A good way to start plotting out an investment plan to pay off student loan debt is to become familiar with ETFs, since the products often have among the lowest fees in the fund industry and offer exposure to broadly diversified indexes.
Of course, there are risks associated with any investment. Bobby White, chairman and CEO of Reliance Financial Group, along with the company's chief investment officer Wesley Fleming, pointed to the market crash of 2008 as an example of why investing always needs to be a long-term play for investors. Time is the best way to "stretch the risk out."
And investing to pay off your loans does depend on how much disposable income you have—if you can't even meet your monthly bills, then this strategy has no place for you. But then again, should you be maxing out a 401(k) plan contribution at 10 percent—which most financial services firms recommend—if you can't put even one dollar from a paycheck to an investment plan to pay down your student debt?
Some broad U.S. equity indexes easily beat the 3.86 percent current undergrad rate on federal loans: the SPDR S&P 500 ETF has a 10-year total return of more than 7 percent, and iShares Russell 2000 ETF has generated more than 8 percent.
"If you look at the average portfolio over the last 25 years, you are getting a return that is exceeding historical averages," Thibeault said. By doing the math, some might find that, based on anticipated returns and their after-tax earnings, an individual investment account could outpace their student loans, which continue to accrue interest.