Student loans can be a significant financial burden, especially for recent grads. More than half of the class of 2022 graduated with education debt, owing an average of $29,400, according to College Board.
The fastest way to pay off your student loans is making extra payments each month. This reduces the overall interest you’ll owe and helps you see your balance decrease faster. While no single method will erase your debt completely, using a combination of tactics can simplify repayment and save you money over the life of your loans.
Paying a little extra toward your student loans each month is a smart way to pay down your balance faster and reduce the amount of interest you pay over time. If you can afford to do so, you could potentially save thousands of dollars.
For example, say you have a $20,000 student loan at 6.00% interest for 10 years. Your normal monthly payment would be $222 — but if you paid an extra $150 per month, you could save over $3,300 in interest and reduce the term of your loan by nearly five years:
Important:
Make sure your loan servicer applies the additional amount to your loan’s principal rather than fees or accrued interest. Otherwise, you won’t see your loan balance drop as quickly as you may hope.
By making payments every two weeks instead of once a month, you reduce the accrued interest that’s charged to your account. And while you’ll pay the same amount most months, you end up making an extra payment each year.
Let’s go back to our previous example of a $20,000 loan with 6.00% interest and a 10-year term. If you made biweekly payments of $111, you’d pay off your loans a year ahead of schedule and save more than $650 in interest:
Some loan servicers allow you to set up automatic biweekly payments online. If yours doesn’t, you can make them manually. For instance, if your payment of $300 is due on the first of the month, you would pay half of that amount ($150) two weeks before and the other half on the due date.
You may be eligible for federal student loan forgiveness programs if your job meets specific criteria. These programs can help you save money by forgiving a portion of your student loan debt.
For example, if you work full-time for a not-for-profit organization or federal, state, local, or tribal government, you may qualify for Public Service Loan Forgiveness (PSLF). This program forgives the remaining balance of eligible federal student loans once you’ve made 120 qualifying payments under an income-driven repayment plan.
Related: Student loan forgiveness programs for teachers
State governments, federal agencies, and even some private employers offer repayment assistance programs that could help you save money and make it easier to manage your student debt.
These programs are most common in certain professions — teachers, lawyers, veterinarians, nurses, doctors, dentists, and mental health professionals may have an easier time finding options. Often, you must commit to working for several years in a low-income area or underserved community. In exchange, these programs will pay a portion of your student loans annually.
A few popular repayment assistance programs include:
- Nurse Corps Loan Repayment Program (NCLRP): The NCLRP pays up to 85% of your nursing school debt if you work for two years at a critical shortage facility.
- Attorney Student Loan Repayment Program (ASLRP): The ASLRP program offers up to $6,000 per year in federal student loan repayment to qualified attorneys at the Department of Justice in exchange for three years of service.
- National Health Service Corps Loan Repayment Program (NHSC LRP): The NHSC Loan Repayment Program pays up to $50,000 of loans for health care professionals in eligible disciplines who work in underserved areas for at least two years.
Tip:
Private companies are increasingly offering student loan repayment as a standard employee benefit. Check with your employer’s human resources department to see if debt assistance is part of your benefits package.
A student loan refinance can reduce your interest rate or lower your monthly payments, helping you save money or otherwise make your debt more affordable.
When you refinance, you take out a new private student loan (ideally with a lower rate or more desirable terms) and use that money to pay off your existing education debt. You typically need good-to-excellent credit and consistent income to qualify, but adding a cosigner to your application could help if you aren't eligible on your own.
Related: Should I refinance my student loans?
Important:
Refinancing federal student loans turns your debt into a private loan, making you ineligible for federal benefits like income-driven repayment, forgiveness, and deferment and forbearance. This process is irreversible, so proceed with caution.
Overview
Brazos offers student loan refinancing exclusively to Texas residents who have earned at least a bachelor's degree from an eligible school. The company does not charge application or origination fees, and its interest rates could be lower than what you find with other private lenders.
