A stark reality today is the growing number of Canadian workers paying off student loans – 57% of new grads begin careers with on average $28,000 in student loans and about 25% of working Millennials are still repaying a student loan. At work, a person might wonder whether to begin saving for retirement or begin focusing on retiring their student debt? Here’s a scenario to help figure it out. 

Your income exceeds your expenses, including your monthly required student loan payment. The question is what to do with the remainder once expenses have been paid. Should you invest the difference in your workplace retirement plan? or should you make larger student loan payments to get rid of the debt faster? 

To find your answer, consider these things:

1. How much is left over after expenses? Budgeting for expenses and having emergency cash on hand may restrict one or both strategies. If you do not have student loan repayment benefits at work, think twice about accelerating payments to either plan before some thoughtful budgeting. 

2. Don’t get over-extended. Over-extending your financial commitment for investment or for student debt repayment, may force you to access more expensive kinds of debt, like credit cards.

3. Are you comfortable with debt? Physiologically, owing money is stressful and causes anxiety for many people.

4. Your goals for the future: Outstanding debt can affect one’s ability to secure a mortgage or secure other types of lending.

5. Employer matches. If you participate in a Group Retirement Savings Plan (GRSP) or a Defined Contribution Pension Plan (DCPP) at work, does your employer offer to match your contributions? If yes, consider maximizing the employer match before you accelerate repayment of your student loans.

There is no right or wrong to the pay-back vs save question - every circumstance is different with a unique set of needs and wants. Careful consideration of the above will help you find the financial path that suits you best.

The Smart Benefit™ is an employee benefit that helps employees pay back student loans faster and for less money than expected. Contact [email protected] for more information.