21M Graduating May 2026 so repayment starts around Nov/Dec 2026. I have $15,230 in federal Direct loans:
- $4,818 @ 6.39%
- $3,675 @ 5.50%
- $6,737 @ 4.99%
Standard plan minimum looks like an estimated ~$170/mo total for all 3 loans.
Rates seem relatively low, should I just pay minimums and invest extra, or aggressively pay off the 6.39% (and maybe 5.5%) first? What would you do / what’s the usual interest-rate cutoff?
Have a job lined up that pays 129k base salary but will be living off of sign on bonus for couple months (Aug – Nov) while maxing 401k and HSA.
Pay off $15k federal student loans (5–6.39%) early or invest?
byu/burnerberkeley inpersonalfinance
Posted by burnerberkeley
4 Comments
Technically There’s no guarantee you’ll make up the difference.
With that income, it should not be a huge deal to quickly take care of the loans. I would make aggressive payments but not so aggressive that I can’t invest a sizeable portion of my income.
If I was you I’d just pay all of that off in year one and be done with it at that income.
Knock out loans first and fast. Guaranteed benefit. They will be done in a year and your credit report will look amazing. You can probably knock them out within one year but definitely 2 years.
Make sure you have a sizable emergency cash pile also before you invest. Enough for at least 3 months of unemployment and preferably 6 months.
This [flowchart](https://i.imgur.com/lSoUQr2.png) spells out a pretty good plan. Build a small emergency fund ($1K), invest max in 401K to get full employer match (but no more), build a more robust emergency fund of 3-6 months expenses, pay off all your student loans (starting with highest interest first), and then start increasing contributions to investments in the order on the chart.
Employer match is free money, so worth it to get that no matter what. Then after you build up your emergency fund a bit to stave off having to go into credit card debt if something comes up, paying off your loans is probably the best bet financially and definitely psychologically.
Outside of a Roth, you have to keep in mind that you’ll owe taxes on any investment gains and returns on investments aren’t guaranteed. A 5%+ guaranteed tax-free return (which you’d get by paying off the loans) is pretty solid.