However, Brazos has eligibility requirements that some borrowers might find to be difficult to meet. To qualify, borrowers must have a minimum income of $60,000 and a credit score of 720 or higher. If you can't meet those minimums alone, you can add a cosigner who can be released after making 24 consecutive payments.
pros
- Offers five loan terms
- Competitive rate offerings
- Cosigner release after two years
- Doesn’t charge application or origination fees
- A quarter-point rate discount for using autopay
cons
- Must be a Texas resident to qualify
- Higher minimum credit and income requirements than many other lenders
- Must have earned at least a bachelor’s degree to qualify
Loan terms
5, 7, 10, 15, or 20 years
Loan amounts
$10,000 minimum, up to $150,000 for bachelor’s degrees and $400,000 for graduate, medical, law, or other professional degrees
Cosigner release
After 24 on-time, consecutive payments
Eligibility
Borrower must be a Texas resident and a U.S. citizen or permanent resident who has at least one outstanding, fully disbursed education loan
$5,000 up to the full balance
Overview
SoFi®, an online lender established in 2011, offers student loan refinancing for undergraduate and graduate borrowers from Title IV schools. They also provide refinancing options for Parent PLUS loans and medical school graduates in residency or fellowship. With five repayment terms, SoFi caters to various budget needs, and you can prequalify with a soft credit pull, which won't impact your credit score. Loans are serviced by MOHELA.
SoFi stands out for its member perks, including no fees, an autopay discount, and a 0.125 percentage point interest rate reduction for existing members. Additional benefits include free financial planning, unemployment protection, and access to travel deals.
pros
- Rate discounts, financial planning, and travel deals for members
- No application, origination, or late payment fees
- Autopay rate discount available
- You can refinance parent PLUS loans in the student's name
cons
- Cosigner release not available
- Must have at least $5,000 in loans to refinance
Loan terms
5, 7, 10, 15, or 20 years
Loan amounts
$5,000 - full outstanding balance
Eligibility
Must be a U.S. citizen or permanent resident. Must have made 6 on-time payments in the past 6 months, with no record of default, delinquency, bankruptcy, or foreclosure in the last five years. Employment is required, or you must have a job offer starting within 90 days. Must also have attended a Title IV-eligible school.
$10,000 up to total refinance amount
Overview
ELFI offers student loan refinancing for borrowers who have earned at least a bachelor's degree. A key benefit is that you're assigned a dedicated Student Loan Advisor as soon as you begin the application process. This advisor helps guide you through the refinancing process and assists in selecting the loan terms that best fit your financial situation. Advisors can be reached by text, email, or phone.
ELFI also allows you to refinance a parent's PLUS loan in your name, a feature that sets it apart from many other private lenders. However, ELFI does not offer cosigner release or interest rate discounts.
pros
- Work with a dedicated Student Loan Advisor
- Students can refinance parent loans in their own name
- Transparent eligibility criteria
- Payment relief options for struggling borrowers
cons
- At least a bachelor’s degree required for refinancing
- No cosigner release
- No autopay rate discount
- Fees apply for late or returned payments
Loan terms
5, 7, 10, 15, or 20 years for student loan refinancing; 5, 7, or 10 years for parent loan refinancing
Loan amounts
Minimum of $10,000 with no set maximum.
Eligibility
Must be a U.S. citizen or permanent resident with a bachelor’s degree or higher. Must have at least $10,000 in student loans to refinance and a minimum credit history of 36 months.
Overview
LendKey is a lending platform that partners with credit unions and community banks to help borrowers get low-interest student refinance loans. You can compare lenders all in one place without negatively impacting your credit score.
Because LendKey pairs borrowers with local banks and credit unions, the terms and eligibility requirements can differ, depending on which lender you choose. You'll have many options to compare, but it's important that you carefully review each credit union or bank's terms before signing your loan agreement.
pros
- Doesn’t charge origination or application fees
- Can refinance with an associate degree
- Offers a discount for autopay
cons
- Terms vary by the lender you choose
- Potentially need to meet membership requirements for certain credit unions or banks
Cosigner release
Varies based on lender's terms
Eligibility
Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from one of LendKey lenders’ eligible institutions.
Overview
INvestEd is a nonprofit lender that offers student loan refinancing with competitive rates. Borrowers can take advantage of an autopay discount, as well as cosigner release after only 12 on-time payments.
The lender's maximum refinance loan limit is $250,000, which is lower than some other lenders. International students aren't able to refinance their student loans. INvestEd has a minimum credit score requirement of 670, and borrowers must meet an income requirement. However, the lender doesn't offer prequalification, so potential borrowers can't find out what their rate would be without a full application.
pros
- Don’t need a degree to refinance
- Offers rate discount for autopay
- Can release cosigner after 12 on-time payments
- Various deferment options available
cons
- Can’t prequalify before applying
- Maximum loan limit is lower than some lenders
- Not able to transfer a parent loan to a student
- International students aren’t eligible
Eligibility
U.S. citizens or permanent residents are eligible. Borrowers must meet minimum requirements including a FICO score of 670 or higher, annual income of $36,000, a debt-to-income ratio below 40% to 50%, a year of continuous employment, and no defaults or serious collection activities in recent years.
