Should you pay off student loans or start investing?

It feels like a moral question, but it is really just a math question. Every dollar has one job, and the winning job is whichever gives you the bigger, safer return. Here is the rule that cuts through it.

The one number that decides it: your interest rate

Paying off a debt is a guaranteed return equal to its interest rate. Wipe out a loan charging 7% and you have earned a guaranteed, risk-free, tax-free 7%. Investing, by contrast, might earn more over time, but it is not guaranteed and it bounces around. So compare the two honestly.

Above roughly 6% to 7% interest, kill the debt first. Credit cards at 20% and most car loans are obvious. There is no reliable investment that beats a guaranteed 20%, so paying those off is the best "investment" you can make.

Below roughly 5%, you can lean toward investing while paying the minimum on the debt, because a sensible long-term portfolio has a good chance of beating a low rate. Many Canada Student Loans sit in this lower range, which is why the answer for a lot of grads is "do both": pay the minimum, and invest a little alongside it.

The Canadian tax angle most people miss

Interest paid on government student loans (Canada and Alberta student loans) can earn you a federal tax credit. That effectively lowers the real cost of that debt, which nudges the math a little further toward investing while you pay it down slowly. It does not apply to a regular bank line of credit you used for school, so know which kind of loan you actually have.

Do these two things first, always

Before you optimize anything, cover the basics: keep a small cushion of about one month of essentials so a surprise does not put you back on the credit card, and grab any employer retirement match, which is free money that beats both options. After that, apply the interest-rate rule above.

A clean plan for most grads

Pay every debt above 7% aggressively. For anything below 5%, pay the minimum and start investing a small amount in a TFSA so your money gets the one thing debt repayment cannot give it: decades of compounding. The goal is not to be debt-free at all costs, it is to put each dollar where it works hardest. If you are not sure whether you are ahead or behind for your age yet, check in about two minutes.