Should I pay off my student loans?

Saint Sarah said
I'm not sure this is as clear cut as everyone thinks it is. Are your student loans rates fixed or variable? How long is the term? What does your earning potential look like?

If you are on say a 20 year plan to pay off the student loans, your interest rate is variable and you're in line for a nice little salary or raises you may be wise to start paying them down. Because you could all of a sudden find yourself with a 7% interest rate and a salary that precludes you from taking the interest deduction.

But under the scenario you've laid out and assuming it all stays the same, it would be best to keep the money in the checking account and reinvesting your interest. Of course, you could probably get a better return somewhere else.

Good point. However, student loans with that low of an interest rate are usually fixed loans and usually consolidated ones. And there are limits to the amount the rates could go up. I think the limit for my variable SL's is a .25% a quarter. If this was the case he'd have plenty of time to pay it off down the road before the rates got too high.

And even if rates did rise, it would still make sense to wait until it got to the point that it didn't make fiscal sense any longer.

And I doubt he's going to find any investment elsewhere that will return that much at this time, especially not one as liquid as a savings account.