Overview
If you have at least $10,000 in student loans to refinance, Citizens may be a good option.The lender has a relatively high loan maximum of $300,000 for undergraduate borrowers, and graduate or professional degree holders can refinance up to $500,000 or $750,000.
Citizens offers loan repayment terms ranging from five to 20 years, and rates can be either fixed or variable. Medical residents can refinance loans with fixed monthly payments of $100 for up to four years.
pros
- Offers prequalification to check rates
- Discounts for autopay and loyalty
- Wide range of repayment terms
cons
- Higher minimum loan requirement than some lenders
- Cosigner release only available after 36 payments
- 12 payments required for borrowers without at least a bachelor’s degree to be eligible to refinance
Loan terms
5, 7, 10, 15, or 20 years
Loan amounts
$10,000 minimum, with a maximum of $300,000 for bachelor’s degree or below; $500,000 for graduate degrees; and $750,000 for professional degrees
Eligibility
Must refinance at least $10,000 in student loans and be a U.S. citizen, permanent resident, or resident alien with a valid U.S. Social Security number. Must have earned at least a bachelor's degree to qualify.
Overview
EdvestinU is a nonprofit student loan lending and refinancing organization that's part of the Granite Edvance Corporation. It offers student refinance loans, with fixed- and variable-rate options available.
The lender offers student loan refinancing in 20 states. It has higher loan minimums and lower maximums to qualify for refinancing than some competitors. Eligible borrowers have a range of student loan repayment term options to choose from.
pros
- No degree required to qualify and can refinance while still in school
- Rate discount of 0.25 percentage points for autopay
- New Hampshire residents may qualify for a 1.5 percentage point rate reduction
- Can prequalify and see rate offers with no impact on credit score
cons
- Not available to borrowers in all states
- Higher minimum balances and lower maximum balances than some competitors
- Stricter cosigner release requirements than many other lenders
Eligibility
U.S. citizens or permanent residents who are at least 18 years old and reside in Alaska, Arkansas, Colorado, Connecticut, Florida, Maine, Massachusetts, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Puerto Rico, Rhode Island, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin.
$10,000 up to the total amount
Overview
The Massachusetts Educational Financing Authority (MEFA) provides refinancing options for student borrowers, even if you haven't earned your degree. While MEFA doesn't offer variable-rate loans, its fixed-rate options are competitive with what other lenders offer.
You can refinance loans starting at $10,000, but you'll need to have made six on-time payments on your current loans within the last six months to qualify. If your credit history isn't strong enough, you can apply with a cosigner. However, MEFA doesn't offer cosigner release, meaning the cosigner remains responsible until the loan is fully paid off.
pros
- You don’t need a degree to refinance
- View your estimated rate through prequalification
- No application, origination, or late fees
cons
- Variable rates are not offered; only fixed
- No autopay rate discount
- Cosigner can’t be released from the loan
- Parent loans are not eligible for refinancing
Loan amounts
$10,000 up to your total debt
Eligibility
Must be a U.S. citizen or permanent resident who is the primary borrower on education debt used to attend an eligible college or university. Must have made six on-time loan payments over the most recent six months. Must have no history of default or delinquency on education debt for the past 12 months and no history of bankruptcy or foreclosure in the past five years.
Overview
Rhode Island Student Loan Authority (RISLA) is a nonprofit lender founded in 1981 that offers refinance loans to borrowers in all 50 states. While most private student loan lenders cater exclusively to borrowers who have earned degrees, RISLA also refinances loans for those who did not complete a degree program.
One of the benefits RISLA offers is income-based repayment, which is usually only available with federal student loans. Borrowers experiencing financial hardship may also qualify for forbearance for a period of as long as 24 months. Those returning to resume graduate studies school may defer repayment on their refinancing loans for as long as 36 months.
pros
- Offers income-based repayment
- Forbearance periods of as long as 24 months available
- Graduate school deferment periods as long as 36 months
- Can refinance even without a degree
cons
- Cosigners cannot be released from loans
- Limited range of repayment terms
- Must have income of at least $40,000 to qualify
- Doesn’t offer variable-rate loans
Loan amounts
$7,500 minimum up to of $250,000, depending on degree
Eligibility
Borrower or cosigner must meet credit requirements. Student must be a U.S. citizen or permanent resident and have used original student loans to attend an eligible degree-granting institution.
