Paying Off Student Loans Early: Pros and Cons

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Paying off your student loans early may make sense for some, but it may not be the best choice unless you have the income to pay off higher-interest debt, like credit cards, and you’ve put money aside in an emergency fund. Find out how long it really takes to pay off student loans, if it’s a good idea (or not) to pay off your loan early, and the pros and cons.

• How long does it take to pay off student loans?
• Is it worth paying off student loans early?
• Pros of paying off student loans early
• Cons of paying off student loans early/a>
• Frequently asked questions about student loan repayment

How long does it take to pay off student loans?

The timeline to pay off your student loans depends on how many loans you have, your repayment plans and income, future goals, and more. On average, it can take graduates with a bachelor’s degree more than two decades to pay off their student loan debt, according to Research.com. And it can take graduate students who earn a master’s or Ph.D. degree nearly 23 years on average to pay off their student loans.

Paying off federal student loans works differently than paying off private loans. Generally, these are the average time periods to pay off federal or private student loans:

Is it worth paying off student loans early?

It’s almost always advisable to pay off any type of debt as soon as possible. Student loans are no different. Probably the biggest benefit to paying off your student loans early is the interest savings. You’ll also get out of debt faster, have more income to spend on rent or a car payment, pay off credit card debt, and enjoy life.

By paying off your loans early, you’ll lower your debt-to-income (DTI) ratio — the percentage of your gross monthly income (before taxes) used to pay your rent or mortgage, car payment, and other debts. Lenders look at this ratio when determining if you’re a good credit risk. Also, you won’t typically incur any fees from either federal or private lenders for paying off your loans early.

But if your income’s on the lower end with no raise in sight and you haven’t yet created a savings account or emergency fund, you may want to follow the standard repayment plan options instead. Also, if your employer offers a 401(k) retirement plan and matches your contribution, it may make sense to put more money into this fund rather than putting that money toward paying off your loans.

Pros of paying off student loans early

Paying off your student loans early comes with a few benefits. Consider the following:

1. Pay less interest

Although student loans generally have lower interest rates than many personal loans and credit cards, they still incur interest that must be paid on top of the principal loan amount each month. Paying off your student loans early can essentially lower the total cost of your loans.

2. Get out of debt faster

No one wants debt hanging over their head. By paying off your loans faster, you’ll shed those monthly student loan payments, allowing you to use that money to pay off high-interest credit card debt. Paying off your loans early also increases your cash flow each month to go toward living expenses, rent for a larger apartment, getting married, saving for your future, starting your own business, and more.

3. Lower your debt-to-income ratio

Lowering your DTI ratio can make it easier to get approved for other types of credit accounts, such as a personal loan, car loan, or mortgage. It might also increase your chances of getting a lower interest rate and better terms on your new loan.

4. Save for the future

Although living for today is preferable in many instances, it doesn’t really apply when trying to save for the future. Retirement may be years down the road, but it’s estimated that saving 10-times your pre-retirement income by age 67 should allow you to maintain your current lifestyle in retirement. Cutting the cost of student loans from your budget will help you meet your future financial goals faster.

Cons of paying off student loans early

Although there are several benefits to paying off your student loans early, you should also consider the drawbacks.

1. Not using tax advantages

Federal student loans offer several tax advantages.

• The American Opportunity Credit allows you to claim up to $2,500 (per student) per year for the first four years of college as you work toward your degree.
• The Lifetime Learning Credit lets you claim up to $2,000 (per student) per year for your college or career school tuition and fees. This includes supplies required for classes that had to be purchased at the college.

2. Creating more debt to pay off debt

It’s important not to take on new debt to pay off debt, like a personal loan or credit card as this will only add to your debt load. In fact, the interest charged on your student loans is often lower than on other forms of credit, so you may even pay more in interest, which will not work to your advantage.

3. Not benefitting from student loan forgiveness

Unlike private student loans, federal loans offer several student loan forgiveness programs. For example, the Public Service Loan Forgiveness program or Income-Driven Repayment (IDR) programs forgive your loans when you meet certain criteria. So, instead of paying off your loans early, if you qualify, you might consider carrying student loans until they’re forgiven.

4. Overlooking saving

When was the last time you put money into your savings account to save for an unexpected emergency or medical bill, catch up on a past-due bill, or pay for a long-awaited vacation?

If you don’t have a savings account or emergency fund, you may have to depend on other forms of credit to fund these expenses. If paying off your loans early means not creating a savings account or putting less into your emergency fund, then it may not be worth it.

Frequently asked questions about student loan repayment

Here are a few commonly asked questions about paying off student loans early to consider:

What is a grace period for student loans?

Most student loans come with a six-month grace period. This happens before repayment starts on your federal loans after graduation or if you drop below full-time enrollment or drop out of college. This period is meant to help you get on your feet in your new career. However, it’s best to check in with your loan servicer to determine when your grace period starts — or if your loan servicer even offers a grace period.

How do I repay my student loans?

How you repay your student loans depends on your lender and the type of loans you have. You’ll have income-driven repayment plans that tie your monthly payment to your income with federal student loans. Because your income or finances may change over time, you may find it helpful to reevaluate your payment plan.

Private lenders may have a fixed student loan repayment plan, but in the same way, as your circumstances change, they may also be willing to work with you to find a better payment plan for you.

Can I or should I refinance my student loans?

