Yes it is called inflation. That 3.5% loan principle and payment has become 2% less valuable most years, and recently it has become 9% less valuable. So if that

Yes it is called inflation. That 3.5% loan principle and payment has become 2% less valuable most years, and recently it has become 9% less valuable. So if that money was put into buying assets that the OP needed, that would be risk free gain. Also the tax deduction you point out is nullified by paying off the loan. The deduction is on student loan interest. So now that is lost every year. If someone qualifies for that deduction and inflation is normal/high it is pretty hard for 3.5% to be worth paying off early.