Overview
Brazos offers student loan refinancing exclusively to Texas residents who have earned at least a bachelor's degree from an eligible school. The company does not charge application or origination fees, and its interest rates could be lower than what you find with other private lenders.
However, Brazos has eligibility requirements that some borrowers might find to be difficult to meet. To qualify, borrowers must have a minimum income of $60,000 and a credit score of 720 or higher. If you can't meet those minimums alone, you can add a cosigner who can be released after making 24 consecutive payments.
pros
- Offers five loan terms
- Competitive rate offerings
- Cosigner release after two years
- Doesn’t charge application or origination fees
- A quarter-point rate discount for using autopay
cons
- Must be a Texas resident to qualify
- Higher minimum credit and income requirements than many other lenders
- Must have earned at least a bachelor’s degree to qualify
Loan terms
5, 7, 10, 15, or 20 years
Loan amounts
$10,000 minimum, up to $150,000 for bachelor’s degrees and $400,000 for graduate, medical, law, or other professional degrees
Cosigner release
After 24 on-time, consecutive payments
Eligibility
Borrower must be a Texas resident and a U.S. citizen or permanent resident who has at least one outstanding, fully disbursed education loan
Loan Amounts
$5,000 up to the full balance
Overview
SoFi®, an online lender established in 2011, offers student loan refinancing for undergraduate and graduate borrowers from Title IV schools. They also provide refinancing options for Parent PLUS loans and medical school graduates in residency or fellowship. With five repayment terms, SoFi caters to various budget needs, and you can prequalify with a soft credit pull, which won't impact your credit score. Loans are serviced by MOHELA.
SoFi stands out for its member perks, including no fees, an autopay discount, and a 0.125 percentage point interest rate reduction for existing members. Additional benefits include free financial planning, unemployment protection, and access to travel deals.
pros
- Rate discounts, financial planning, and travel deals for members
- No application, origination, or late payment fees
- Autopay rate discount available
- You can refinance parent PLUS loans in the student's name
cons
- Cosigner release not available
- Must have at least $5,000 in loans to refinance
Loan terms
5, 7, 10, 15, or 20 years
Loan amounts
$5,000 - full outstanding balance
Eligibility
Must be a U.S. citizen or permanent resident. Must have made 6 on-time payments in the past 6 months, with no record of default, delinquency, bankruptcy, or foreclosure in the last five years. Employment is required, or you must have a job offer starting within 90 days. Must also have attended a Title IV-eligible school.
Loan Amounts
$10,000 up to total refinance amount
Overview
ELFI offers student loan refinancing for borrowers who have earned at least a bachelor's degree. A key benefit is that you're assigned a dedicated Student Loan Advisor as soon as you begin the application process. This advisor helps guide you through the refinancing process and assists in selecting the loan terms that best fit your financial situation. Advisors can be reached by text, email, or phone.
ELFI also allows you to refinance a parent's PLUS loan in your name, a feature that sets it apart from many other private lenders. However, ELFI does not offer cosigner release or interest rate discounts.
pros
- Work with a dedicated Student Loan Advisor
- Students can refinance parent loans in their own name
- Transparent eligibility criteria
- Payment relief options for struggling borrowers
cons
- At least a bachelor’s degree required for refinancing
- No cosigner release
- No autopay rate discount
- Fees apply for late or returned payments
Loan terms
5, 7, 10, 15, or 20 years for student loan refinancing; 5, 7, or 10 years for parent loan refinancing
Loan amounts
Minimum of $10,000 with no set maximum.
Eligibility
Must be a U.S. citizen or permanent resident with a bachelor’s degree or higher. Must have at least $10,000 in student loans to refinance and a minimum credit history of 36 months.
Overview
LendKey is a lending platform that partners with credit unions and community banks to help borrowers get low-interest student refinance loans. You can compare lenders all in one place without negatively impacting your credit score.
Because LendKey pairs borrowers with local banks and credit unions, the terms and eligibility requirements can differ, depending on which lender you choose. You'll have many options to compare, but it's important that you carefully review each credit union or bank's terms before signing your loan agreement.
pros
- Doesn’t charge origination or application fees
- Can refinance with an associate degree
- Offers a discount for autopay
cons
- Terms vary by the lender you choose
- Potentially need to meet membership requirements for certain credit unions or banks
Cosigner release
Varies based on lender's terms
Eligibility
Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from one of LendKey lenders’ eligible institutions.
