Invest or Pay Off Debt Calculator

When you have extra money each month, should it go toward debt or into investments? Paying off debt gives a guaranteed return equal to its interest rate. Investing may earn more, but with risk. This calculator compares the two over the same period so you can see the trade-off in dollars.

What this calculator does

Enter your debt balance, interest rate, required monthly payment, extra money available each month, expected after-tax investment return and the number of years to compare. It shows:

• which strategy leaves you with more,
• the difference in net worth,
• your net worth at the end if you pay the debt first, and
• your net worth at the end if you invest the extra.

The formula in plain English

The calculator follows both strategies month by month.

Pay debt first: each month, the required payment plus the extra goes to the debt. When the debt is paid off, both amounts are invested every month until the end.

Invest the extra: each month, the required payment goes to the debt and the extra is invested. When the debt is paid off, the freed-up payment is invested too.

Interest on the debt and growth on investments compound monthly.

Net worth at the end = investments − any remaining debt.

A worked example

Dr. Brown has $60,000 in student loans at 6.5%, with a $700 monthly payment. She has an extra $500 a month and expects 6% after-tax investment returns. She compares 10 years.

• Pay debt first: net worth after 10 years is about $86,200.
• Invest the extra: net worth is about $85,100.
• Paying the debt first comes out about $1,100 ahead.

The difference is small because the rates are close. With a 4% loan, investing would win; with a 9% loan, paying it off would win clearly. When the difference is this small, many people choose the guaranteed option.

Why it matters at each career stage

If you're: Resident / fellow

During training, the first priority is usually a small emergency fund and any retirement match. If you're aiming for PSLF, extra loan payments don't help. Otherwise, low-rate loans are less urgent than high-rate ones.

If you're: Employed

After training, many people do both: a fixed extra payment on student loans plus maxing out retirement accounts. Retirement accounts have tax benefits that make investing more attractive, especially at high tax rates.

If you're: Practice owner

Practice loans are often tax-deductible business expenses, which lowers their effective rate. Consider keeping cash reserves for the practice before paying off low-rate debt aggressively.

A practical order of priorities

1. Build a starter emergency fund.
2. Get your full employer retirement match.
3. Pay off credit cards and other high-rate debt.
4. Build a full emergency fund of three to six months.
5. Max out tax-advantaged accounts (401(k)/403(b), HSA, backdoor Roth).
6. Decide between extra debt payments and taxable investing based on the rate.

When the answer flips

Three things can flip the result. A higher debt rate favors paying it off, because that guaranteed return gets harder to beat. A longer time horizon favors investing, because compound growth has more time to work, though with more risk along the way. And taxes matter: investing inside a 401(k), 403(b) or HSA gives you a tax break that a loan payment doesn't, which is why maxing tax-advantaged accounts usually comes before extra payments on moderate-rate debt.

More than math

Being debt-free has value that doesn't show up in a spreadsheet: less stress, lower required monthly expenses and more flexibility to change jobs or cut back hours. If paying off a loan would help you sleep better, that's a legitimate reason to choose it even if investing might earn slightly more.

Next, see how extra payments shrink a loan, plan a full debt payoff, or see what investing could grow to with the compound interest calculator.