Remember, if you pay off your student loans early, you won’t have any reason to refinance to a lower interest rate or better term. Refinancing also means you give up federal protections that come with federal loans. Even so, if you have a stable income and a credit score that gets you the best rates and terms on your refinanced loan, it may be worth it.

The student loan consolidation companies in the table below are Credible’s approved partner lenders. Because they compete for your business through Credible, you can request rates from all of them by filling out a single form. Then, you can compare your available options side-by-side. Requesting rates is free, doesn’t affect your credit score, and your personal information is not shared with our partner lenders unless you see an option you like.

Lender	Variable rates from (APR)	Fixed rates from (APR)
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.3%+	4.85%+
Fixed APR: 4.85%+ Variable APR: 5.3%+ Min. credit score: 720 Loan amount: $10,000 to $400,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Military deferment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must have a credit score of at least 720, a minimum income of $60,000, and must be a resident of Texas Customer service: Email, phone Soft credit check: 720 Cosigner release: No Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 - $149,000 Max. Graduate Loan Balance: $200,000 - $400,000 Offers Parent PLUS Refinancing: Does not disclose
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	7.06%+1	6.8%+1
Fixed APR: 6.8%+1 Variable APR: 7.06%+1 Min. credit score: Does not disclose Loan amount: $10,000 to $750,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay, loyalty Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $150,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	6.99%+2	6.99%+2
Fixed APR: 6.99%+2 Variable APR: 6.99%+2 Min. credit score: Does not disclose Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 12, 15 Repayment options: Military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay Eligibility: All states except for ME Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: College Ave Servicing LLC Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $300,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.03%+5	6.0%+5
Fixed APR: 6.0%+5 Variable APR: 8.03%+5 Min. credit score: 700 Loan amount: $7,500 to $200,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and submit two personal references Customer service: Email, phone Soft credit check: Yes Cosigner release: After 36 months Loan servicer: Granite State Management & Resources (GSM&R) Max. Undergraduate Loan Balance: $150,000 to $249,000 Max. Graduate Loan Balance: $150,000 to $199,000 Offers Parent PLUS Refinancing : Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.28%+3	5.08%+3
Fixed APR: 5.08%+3 Variable APR: 5.28%+3 Min. credit score: 680 Loan amount: $10,000 to $250,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Forbearance Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident, have at least $15,000 in student loan debt, and have a bachelor’s degree or higher from an approved school Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: Mohela Max. Undergraduate Loan Balance: $250,000 Max. Graduate Loan Balance: $250,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.12%+4	5.9%+4
Fixed APR: 5.9%+4 Variable APR: 8.12%+4 Min. credit score: 670 Loan amount: $5,000 to $250,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Academic deferment, military deferment, forbearance Fees: Late fee, returned payment fee Discounts: Autopay Eligibility: Must be U.S. citizen or permanent resident Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: Yes Max undergraduate loan balance: $250,000 Max graduate loan balance: $250,000 Offers Parent PLUS refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.02%+	4.49%+
Fixed APR: 4.49%+ Variable APR: 5.02%+ Min. credit score: 700 Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 15 Max. undergraduate Loan Balance: $125,000 Time to Fund: 10 to 30 days Repayment options: Immediate repayment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from an eligible institution Customer service: Email, phone Soft credit check: Yes Cosigner release: After 12 months Loan servicer: LendKey Technologies Inc. Max. graduate Loan Balance: $175,000 Credible Review: LendKey Student Loans review Offers Parent PLUS Refinancing: No
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	5.75%+
Fixed APR: 5.75%+ Variable APR: N/A Min. credit score: 670 Loan amount: $10,000 up to the total amount Loan terms (years): 7, 10, 15 Repayment options: Military deferment, loans discharged upon death or disability Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: AES Max. Undergraduate Loan Balance: No maximum Max. Gradaute Loan Balance: No maximum Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.34%+ - 10.79%+8	7.58%+ - 14.48%+8
Fixed APR: 5.34%+ - 10.79%+8 Variable APR: 7.58%+ - 14.48%+8 Min. credit score: Mid-to-high 600's FICO8 Loan amount: $5,000 to $500,000 (depending on degree) Loan terms (years): 5, 7, 10, 15, 20, 25 years8 Time to fund: 3 business days Repayment options: Immediate Fees: Late fee, NSF fee Discounts: Autopay8 Eligibility: Must be a U.S. citizen or have permanent residency status with a valid U.S. Social Security number Customer service: Email, phone Soft credit check: Yes8 Cosigner release: After 24 months8 Loan servicer: Firstmark Services Max. undergraduate loan balance: $125,000 Max. graduate loan balance: $500,000 Offers Parent PLUS loans: Yes Min. income: You or your cosigner must meet Nelnet Bank's income criteria
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	5.79%+
Fixed APR: 5.79%+ Variable APR: N/A Min. credit score: 680 Loan amount: $7,500 to $250,000 Loan terms (years): 5, 10, 15 Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Available in all 50 states; must also have at least $7,500 in student loans and a minimum income of $40,000 Customer service: Email, phone Soft credit check: Does not disclose Cosigner release: No Loan servicer: Rhode Island Student Loan Authority Max. Undergraduate Loan Balance: $150,000 - $249,000 Max. Graduate Loan Balance: $200,000 - $249,000 Offers Parent PLUS Refinancing: Yes
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures  | 8Nelnet Bank Disclosures

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Kathryn Pomroy

Kathryn Pomroy has been a personal finance writer for over seven years with work featured on LendingTree, Intuit/QuickBooks, FundThrough, insure.com, finder.com, NextAdvisor, and more.

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