What is a student loan payoff letter and when do I need one?

It’s no secret that many Americans are struggling under the weight of their student loan debt. Twenty-one percent of student loan borrowers with less than $15,000 in outstanding debt were behind on their payments in 2021, while 17% with $15,000 or more were behind, according to the Federal Reserve.

Student loans also come with a lot of paperwork, and one important document you may need to request is a student loan payoff letter. Learn more about what a student loan payoff letter is, when you might need one, why it’s important, as well as some ways you can pay off your student loan debt faster.

• What is a student loan payoff letter?
• When do I need a student loan payoff letter?
• How do I get a student loan payoff letter?
• Ways to pay off your student loans faster

What is a student loan payoff letter?

A student loan payoff letter — also known as a "payoff verification statement" or a "payoff statement" — is a statement from your student loan lender that outlines your payoff amount, monthly bill obligation and other account information. A student loan payoff letter is only valid for a specific amount of time after the lender issues it. You can get a student loan payoff letter whether you have private student loans or federal loans, or a combination of both.

A student loan payoff letter doesn’t prove that you’ve paid a loan in full — instead, it shows how much you still need to pay in order to completely pay off your student loan debt. This amount differs from your current balance, as your balance doesn’t include the interest you owe. A student loan payoff letter can also include any fees you haven’t yet paid.

Keep in mind that a payoff statement isn’t the same as your monthly statement, and if you need one you’ll have to request it from your loan servicer.

What information is included in a student loan payoff letter?

Commonly, student loan payoff letters include:

• 10-day payoff amount — Some servicers may choose a 15- or 30-day payoff amount instead.
• Account number — If you have multiple account numbers, those will be listed as well.
• Loan details — All individual loans and their payoff amounts must be listed.
• Payoff instructions — The servicer will need to include detailed instructions about how to pay off the loan.

When do I need a student loan payoff letter?

Now that you know what a student loan payoff letter is, here’s a closer look at when you may need one.

If you’re refinancing your student loans

When you refinance a student loan, you’ll need to provide your student loan payoff letter to your new lender.

If you’re paying off your student loans

When you’re planning to pay off your student loans, a student loan payoff letter can help you create a repayment plan and budget, as it gives a clearer idea of how much you truly owe. Because interest accrues daily, you won’t get the full picture by reviewing your current balance, which doesn’t include all the accrued interest or fees through the payoff date.

If you’re getting a mortgage

When you’re applying for a mortgage, the less debt you have, the better. Your student loan debt affects your debt-to-income ratio, which lenders look at when considering you for a mortgage. Your DTI can also affect what mortgage rate and terms you’re offered. Use your student loan payoff letter to create a debt repayment plan so you have less debt when you apply for a mortgage.

How do I get a student loan payoff letter?

If you need a student loan payoff letter, the process of obtaining one is pretty straightforward.

To get a student loan payoff letter, you need to contact your student loan servicer. If you have multiple student loan servicers, you’ll need to identify each and contact them individually to request a letter from each loan servicer.

Ways to pay off your student loans faster

Once you have your student loan payoff letters in hand and you know exactly how much you owe on your student loans, you can sit down and create a plan for paying off your student loans faster.

• Consider refinancing and consolidation. In some situations, refinancing or consolidating student loans can make it easier to pay off your student loans faster by lowering your interest rate or streamlining your loans into one monthly payment (which is what happens when you consolidate). It’s important to review the terms of the new loan before refinancing or consolidating, as a better interest rate may come with a longer loan term. You’ll also lose valuable federal protections (like loan forgiveness or forbearance) when you refinance or consolidate federal student loans into private ones. Do your research carefully.
• Make biweekly student loan payments. Pay half of your monthly student loan payment every two weeks instead of paying the full amount once a month. This works out to making one extra payment a year, which helps you save on interest and pay down your loan faster.
• Sign up for automatic payments. Many lenders give you an interest rate discount when you sign up for automatic payments. Not only will this help ensure you never miss a payment, but a lower interest rate will allow you to put more money toward your principal.
• Pay extra toward your principal. Making extra payments toward your principal balance will help you avoid paying more interest, as long as you tell your lender you want any extra loan payments to be applied toward the principal instead of interest.
• Eliminate one loan at a time. To stay motivated while paying off student loan debt, it can help to focus on paying off one loan at a time. You’d still make minimum payments on all your student loans, but you’d focus on making any extra payments for one specific loan. Once you pay off a loan, you can use your monthly savings to help pay down your other loans faster.