[USER]

Hello, I’m 24 and I have $7200 left of student loans at 3.75%. While I was going to local college I did monthly payment program through the school and I paid $39,000 toward tuition.

I had savings from highschool job.

I also worked a part time/full time job at amazon while in college.

I have enough in taxible brokerage to pay this $7200. My math brain says don’t sell the etfs and to make minimum payments on loans.

The other sides of me says I may feel good each month with one less bill.

What would you do if you were in my shoes?

Thanks for reading.

[Mark]

wow! Surprised to see so many votes for paying off the debt. I would definitely not pay off a $7200 loan at 3.75% at today’s (higher) interest rates.

I assume the monthly payment is not very high and not very hard for you to pay. I was in a similar situation.

. It was 1980. Market rates were 15%.

You better believe I didn’t pay it off early!

[Mark]

Don’t listen to ur math brain this time around. If u don’t feel good after clearing urself from debt u can always go back into debt

[Max]

I’m still in my 40’s and to pay off my mortgage in about 3 months. Student loans long gone and no other debt.

The freedom and peace of mind I feel math can’t give me.

[Josh]

Inflation is at 2.7% and your loan is 3.75% so it doesn’t really make financial sense to pay it off.

Your effective interest is 1%
If you make say 7.7% on stock. That’s 5% true profit. Or a five times difference.

That’s how I look at things atleast.

Some people feel better having no loans. I feel better knowing I’m making more money.

Do what feels right.

[Mae]

My philosophy is to start investing only after clearing debts and putting an emergency fund in a low yield savings account.

If you already have ETFs I would try to time the sale to not be at a loss.

[Amber]

I’d personally keep my investments and direct my excess money towards paying off the loans from now.

[Jennifer]

Your investments are probably making more than 3.75%. Can you pick up a side hustle to speed up the pay off process?

I clean houses and it’s not a hard market to get into, and most move out cleans are on the weekends and they pay the best.

I have taken out investment accounts to pay off debt and I wish I hadn’t.

I’m 40 now and wish I had left it alone and let it grow.

[Jule]

I wouldn’t sell shares but rather I would put as much as I can from disposable income and try to clear the loans in the next few months.

[Stasi]

Couple of things to think about. 1. Do the ETFs make more than 3.75% in interest? If so, it’s probably worth keeping the ETFs.

2. The psychological factor of how being debt free will make you feel and if you’d use that freedom to make sound financial decisions.

A lot of people think they would but actually don’t.

3. The power of compounding. That ETF will earn interest on interest and it makes a huge difference as it grows.

You’re young and have a long time to compound.

I am a huge advocate of starting your savings young because I have personally seen the benefits of doing so.

[Lisa]

Simple math says you’re earning more in your savings/brokerage account than the interest on the debt…

[Anjoli]

Pay off the debt. But don’t pull out the money from what you already have in your brokerage account.

Just pause on investing and throw everything extra you have now at that debt to eradicate it as quickly as possible.

You will feel amazing getting rid of those student loans – best feeling I’ve ever had personally!

[Ryan]

My opinion (read: NOT financial advice) would be to keep the brokerage intact and just slowly pay off the debt.

The rate you have is low and you’ll very likely make more with your money in the brokerage account, so I wouldn’t sell anything to pay it off.

If you want pace of mind, contribute more of your disposable income toward paying it down, whatever you can comfortably afford to do that doesn’t stretch you too much.

However I would keep that brokerage money making money, rather than sell so you can pay off debt that carries such a low rate.

[Colin]

Lots of folks giving advice without acknowledging your biggest, best asset: your age. You’re 24.

At an interest rate of 3.75%, your money is worth waaaay more to you invested than in clearing your debt.

Yes, having debt stinks, and being debt free is great.

But you’re 24. $7,200 in the grand scheme of things is a small amount of debt over a lifetime of earning. You’ll still be young when that is paid off.

Before you know it, your debt will be a thing of the past. But that growth of your investments will be a thing of your future for many, many years.

You’re 24. When you’re 34 you will be so happy you did not sacrifice $7,200 and 10 years of growth on it.

When you’re 44 you’ll have benefitted from 20 years of growth on that $7.2k plus everything else you’ve invested.

Stay invested. Pay off the debt as you go. It’s not just better math. It’s a better future.

[Russell]

Student loans can be wonky. Make sure “the minimum” is still paying down the principal and not an interest only payment or, worse, keeps your account “current” but growing.

Set up an auto pay to pay it off in the next year so you know it’s going away, but I wouldn’t sell stocks to do it.

[Erica]

The interest is low enough that it won’t be worth it to sell stocks, deal with capital gains and lose growth of the stocks.

If you are wanting to pay early, I would try to save more or get a side job.

You can put extra towards the loan instead of paying it off all at once and still pay it off early.

[Colin]

Imagine 10, 20, 30 years from now. Your debt is long gone; it was gone before you were 30 just by dutifully paying the minimum or throwing a little extra at the principal each month.

But that $7.2k invested has doubled and double again and doubled again and doubled again.

Wow, you are glad you didn’t sell those investments.

[Marissa]

There was no better feeling than paying off my student loans. The math may not add up but being debt free except my mortgages is something I wouldn’t trade!

[Maribel]

Consider if paying your student loan affects your credit goals… i.e. if it’s your oldest loan, paying it off will reduce the age of your credit and affect your credit score if you plan to make a big purchase using credit.

Can you weigh the feeling of being debt free versus using your money to earn more at a rate that outpaces your debt rate?

[Will]

I’d just pay it off, personally, but that’s likely not the most optimal approach.

If you can consistently beat that rate of return, any money invested will turn a profit for you.

It’s a function of the math and your risk tolerance.

[Natalie]

I want to applaud you for making such good decisions about your education and finances so far at such a young age! One thing I regret doing in my mid twenties was I paid off my loans really fast….but I didn’t contribute much to my 401k. What a major mistake I made!

Number’s don’t lie. The interest on your loans is way less than the interest you’re earning if you’re invested in an S&P500 index fund.
For you situation….

I don’t feel it would be a good idea to sell your ETFs– especially if you’ve held them less than a year. You’ll pay dearly in short-term capitals gains tax.

Do you currently have income coming in? Do you have a 401k through your employer with a match?

Maybe contribute enough to get a 401k match from your employer and then throw the rest at your loans.

If you’re focused and live modestly it shouldn’t take you too long to extinguish that 7.2K loan.

Then refocus and max out your 401k, roth IRA, HSA if you have one. Good luck!

[Author]

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