One in Four Families With Student Loans Has the Cash to Pay Them Off Today. Should You?

If you’ve got student loans and a fat savings account, you’ve probably wondered why you’re paying 6% on one while the other earns 4%. You’re not alone. One in four families with student debt could wipe it out today with the cash already in the bank.

The other three can’t come close. And for them, the bank balance matters more than the loan.

What the Fed’s new data shows

The Federal Reserve released its 2025 Survey of Consumer Finances this month. It’s the big one, run every three years. The Fed’s report says 20% of families carry student debt, with a median balance of $25,600.

We pulled the public data and split those families by one question: could the money in their checking, savings and money market accounts cover the whole student loan balance?

For 25% of them, yes. Their median balance owed was $10,400. Their median cash was about $35,600. Median family income in that group: about $153,000.

For the other 75%, not even close. They owed a median $31,000 and held about $3,800. Sixteen percent of all families with student debt had under $1,000 in the bank.

The number that matters

Here’s what they don’t tell you about thin cushions. Among the cash-short group, 20.6% had been 60 or more days late on some payment in the past year. In the group that could pay off its loans, 7.5%. For all families, the Fed’s figure is 8.2%.

The survey doesn’t prove the small balance caused the late payments. It shows they travel together.

The payoff math

Say you owe $10,400 at this year’s 6.52% undergraduate rate. Turn on auto-pay by December 31 and the Education Department knocks a full point off through June 2028, so you’re at 5.52%. That’s about $574 a year in interest.

Park the same $10,400 in a 4.40% savings account, one of the top nationally available rates on October 23. You earn $458, or about $357 after federal tax in the 22% bracket.

Paying it off wins by roughly $217 a year. Real money, but not life-changing.

Our verdict: your call, with a lean. If you’re in the lucky quarter, your rate is above your after-tax savings yield, and you’d still have a full emergency fund after writing the check, pay it off. Smart. If you’re chasing Public Service Loan Forgiveness or forgiveness under an income-driven plan, don’t. Every extra dollar is one forgiveness would’ve covered.

If you’re in the other 75%, keep the cash. A federal loan won’t hand the money back when the car dies.

Do this now

Turn on auto-pay with your servicer before December 31. The full-point discount is the cheapest rate cut you’ll get this year. Check your actual rate on each loan, because older loans carry different ones. Build the emergency fund first, then run your balance through our debt payoff calculator. On the Repayment Assistance Plan? Read why paying ahead can cost you before sending extra. More on the education hub.

The detail

Our figures use the Fed’s 2025 SCF summary extract, weighted, across all five data sets. “Cash” is the Fed’s LIQ variable: checking, savings, money market, call and prepaid accounts. It leaves out CDs, retirement and brokerage money. Late means the Fed’s LATE60 flag, any payment 60 or more days past due in the past year, on any debt. The sample holds about 766 families with student debt and about 194 in the pay-it-off group, so treat the subgroup numbers as estimates. Our overall figures line up with the Fed’s published 20% share and 8.2% late rate.

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