The Mistake I Made When Paying off My Student Loan

by Nicole

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Student loans and debt can be really overwhelming, stressful, and anxiety provoking. I’m here to relieve some of that anxiety and I think you guys will be surprised at my student loan advice. I promise, there is a light at the end of the tunnel and you’ll get there. Sometimes, it’s about the journey, not the destination.

When I had debt, I felt like I was walking on eggshells with my bank account. There was a sense of guilt any time I put money towards something other than my student loans. I hated this feeling but it motivated me to pay off my loans ASAP. My goal was to pay them off as soon as possible because I felt the debt was weighing me down. I wanted to be financially free and I knew if I paid much more than the minimum payments, I could pay it off fast and be FREE! 

I realized years later after I paid down all my loans that I could have done this in a more optimal manner.

My Greatest Advice

I wish there was a simple answer to tell you how to pay off your loans and become debt free but there really isn’t. It is about mindset and changing the way you think about debt, spending, and saving money. If you haven’t read my blog about value based spending, I highly suggest you do so. You can find that article here

My greatest advice when it comes to paying off loans is don’t be shortsighted!!!

When I paid off my debt I did it quickly by saving every penny I had and I paid as much towards the principle as I possibly could each month. I didn’t invest a dime and didn’t contribute to my 401k. I was like most people and believed that if I relieved myself from this debt, I would finally be able to have money and start saving. This behavior was shortsighted and I could have been more efficient with my methods. I didn’t educate myself enough at the time to understand that paying the minimum and investing some money into tax advantaged accounts would actually HELP ME. My goal is to educate YOU so you don’t make the same mistakes I did.

What You Need to Know

Here’s what you need to know


Jump for joy right now at this advice! Yes, you read that right. You don’t have to rush paying off your loans. In most cases, it makes sense to pay the minimum and take advantage of your investment vehicles. I hate debt too and I understand how it feels to be weighed down by it but don’t ignore other investments that could help you!! I’ll demonstrate the truth behind this advice below… keep reading!

Take advantage of tax advantages

I ended up losing money by paying off my loans as quickly as I did rather than contributing some of that money to a tax advantage account such as the 401k. Any money you contribute to your traditional 401k remember is pre tax. This will end up saving you a lot of money over time. If you want to learn more about tax advantage accounts and the order in which to invest, read my investment 101 series here.

If you haven’t already opened a 401k, you need to do that now! Prioritize tax advantaged accounts like the 401K, IRA, and HSA because it’s a use it or lose it scenario. The IRS only allows a certain amount of contributions to each per year. If you have a lot of student loans, hopefully you are a successful, high earner and the 401k would benefit you even more in that case.

On the other hand, if you can’t bear to have debt, I understand that feeling. In that case just acknowledge that paying it off ASAP is a less optimal decision for your future. 

Justin & I both wish we knew this when we were paying off our loans. Yes, we paid off our loans fast but looking back, we shouldn’t have been so aggressive with it because we lost out on significant 401K benefits because we put all our eggs in the student loan basket. Similarly, this same principle goes for paying off mortgage loans and car loans. When Justin bought his car, he paid it off ASAP but again didn’t contribute the max to his 401k because we were scared of debt. In reality, we lost thousands of dollars in tax benefits.

Don’t be scared of debt, outsmart it!

Student Loan Example

I think it’s easier to visualize my advice. We will use this example data for all of the following 3 scenarios. Please note that interest rate will have an impact on these numbers. There are a lot of consideration but I am highlighting the fact that investing while paying off debt is HELPFUL.


Less Optimal Scenario


More optimal Scenario


Most Optimal Scenario


Like I often say, finance is personal. YOU are the only person that can make financial decisions for yourself. That being said, becoming educated on topics like this is critical to your success financially. Four years ago I never would’ve believed that paying the minimum on my student loan could have increased my total wealth. Although my decision was subpar at the time, I do not regret it because it led to my interest in finance. I hope my knowledge is able to help you change your mindset about debt! As usual, if you have any questions, drop them in the comments below or reach out to me. I can be found on Instagram, YouTube, Twitter, and Pinterest!



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