Overview
INvestEd is a nonprofit lender that offers student loan refinancing with competitive rates. Borrowers can take advantage of an autopay discount, as well as cosigner release after only 12 on-time payments.
The lender's maximum refinance loan limit is $250,000, which is lower than some other lenders. International students aren't able to refinance their student loans. INvestEd has a minimum credit score requirement of 670, and borrowers must meet an income requirement. However, the lender doesn't offer prequalification, so potential borrowers can't find out what their rate would be without a full application.
pros
- Don’t need a degree to refinance
- Offers rate discount for autopay
- Can release cosigner after 12 on-time payments
- Various deferment options available
cons
- Can’t prequalify before applying
- Maximum loan limit is lower than some lenders
- Not able to transfer a parent loan to a student
- International students aren’t eligible
Eligibility
U.S. citizens or permanent residents are eligible. Borrowers must meet minimum requirements including a FICO score of 670 or higher, annual income of $36,000, a debt-to-income ratio below 40% to 50%, a year of continuous employment, and no defaults or serious collection activities in recent years.
Overview
If you have at least $10,000 in student loans to refinance, Citizens may be a good option.The lender has a relatively high loan maximum of $300,000 for undergraduate borrowers, and graduate or professional degree holders can refinance up to $500,000 or $750,000.
Citizens offers loan repayment terms ranging from five to 20 years, and rates can be either fixed or variable. Medical residents can refinance loans with fixed monthly payments of $100 for up to four years.
pros
- Offers prequalification to check rates
- Discounts for autopay and loyalty
- Wide range of repayment terms
cons
- Higher minimum loan requirement than some lenders
- Cosigner release only available after 36 payments
- 12 payments required for borrowers without at least a bachelor’s degree to be eligible to refinance
Loan terms
5, 7, 10, 15, or 20 years
Loan amounts
$10,000 minimum, with a maximum of $300,000 for bachelor’s degree or below; $500,000 for graduate degrees; and $750,000 for professional degrees
Eligibility
Must refinance at least $10,000 in student loans and be a U.S. citizen, permanent resident, or resident alien with a valid U.S. Social Security number. Must have earned at least a bachelor's degree to qualify.
Overview
EdvestinU is a nonprofit student loan lending and refinancing organization that's part of the Granite Edvance Corporation. It offers student refinance loans, with fixed- and variable-rate options available.
The lender offers student loan refinancing in 20 states. It has higher loan minimums and lower maximums to qualify for refinancing than some competitors. Eligible borrowers have a range of student loan repayment term options to choose from.
pros
- No degree required to qualify and can refinance while still in school
- Rate discount of 0.25 percentage points for autopay
- New Hampshire residents may qualify for a 1.5 percentage point rate reduction
- Can prequalify and see rate offers with no impact on credit score
cons
- Not available to borrowers in all states
- Higher minimum balances and lower maximum balances than some competitors
- Stricter cosigner release requirements than many other lenders
Eligibility
U.S. citizens or permanent residents who are at least 18 years old and reside in Alaska, Arkansas, Colorado, Connecticut, Florida, Maine, Massachusetts, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Puerto Rico, Rhode Island, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin.
Loan Amounts
$10,000 up to the total amount
Overview
The Massachusetts Educational Financing Authority (MEFA) provides refinancing options for student borrowers, even if you haven't earned your degree. While MEFA doesn't offer variable-rate loans, its fixed-rate options are competitive with what other lenders offer.
You can refinance loans starting at $10,000, but you'll need to have made six on-time payments on your current loans within the last six months to qualify. If your credit history isn't strong enough, you can apply with a cosigner. However, MEFA doesn't offer cosigner release, meaning the cosigner remains responsible until the loan is fully paid off.
pros
- You don’t need a degree to refinance
- View your estimated rate through prequalification
- No application, origination, or late fees
cons
- Variable rates are not offered; only fixed
- No autopay rate discount
- Cosigner can’t be released from the loan
- Parent loans are not eligible for refinancing
Loan amounts
$10,000 up to your total debt
Eligibility
Must be a U.S. citizen or permanent resident who is the primary borrower on education debt used to attend an eligible college or university. Must have made six on-time loan payments over the most recent six months. Must have no history of default or delinquency on education debt for the past 12 months and no history of bankruptcy or foreclosure in the past five years.
