Should You if You Have Student Debt? The Answer May Surprise You.

For those who still have significant debts from school, figuring out financial decisions can be tough. In terms of investing — should you? — the answer isn’t exactly one-sided. There are many things to consider when choosing whether to invest while you still have student debt.

The student debt landscape: A reality check

Before diving into strategy, let’s start with the facts. As of 2025, American student loan debt sits at roughly $1.8 trillion, held by about 42 million to 43 million borrowers. The average federal student loan balance is north of $37,000. Meanwhile, delinquency rates are rising. Around 5.8 million borrowers were 90+ days behind on payments as of April 2025 — nearly one in three of those with payments due. With collections restarted after pandemic-era pauses, many borrowers are now facing renewed pressure and risk of credit score damage.

Given all of that, it’s a compelling question: If you’re carrying student debt, should you pause investing to focus on paying it off? Or is there a smarter path that balances paying off debt with trying to make money in the market?

Image source: Getty Images.

Investing vs. paying down debt

There’s no one-size-fits-all best path. Here are key trade-offs to consider.

1. Interest rates matter

If your student debt has a high interest rate (say, 6% or more), that’s a strong argument for paying it down aggressively. Money you put toward debt repayment gives you a guaranteed “return” if you look at it in terms of interest saved. Meanwhile, the stock market is volatile. While its long-term average might exceed 7% to 8%, that’s not guaranteed in any given period.

However, if your interest rate is low or if you’re eligible for subsidies, income-driven repayment plans, or forgiveness options, you’ve got more room to instead use your money in the market. 

2. The power of time

Time in the market is a hard-to-beat advantage. Something as simple as an investment in JPMorgan Chase  (NYSE: JPM) has returned 206% over the last five years. Even modest investments made early can grow significantly over decades. That’s especially true for investments in tax-advantaged accounts like 401(k)s or IRAs. If you can contribute 5% to 10% of your paycheck now (while still meeting debt obligations), that can create future momentum.

3. Hybrid approach

For many, the optimal route is splitting resources. If you have a job and are making a decent income, pay more than the minimum on your student loans while also investing a portion of your income. This way, you get debt reduction and exposure to market upside. The trick is to calibrate how much weight you give each goal depending on interest rates, cash flow, and risk tolerance. Before investing in the stock market, you’ll want to make sure you have an emergency fund set up and have paid off any high-interest debt. And don’t invest any money you’ll need in the short term, say, for your wedding next year or the round-the-trip adventure you’re planning a few years out. 

When investing while in debt makes sense

Here are cases where it may be prudent to keep investing despite having student loans:

• Employer match: If your employer offers a 401(k) match, that’s free money. You generally shouldn’t leave that on the table.
• Low-interest or forgiveness paths: If your loan is on an income-driven plan, or you qualify for Public Service Loan Forgiveness (PSLF) or other debt relief, more room opens for investing.
• Strong cash-flow buffer: If you still have discretionary money after expenses and loan payments, investing some of it helps you build a nest egg, rather than waiting until all debt is paid.
• Time horizon is long: If you’re young and decades away from retirement, the upside of investing early can outweigh the drag of debt, especially if your debt rate is modest.

When it makes more sense to focus on debt

On the flip side, it may be wise to pause or dial back investments in certain scenarios:

• High interest rates or variable rates: These can erode your financial flexibility if interest rates spike.
• Limited cash cushion: Don’t end up with no cash on hand for rainy days. If making both payments leaves little buffer, you’re vulnerable to emergencies.
• Credit consequences: Missed student loan payments can damage your credit, making future borrowing (for a house, car, etc.) more expensive.
• Just wanting it done: Maybe you just don’t want debt anymore. That’s not a bad thing. Paying off your loans before investing might not be the most balanced approach, but if it’s what you want, it’s not a bad plan.

A sample game plan

1. Understand your debt terms: Know your interest rates, whether your loans are subsidized, whether you’re eligible for forgiveness, and how flexible your repayment plan is (e.g., income-driven plans).
2. Target the “extra money” bucket: After covering essentials and making minimum payments, decide how much extra you can allocate.
3. Allocate smartly: You might do something like this: 60% of your extra goes toward accelerating paying off student debt, while 40% goes to investing. Adjust this plan based on your personal risk appetite.
4. Max out employer match first: If your employer match exists, treat it as a no-brainer priority before accelerating debt.
5. Reassess regularly: As your income, interest rates, or life stage change, revisit your mix.

Class dismissed

Carrying student debt doesn’t mean you have to shelve investing entirely — but it does require balance. The ideal strategy often lies in a hybrid approach that respects both the guaranteed benefit of paying debt and the growth potential of investing. If your debt’s cost is manageable and you can access employer-matching or tax-advantaged accounts, continuing to invest while silencing your loans can set you up for a stronger financial future.