I was recently giving a presentation at the University of Wisconsin School of Veterinary Medicine when a student asked a question I hear constantly from medical graduates:
“Should I pay off my student loans, or should I invest instead?”
She explained that she had some non‑retirement investments that had performed well over the last couple of years. Her student loans were at 7%. Her investments had earned more than that. So she wondered:
“Should I cash out my investments to pay off the loans?”
It’s a fair question. It’s also not a simple one.
Why “It Depends” Is the Only Honest Answer
Everyone’s financial life is different — goals, values, risk tolerance, career plans, and emotional relationship with debt.
Especially for medical professionals and veterinarians, the student‑loan conversation is deeply personal and highly nuanced.
Some people believe all debt is bad. Others are comfortable carrying debt if it allows them to pursue opportunities, build flexibility, or maintain liquidity.
Neither view is wrong. But neither view is universally right.
The Math Isn’t the Whole Story
Mathematically, her investments had earned around 10% while her loans cost 7%. On the surface, that looks like a 3% advantage — and this is the argument most people in my industry default to:
“If your investments are earning more than your loan interest, you’re coming out ahead.”
It’s clean. It’s simple. And it’s not wrong.
But there’s another argument that’s just as compelling:
“If I pay off a 7% loan, I’ve guaranteed myself a 7% savings — while a 10% investment return is not guaranteed.”
There’s truth in that. Paying off the loan does guarantee you’ll avoid paying that 7% interest for the year. And compared to a non‑guaranteed investment return, that certainty can feel powerful.
But here’s where the math stops being clean:
- Paying off a loan saves 7% only on the remaining balance, and that dollar amount shrinks each year as the loan amortizes.
- Investment returns compound, while loan interest declines — they grow in opposite directions.
- Student‑loan interest is sometimes tax‑deductible, reducing the effective interest rate below 7%.
- And the 10% she earned previously is not guaranteed to repeat — but neither is the idea that paying off the loan is always the best use of cash.
So yes — paying off the loan guarantees interest savings. But no — it is not the same as earning a guaranteed 7% return.
This is why the 7% vs. 10% debate is never as simple as it sounds. There’s the math answer… and then there’s the right answer for the individual.
Values, Upbringing, and Money Stories Matter
After the presentation, she shared more context:
- Her sister’s financial planner told her to cash out the investments.
- Her mother — who is strongly anti‑debt — told her the same.
- She grew up in a household where debt was viewed as dangerous.
This is incredibly common.
Our upbringing shapes how we feel about debt, risk, and money. And those feelings often influence decisions more than spreadsheets do.
A Critical Question for Future Practice Owners
I asked her a key question:
“Do you want to own a practice someday?”
She said yes.
That changed everything.
For medical professionals — especially veterinarians — practice ownership is often the biggest financial opportunity of their career. And when banks evaluate a borrower, cash on hand often matters more than student‑loan balances.
A strong balance sheet with liquidity can outweigh a lower loan balance with no assets.
So in her case:
- Keeping the investments
- Letting them grow
- Maintaining liquidity
…could actually improve her ability to secure financing for a future clinic.
Joy, Fulfillment, and the Life You Want to Live
Then she added something else:
“I love to travel. It brings me joy.”
That matters.
If paying off the loans wipes out her cash and prevents her from traveling — something that energizes her, improves her well‑being, and even impacts her work — then the “mathematically optimal” choice might actually make her life worse.
Money is a tool. Its purpose is to support a meaningful life — not restrict it.
But What If Debt Makes You Sick to Your Stomach?
On the other hand, some people simply cannot stand carrying debt.
If someone values peace of mind more than liquidity or potential investment growth, then paying off the loans may be the right choice — even if the math says otherwise.
There is no shame in that. That’s values‑aligned planning.
The Real Answer: Start With Your Priorities
Before deciding whether to pay off student loans or invest, ask:
- What do I value more — liquidity or debt freedom?
- Do I want to own a practice someday?
- How does debt make me feel?
- What brings me joy and fulfillment?
- What opportunities might liquidity create for me?
Remember:
“Financial planning is the ongoing process of aligning your use of capital (time, money, energy, attention) with what matters to you.”
That’s where the real answer lives.
Common Questions I Hear
Should I pay off my student loans early? It depends on your goals, values, cash flow, and future plans — especially if practice ownership is on the horizon.
Is it better to invest instead of paying off loans? Sometimes. But investment returns aren’t guaranteed, and your emotional comfort matters.
Does carrying student debt hurt my chances of owning a practice? Not necessarily. Banks often weigh liquidity more heavily than loan balances.
What if I want to enjoy life now and still be responsible? That’s the ideal — and it’s absolutely possible with a values‑aligned plan.
The Bottom Line
There’s a math answer. And there’s the right answer.
Sometimes they match. Sometimes they don’t.
The real starting point is understanding your values, your goals, your comfort with debt, and the life you want to build — today and in the future.
Actual performance and results will vary. This case study does not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted for your specific situation.