Extra cash each month could go toward paying off student loans faster, or into an investment account. Compare both strategies to see which builds more net worth over your timeline.
Say you have an extra $150 a month beyond your required student loan payment. Option A puts that toward the loan principal, paying it off faster and reducing total interest paid. Option B keeps the standard payment and invests that $150 a month instead. Every slider on this page has a matching number field: drag to explore, or type exact figures if you already know your numbers. The calculator tracks both paths and adds up your remaining debt and any invested cash at the end of your timeline to see which strategy leaves you further ahead.
Every extra dollar you put toward a loan is a dollar that stops earning a market return and instead earns a guaranteed return equal to your loan's interest rate, since it is interest you no longer have to pay. Paying down debt faster is effectively a risk free investment at your loan's rate. Investing that dollar instead is a bet that market returns will outpace that rate. This same tradeoff, comparing a known guaranteed rate against an uncertain expected return, is tested on the CFP exam and in the quantitative sections of the CFA Level 1 exam.
This is the full extra interest you'll pay over the life of the loan by making only standard payments instead of paying extra, added up into a single dollar figure. It's a fixed number based only on your loan balance, rate, term, and extra payment amount, unrelated to how your investment actually performs. That's the real dollar cost of choosing to invest instead of paying the loan down faster, so it's the number your invested extra payment needs to grow past for that choice to have paid off. Compare it directly against the "Invested Cash, Grown" figure below.
Once a loan is fully paid off under both strategies, there is no more debt gap left to close, so the breakeven calculation loses its meaning from that point forward. If you set your comparison window at or beyond how long the standard payment schedule would take, expect this figure to look unusual. For a clean read on the tradeoff, keep your comparison window shorter than your remaining loan term.
Comparing a guaranteed return against an expected return, and reasoning about debt versus investment tradeoffs, are recurring themes on the CFP exam, Series 65, and CFA Level 1 exam. If you are pursuing a securities license more broadly, the same opportunity cost logic appears throughout the SIE exam.
Yes. Paying down a loan faster is a guaranteed return equal to your loan's interest rate, with no market risk. Investing the difference could outperform that, but it could also underperform it, especially over shorter timeframes where markets are more volatile.
No. Income driven repayment plans and forgiveness programs can change the math significantly, since paying extra toward a loan you expect to be partially forgiven may not be worthwhile. This tool assumes the full balance will be repaid under standard amortization.
That depends on your portfolio and risk tolerance. A diversified stock portfolio has historically returned somewhere in the 7 to 10 percent range annually over long periods, before inflation, though any given year or decade can vary significantly. Use a conservative assumption if you want a cautious read on the comparison.
Yes. Each slider has a paired number input. Type directly into any gold field to enter a precise figure, and the slider along with all results update immediately.
Opportunity cost math like this shows up directly on CFP and CFA exams. Practice for free.
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