I have $17k in student loans (4 of them, all Stafford less than 4.5%). My monthly minimum payment is under $200, and my employer contributes exactly $200 on my loans each month (regardless of minimum payment or principal balance).I have enough cash to pay the loans off completely (sitting in a savings account at 2%), but when the loans are paid off I lose the employer contribution.

Should I just wait until I leave this job and then pay off the entire loan balance, or should I pay off some of the loan to lower the interest payment so that more of the employer contribution goes to the principal balance? Does the effect on my credit score of closing the credit line sooner rather than later matter?

Usually $50-$60 of each payment goes to interest (depending on the length of the month?) and the other ~$140 goes to the principal of the highest-interest-rate loan.

  • 1
    This is an interesting question, in that you know that you've got a $2400/yr raise for the foreseeable future. Where is that "enough cash to pay the loans off completely"? In a bank paying 0.01%, in a high-yield savings account paying 2+% or invested in stocks+bonds?
    – RonJohn
    Aug 3, 2019 at 20:37
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    The cash is in a savings earning 2%. I should probably start some sort of investing account though...
    – Sanchewy
    Aug 3, 2019 at 21:12

2 Answers 2


Understanding that not everything mentioned might apply to you, here's what I'd do, in this order:

  1. Put $1000 in an 2% Savings Account Emergency Fund.
  2. Fund your 401(k) up to the Company Match. (Otherwise, you're cutting your pay.)
  3. Learn where all your money goes. (Not knowing this is how we slowly drowned in CC debt without buying lots of extravagant stuff.)
  4. Pay off as much 7+% debt as possible, using the Avalanche Method (pay the highest rate debt first, then second highest, etc).
  5. Decide on your hatred of debt. This will guide you in how aggressively to pay off any debt between 4.501% and 6.99%.
  6. The direct answer to your question: Decide how long you think you'll work for the company, and pay off the SL so that the debt will be paid off by the time you leave the company.

    • Maybe pay a bit less in case you stay longer.
    • If your SLs qualify for a tax deduction, adjust the interest rate by your tax bracket (meaning that the effective interest rate might be less than 4.5%).
  7. Split your extra monthly money between:

    • Build up your Emergency Fund to between 3-12 months of monthly expenses (depending on your job security, how regular your paychecks are, etc).
    • Paying off debts lower than 4.5%.
  8. Split your extra monthly money between:

    • Higher 401(k) (or Roth, depending on tax bracket) contribs.
    • Other short, medium and term savings goals.
  • Good idea, I'll try to estimate my employment length and measure my personal payments so that the loan is paid off when I move on from this job. I do have 10k in an emergency fund, but it is earning next to nothing because I wanted it to be immediately accessible (local bank). Is that silly? Would an online saving be better (need wallet top 10 or something)? Does number 8 bullet 1 mean that I should tune my retirement contributions so that I land in a target tax bracket?
    – Sanchewy
    Aug 3, 2019 at 22:30
  • +1 to already having an E-Fund. Some people like having the money instantly accessible. I wouldn't call it silly; rather, it's incorrect risk analysis. Whatever emergency you need it for can either #1 be charged, or #2 wait the few days for an ACH transfer from an online bank, and paying the CC can definitely wait for the ACH transfer. (I really like Ally Bank, but there are others.)
    – RonJohn
    Aug 3, 2019 at 22:37
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    Gotcha, if you charge the emergency purchase you have until next billing cycle to get the funds out through the online process anyway...
    – Sanchewy
    Aug 3, 2019 at 23:04
  • +1 for #5 (decide on debt hatred). Lots of people are eager to ruthlessly pay down debt, but in that interest rate range it may not be the most lucrative long term strategy. Always willing to upvote someone who explores that idea ;)
    – bvoyelr
    Aug 5, 2019 at 17:39

My monthly minimum payment is under $200, and my employer contributes $200 on my loans each month.

Is your employer contribution based upon your monthly minimum or will it always be $200 no matter what your monthly minimum is? How long do you plan to stay at your employer?

Scenario 1 Employer contribution is always $200:

I would just keep the student loan balance in a high interest savings account until you leave this employer. Provided that the new employer does not have a similar benefit, I would be student loan free the next day.

Scenario 2 Employer contributions are tied to your minimum payment:

I would use your savings to pay off a good portion of your loans. How much would depend on how long I plan to work at my employer. The rest would go into a high yield savings account such as Ally. This will minimize the interest paid on the loans, maximize your employer benefit, and interest earned on your savings

The key here is keeping the student loan pay off fund sacred. It cannot and should not be used for anything else. It is not a house down payment, or a new car. Keep it for one purpose and you will be golden.

  • 1
    Pretty sure Scenario 1 is backwards ($200 > minimum payment, so accepting the $200 as long as possible is in OP's best interest. Theoretically possible to have the employer pay ALL of the loans that way.)
    – Mars
    Aug 6, 2019 at 7:23
  • @Mars ty for your input, corrected.
    – Pete B.
    Aug 6, 2019 at 12:55
  • The payment is always a flat $200 a month, regardless of minimum payment, as long as I continue working here and the load principal is > $0. @pete
    – Sanchewy
    Aug 6, 2019 at 23:02

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