diversified portfolio of stocks and bonds based on your risk tolerance and investment timeline, you have the potential to make progress towards your goals. Even while you are paying off student loan debt.

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