Can You Pay a Student Loan off Early?

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Student loans can certainly be paid early! Borrowers are highly recommended to do so as soon as they have the financial means.

As the cost of college attendance slowly rises, more students are relying on outside financial resources such as student loans to fund their school expenses each year. As this demand for student loans increases, so does the student loan debt crisis.

Scholarships, like those offered on, are the most sought form of financial aid because they are not required to be paid back at any time. While students are encouraged to apply early, sometimes this may not always be sufficient enough to cover the full cost of college.

Unlike scholarships, student loans are a form of financial aid that requires repayment following graduation. It is essentially borrowed money from the bank or another service meant to be repaid with interest. If you qualify for high loans, then you could essentially have enough money to attend the school of your choice.

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In almost all cases, interest begins accruing on student loans the day the money is deposited into your bank account. The timeline for when you become responsible for paying this interest as well as your student loan repayment is completely contingent on the source of your loan.

Regardless, when students wait to pay off student loans, they are stuck paying extra payments that exceed their original loan amount as interest accumulates. Eventually, it can lead to a large student loan debt-to-income ratio - something faced by millions of university graduates nationwide.

Although private loans and federal loans will differ in their expectations as well as payment amounts, borrowers can be rest assured that they can begin student loan payments as soon as they have the means to do so. However, before deciding to pay student loans quickly, it is important to assess your other financial constraints and goals. While you can begin paying student loans early, it might not always be the best idea to pay them off completely.

On average, student loan repayment can be tens of thousands of dollars, and it can have the capacity to have a significant hit on the bank account. Without a solid income, it can affect paying off other expenses.

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Ideally, you want to be in a situation where you have money to afford:

  • Cash for an emergency fund
    To prepare for any unexpected issues, it is best to have some extra money saved up. You never know when you will need it, so it is better to have it rather than not.
  • Credit card debt
    Typically, credit card interest rates are much higher than student loans. It would be more reasonable to take care of those expenses first so that they do not negatively affect your credit score and hinder future purchases.
  • High-interest debt

In addition to credit card debt, personal loans can have an average interest rate of 14.5%. Due to this high percentage, it is worthwhile to take care of these outstanding expenses first.

  • Basic living necessities

You want to make sure you have enough money left over to pay for rent, food, and    anything else that might be vital!

Do not prioritize paying off your student loans faster over fulfilling these other obligations.

If your income can cover these extra payments, then consider paying off your student loan earlier. Otherwise, feel free to start saving money to stay up to date with your repayment schedule.


How to pay off student loans early?

After taking care of all other financial restraints, it might be time to start taking care of student loans! Creating an efficient plan will benefit you in paying off your student loan debt faster. Also, consider consolidating your student loans to better manage them.

1) Pay off capitalized interest

Some scholarships offer a grace period, which is generally 6 months post-graduation. While loan repayments are not necessarily due, interest can certainly accrue during this time frame. The accumulation of this interest throughout your academic career will make it more difficult to pay back by the time you begin. To start off strong, make a lump-sum payment to cover the interest. This will help prevent your balance from growing.

2) Extra payments

All student loan servicers will offer their own plans that will include a minimum payment required monthly. This will vary depending on the duration of your plan as well as the amount taken out. If you have the financial means to do so, consider exceeding the minimum amount and making higher payments.

3) Biweekly payments

Both federal student loans and private student loans require 12 payments on a monthly basis. On a biweekly payment schedule, you would make 26 payments throughout the year instead. Without requiring any additional effort, it can eliminate months or years worth of payments.

4) Work at certain companies

A handful of organizations offer employees financial support for student loan repayment as a benefit. Some help you pay it off, while others are authorized to provide student loan forgiveness programs. If you already have a job, speak to HR and ask if they participate in anything similar.

5) Autopay discount

Enrolling in autopay actually helps you save money on student loan repayment. Every payment taken directly from your bank account will result in a point reduction in your interest rate. It also prevents you from missing any payments to ensure you do not default on any payments.

6) Apply for Scholarships

Receiving more money through scholarships means less borrowed through student loans. Through, you can apply to an abundance of opportunities throughout college. There are constantly new scholarships being uploaded, catering to students from all different demographics and experiences.


How does refinancing loans work?

Another great option to pay students loans off earlier is refinancing the initial loan. In this process, the borrower takes out another loan to pay off the existing one. The terms of the old loan are replaced by the new agreement, which usually provides more benefits and financial freedom.

Generally, refinancing a new loan should come at a lower interest rate. That way, it is less expensive to you in the long run. These new circumstances can save borrowers a couple of thousand dollars yearly.

Similarly, borrowers can opt for a shorter term so that they can pay off all loans earlier. While it might increase monthly payments, you will be in debt for a shorter amount of time, and it will save you a lot in interest.

Although refinancing is allowed on all types of student loans, some federal student loan benefits can be lost because of it. Particularly, federal loans are eligible for income-driven repayment plans and public service loan forgiveness.

These individual programs provide extra help to borrowers based on their employment status. Individuals working for the government or a non-profit who qualify for these repayment plans are better off sticking with the initial loan instead of refinancing.

However, if you have a private loan that has no repercussions of refinancing, then it might be worthwhile to set up a meeting with your loan servicer. To be eligible, you must have a good credit score, a degree, and an acceptable debt-to-income ratio.


Frequently asked questions

Can I pay my student loans off with a credit card?

While it is not impossible, it is generally not a good idea. The interest rates on credit cards are usually a lot higher than student loans, so you would end up paying a lot more money than you initially would have.

Some private lenders allow student loans to be paid via a credit card, helping borrowers receive any rewards if there are any. However, you will also be charged a significant transaction fee which might outweigh any of these additional benefits.

Additionally, attributing these large purchases to the credit card might increase your credit utilization ratio, which could potentially negatively affect your credit score.

Typically, loan servicer companies require all cash payments and do not accept credit cards as an adequate payment form. It is contingent on the loan and its servicer. Given the downsides, it is recommended to pay student loans off directly.

How much can I borrow in student loans?

The amount borrowed will differ for every student.

To see how much you qualify for will depend on the universities' cost of attendance, dependency status, financial need, and scholarship help.

Additionally, the source of the loan will play a big factor in determining how much you receive. Federal student loans have limits on the amount you can borrow each year and in total. Private student loans may have different borrowing limits and may require a credit check.

Curious? Read more to explore how much college costs now!