I have enough cash to pay off my student loan—why I’m not doing it

Everyone who knows me knows that I can’t stand being in debt. I pay off my credit cards every month and complete Venmo requests as soon as I receive them.

The only debt I have left is my student loan, which has been on minimum payment autopilot since I graduated from college in 2013. For many years, I left these payments behind and transferred my extra savings to my investments.

But recently, my financial strategy changed after my fiancé and I started planning a summer 2027 wedding. I sold a significant amount of stock and withdrew my retirement contributions to build up our wedding fund.

For the first time in my life, I’m sitting on a pile of money. And I have to say, I would love to use it to wipe out some of my credit.

Listen to me. My student debt has a 6.55% interest rate and is scheduled to be paid off in late 2027. If I pay off my loan now, I can take my monthly loan payment plus a few extra dollars and add that to my regular contributions to the wedding fund and still hit our financing goal on time. Plus I would be debt free.

I chatted with several certified financial planners and almost everyone agreed that the math worked in my favor.

“If you have enough money, paying off the loans first is a smart move,” says MaryAnne Gucciardi, CFP at Wealthmind Financial Planning. “This translates to a guaranteed ‘yield’ of 6.55%, which is higher than you would likely earn in even the best high-yield savings account.”

I’ve already paid off the loan while you’re reading this, right? No. I actually opposed it. Here’s why.

It’s a quick and dirty way to decide how to prioritize your financial goals. If your credit card debt is at 20% (currently just below average), According to Bankrate – Paying the down payment is like earning 20% ​​a year in the stock market. Since this is a figure your portfolio is unlikely to gain in the long run, the thinking goes, you’re better off prioritizing debt.

The same logic applies to my credit. The 3.4% annual return we get from our savings account falls short of the 6.55% I owe on my loans.

Gucciardi and others pointed out to me that the cost of making such a move is liquidity. Once I make the lump sum payment, I won’t be able to go to my student loan servicer and ask for my money back. Meeting our wedding date is as easy as directing the money from my student loan payment to the wedding fund. But a lot can go wrong between now and then.

What if I lose my job? Or does one of us need expensive medical treatment? Or are elements of our wedding costing much more than we budgeted? I have emergency savings, but a few things going wrong can turn something that looks really easy on paper into something really difficult in real life.

So I did some more math. I’ve paid off 81% of my student debt, which means the vast majority of my payment these days goes towards paying off principal rather than interest. According to my calculations, paying off the loan now rather than continuing to make minimum payments would save me between $400 and $500 in interest.

“This clear difference is the price of financial flexibility,” says Sean Pearson, CFP at Ameriprise Financial Services. “What matters most to you is the cost of doing the things you want to do when you have to get them done.”

To be clear, my financial priorities may not be the same as yours, and it’s worth discussing your own goals with a financial advisor. The main thing I’m saving money for right now is a wedding. I want it to be everything my fiancé and I dreamed of, and I want our (frankly too many) guests to have a great time. Having extra cash on hand in case you run into any problems is worth paying the extra $400 to my student loan servicer.

This is a lesson I also apply to my broader financial life. While some financial strategies may be mathematically optimal, they may not fit my specific goals.

“While imperfect, often the best solution is to create a budget that allows you to achieve your priorities when they exist on your timeline, and to remember that the calendar is as important to your financial plan as your calculator,” says Pearson.

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