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I could pay off my $78,00 of student loan debt in 2 years, but I have another financial goal that's more important

I currently have about $78,000 of student loan debt , and if I put all my extra cash towards my loans every month, I could pay it off by 2022.

woman studying
  • I ran the numbers, though, and decided to put what I can towards my loans about $1,400 a month while investing in my retirement savings, too.
  • My loans should be paid off by 2025, and I'll still come out with $20,000 more than I would if I'd paid them off sooner.
  • Read more personal finance coverage .
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My student loans stress me out, and I know I'm not alone: About 63% of job seekers are willing to give up paid time off in exchange for help paying off student debt.

Despite that, paying off my student loans isn't my #1 financial priority I'm focused on saving for retirement instead. Here's why:

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When I graduated from my Master's program in 2015, I took the mandatory student loan exit counseling with StudentLoans.gov . My eyes glazed over and I didn't pay much attention to the numbers. I just repeated to myself I would be OK because I am going after student loan forgiveness.

I was going straight into teaching and planned to have my student loans forgiven with Public Service Loan Forgiveness (PSLF). This plan was on track for the first few years of my career. I had a qualifying job, completed all paperwork annually, and never missed a single income-based payment. I have no doubt that if I stayed in public service, my loans would have been forgiven.

Plans change, and so did my career. I quit teaching and now work full-time as a freelancer. PSLF was off the table, and I couldn't ignore my student loan debt anymore. My balance was about $78,000 by the time I transitioned.

My partner and I are getting married in 2020 and have already combined finances , so we looked at this problem together.

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We looked at what we could cut to help pay off my student loans faster, and we both considered dropping our retirement contributions to help tackle the student loan debt. Then, we thought better of it.

Currently, we put $1,800 into retirement every month. My minimum income-based payment for student loans is currently $400. We put an extra $1,000 towards them each month, for a total of $1,400. The average interest rate of my student loans is 7%. This number will change when we refinance next year.

Would it really be worth it to invest and slowly pay off debt, even if it takes a little longer to be rid of the student loans? We ran through two scenarios when we made the decision to continue investing, even with student loan debt. We knew we wanted the student loan debt gone, but we just needed to decide how aggressive we should be.

If we dropped our investments and put $3,200 a month towards my total student loans of $78,000, then they would be paid off in 2022. That's fast, but we would be missing out on some important growth in the market and a 401(k) match.

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Let's say that in 2022 we decided to start investing the money we were paying towards student loans with a conservative rate of return at 7%. We used an online calculator and found that, by the time 2025 rolled around, we would have $123,832 in retirement savings, give or take.

If we invested and paid off student loans at the same time, then we would stretch out the payoff time a little bit. Putting the minimum $1,400 a month towards my student loans means they will be gone by 2025, and we would pay about $10,000 more in interest than we would with option #1.

At the same time, we are investing about $1,800 a month into our retirement with a conservative return rate of 7%. By the time my student loans are paid off, we would have about $154,838 in our retirement. This number does not include our previous contributions.

To decide if it was really worth it, we then subtracted the extra $10,000 paid in interest and the $123,832 that would have been in our retirement accounts with the fast debt payoff method. We still end up ahead by a little over $20,000.

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Scenario two made the most sense for us. It means we'll be rid of debt and have a net worth to show for it. Not to mention that investing in your retirement lowers your taxable income.

We may be able to pay off some even bigger chunks of debt when we sell our house, which will expedite the process. In addition, when I refinance my student loans , we should be able to save even more on interest.

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