Young professionals juggle ramping up their careers, paying off debt, starting retirement nest eggs, buying homes and potentially building families. There is no shortage of goals for funneling your hard-earned dollars, and we can’t forget to have some fun along the way. It’s time to figure out how to take finances to the next level by supercharging savings and intelligently managing debt, so what do we tackle first?


Frank McLaughlin discusses The Importance of Having an Emergency Fund to make sure you can avoid taking on more debt while you’re whiteboarding to land your next development role. Once you can handle a few months of interviewing or a new set of rims when you hit a pothole, it’s important to review your overall cashflow and leverage to determine how to prioritize your assets. In this post, we will review examples of saving versus paying off student debt.

Claim your company match

Regardless of how daunting your pile of student loans feels, we recommend saving enough in your employer’s 401(k) plan to get the full company match if that’s available. The match is part of your compensation, so claim it! Consider the first few percent of matched contributions from your employer as instant investment returns, and you can see how that beats the interest on your student loans and helps jumpstart your portfolio engine.

Payoff Scenarios

Leverage like student loans and other sources of debt can be a useful tool for building your financial plan, and no rule of thumb captures all the details of your unique situation. We help our clients think about prioritizing savings, liquidity needs, when to use debt, interest rates, and where to borrow money for helping accomplish their goals. I’ll review two basic example scenarios to illustrate how to pay off student loans . These examples will begin breaking down variables for managing debt and avoiding paying a pound of flesh.

The first case is Emily, a 30-year-old Software Development Engineer with $50,000 in loans remaining from undergrad. Undergrad loan rates are favorable, and her debt includes four loans with rates from 3.76% to 4.66%. Emily should prioritize paying off the 4.66% loan first, then pay down the next highest rate debt. However, the low rates favor continuing to save in retirement accounts and toward her other goal of a home down payment—especially after wiping out the highest 4.66% loan. If Emily wants to buy a home soon and mortgage rates are higher than her remaining student debt, it would make sense to use extra savings for a larger down payment instead of accelerating paying down her student loans.

Logan works 80 hours per week as a postgraduate year two emergency medicine resident at the University of Washington. He is carrying $200,000 in student debt from medical school and is planning to continue paying the minimum income-based repayments until landing his first attending job after residency. Logan’s interest rates range from 3.86% to 6.21%, so he should plan on knocking down the 5-6% loans before other goals like maxing his 403(b). Paying down high rate loans quickly helps save on growing interest, so Logan’s high interest Grad PLUS loans are a priority. Logan’s employment also qualifies for the Public Service Loan Forgiveness Program, so he will need to consider how potential loan forgiveness influences his job and repayment planning.  

Next steps

After you have reviewed your financial landscape and assessed your student debt, consider other stepping stones like funding an HSA or IRA. Logan also has questions about Public Service Loan Forgiveness, and Emily is curious about what else to do with her stock options after saving for a home. A Merriman advisor can help you analyze your unique situation and develop a long-term plan. Keep looking forward!