On a recent episode of the Rich Habits Podcast, co-host Austin Hankwitz took a listener’s question about a $130,000-a-year household carrying $80,000 in student loans at 5.35% interest and delivered a blunt verdict: “Paying off debt only goes to zero.” His argument was that shoveling every extra dollar at a low-rate loan is one of the more expensive mistakes a young investor can make. According to Hankwitz, that same $80,000 left in the market “gonna double now every 7 years to $160,000, $320,000, $640,000”, so twenty years later “that $80,000 is now half a $500,000.”
If the listener follows the aggressive-payoff instinct instead, the real cost is a two-decade head start on compounding that never gets rebuilt.
The Verdict: He Is Right, but the Rate Is Doing the Work
Hankwitz’s advice is sound for this specific borrower, and the mechanism is opportunity cost. Every dollar sent to a 5.35% loan earns a guaranteed 5.35% return. Every dollar invested in a diversified equity index earns whatever the market delivers, which historically has been higher over long stretches. The doubling-every-seven-years figure is his projection, not a guarantee, but the underlying market data gives it a plausible anchor. The S&P 500 tracked by the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) has returned roughly 241% over the past ten years and about 485% over the past twenty. Those returns comfortably exceed the loan rate.
Consider a simplified illustration using Hankwitz’s own numbers. He frames $80,000 doubling every seven years to $160,000, then $320,000, then $640,000. Even a lower assumed return would clear the 5.35% hurdle. Stocks may not replicate the past, but a guaranteed 5.35% payoff return is a low bar when the alternative asset class has historically delivered far more, and when the borrower has twenty-plus years of runway to ride out drawdowns.
Compare that to the risk-free alternatives sitting on the table today. The 10-year Treasury yields about 4.7%, I-bonds pay a combined rate near 4.3%, and the national average 12-month CD sits near 1.7%. None of those beat 5.35% on a guaranteed basis, which is why the answer here hinges on equities, not cash.
The Variable That Flips the Math
The single factor that decides whether Hankwitz’s advice helps or hurts a reader is the interest rate on the debt.
At 5.35%, the spread over safe yields is thin and the spread under long-run equity returns is wide. Investing wins on expectation. Flip the rate to 22% on a credit card, and the calculus inverts instantly. No diversified portfolio reliably clears a 22% hurdle, so every dollar sent to that balance is the best return available. The rule of thumb: if the debt rate is comfortably below your realistic long-run investment return, invest. If it is above, pay it off. Federal student loans in the 4% to 6% range typically fall on the investing side, especially inside tax-advantaged accounts. Private loans above 8% often do not.
The Fee Drag Nobody Sees
Robert Croak added a second warning on the same episode. He said Edward Jones, “is going to sell you what they make the most money on” and charges roughly 1.25% in fees. On a portfolio meant to compound for decades, a 1.25% annual haircut is not a rounding error. It quietly eats a meaningful share of the doubling Hankwitz described, because it comes out every year regardless of returns.
What to Actually Do
The hosts laid out a specific blueprint for the $130,000 earner with a mortgage and a new baby:
- Contribute 5% to the employer 401(k) to capture the full 4% match, roughly $541 a month. The match is an immediate 100% return on the matched portion. Nothing else in this article comes close.
- Max both Roth IRAs at $625 a month each, totaling $1,250 a month. Tax-free growth for decades.
- Move brokerage assets off a 1.25% advisory platform to a self-managed account at Fidelity or Public. Keep total monthly contributions near $1,800.
- For the baby, open a 529 and a Trump account to capture $1,000 in free money and contribute up to $5,000 a year.
- Do not make extra payments on the 5.35% student loans until the equivalent balance is invested. Pay the minimum, on time, every month.
The takeaway: at a 5.35% rate, the real emergency is the missed decade of compounding.
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