Overview
Rhode Island Student Loan Authority (RISLA) is a nonprofit lender founded in 1981 that offers refinance loans to borrowers in all 50 states. While most private student loan lenders cater exclusively to borrowers who have earned degrees, RISLA also refinances loans for those who did not complete a degree program.
One of the benefits RISLA offers is income-based repayment, which is usually only available with federal student loans. Borrowers experiencing financial hardship may also qualify for forbearance for a period of as long as 24 months. Those returning to resume graduate studies school may defer repayment on their refinancing loans for as long as 36 months.
pros
- Offers income-based repayment
- Forbearance periods of as long as 24 months available
- Graduate school deferment periods as long as 36 months
- Can refinance even without a degree
cons
- Cosigners cannot be released from loans
- Limited range of repayment terms
- Must have income of at least $40,000 to qualify
- Doesn’t offer variable-rate loans
Loan amounts
$7,500 minimum up to of $250,000, depending on degree
Eligibility
Borrower or cosigner must meet credit requirements. Student must be a U.S. citizen or permanent resident and have used original student loans to attend an eligible degree-granting institution.
Fox Business does not make or arrange loans.
Some lenders offer additional incentives that can help you reduce your outstanding balance. While these discounts vary from lender to lender, common options include:
- Graduation rewards, which can reduce the balance of your loans when you complete your degree
- Loyalty discounts, which reduce your interest rate if you or your cosigner have another account with the lender
- Referral bonuses, which typically offer cash back if a friend uses your link to successfully take out a new loan
Contact your loan servicer to learn about available discounts that could help you pay off student loans faster.
Many lenders will give you a lower interest rate by 0.25 percentage points for enrolling in automatic payments. While that may sound small, it can add up over the years you’re in repayment.
You can typically enroll online, and can often pick the date your payment will be processed. Note that autopay could cost you late fees or insufficient funds fees if there’s not enough money in your bank account to cover your loan payment. (Your bank might also impose an overdraft fee.) Only sign up for automatic payments if you can keep your bank account comfortably padded.
If you unexpectedly find yourself with extra cash, put it toward your student loan. You might have more windfalls than you realize — consider applying the following to your debt:
- Tax refunds
- Work bonuses
- Proceeds from selling used items
- Investment gains
- Inheritances
- Insurance or lawsuit settlements
- Contest winnings
This can help you pay down the principal balance faster, reducing the interest you owe and ultimately helping you pay off your student loans faster.
While it sounds simple, following a budget is one of the most effective strategies to pay off student loans quickly. It can help you limit expenses, prioritize payments, and set financial goals for paying off your debt.
While every little bit counts when paying off debt, focus on cutting costs that will make the biggest difference in your budget, allowing you to put more of your money toward your loan balance.
For example, nearly half of Americans spend 30% or more of their budget on housing, according to Pew Research Center. Reducing your housing costs by living with parents, getting a roommate, or choosing a less expensive neighborhood could make a much larger impact on your budget than, say, giving up a monthly subscription.
Sometimes, there’s only so much you can cut from your budget. If you can’t reduce your spending, try increasing your income instead. Ask for a raise at work, apply for a higher-paying job, or start a side hustle to bring in extra cash. Even small amounts of additional money can add up over time, making it easier to pay off student loans.
Paying off student loans early can free up your budget, allowing you to focus on other financial priorities, but it’s important to consider your entire financial situation first.
- You’ll pay less interest: An early payoff means you’ll reduce the total amount of interest owed over the life of your loan.
- You can reduce your debt-to-income ratio (DTI): A lower DTI can improve your credit score and make you more likely to get approved for future personal loans, such as mortgages.
- You’ll free up more income: Money you were putting toward monthly student loan payments can be redirected toward saving for retirement or putting a down payment on a house.
- You might have less funds for emergencies: Allocating extra money to pay off student loans might leave you with less cash for unexpected emergencies and expenses.
- You may divert funds from higher-priority loans: If you have other debt with higher interest rates, it may be a good idea to address those first before focusing on student loans.
- You’ll lose out on the student loan interest tax deduction: You can deduct up to $2,500 of paid interest each year from your taxable income, but paying off loans early means you’ll lose access to this benefit.
Meet the contributor:
Janet Berry-Johnson
Janet Berry-Johnson is an authority on income taxes and small business accounting. She was a CPA for over 12 years and has been a personal finance writer for more than five years. Her work has been featured by The New York Times, Forbes, Business Insider, and MSN.
