3 Major Benefits Of Paying Off A Student Loan Sooner Rather Than Later

Many students don’t worry about their student loans until about six months after they graduate. Deferring your student loans and paying them back at a later date is an option that works for some, but there are definite benefits to paying off a student loan sooner rather than later. Below are a few reasons why paying your loans earlier benefits you, if you can.

Students graduating, wearing robes and moving their tassels.

A Lowered Debt To Income Ratio

Your debt to income ratio is the amount of debt you have as compared to your overall income. When you pay off your loans early, your monthly payments are lower, which automatically lowers your debt to income ratio.

Having a lower debt to income ratio is preferable as it means you have more disposable income. That means you can make major purchases or start putting more money in your savings. Lenders also prefer lending money to those who have a lower debt to income ratio, so you will find it easier to get a loan to buy a house or a car.

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Pay Less Overall

Interest accrues over time, so the sooner you pay off your student loans, the less interest you’ll have to pay in the long run. If possible, start paying off your loans while still in school. Different repayment plans work for different students, but ideally, you don’t want to be stuck with a long repayment period.

You Will Be Better Equipped To Handle Any Financial Crises That Comes Up Later On

A financial crisis may arise at any time. Your employer laid you off. You had a medical emergency. Regardless of your personal circumstances, you are still expected to pay back your loan on time. Any delay in the payments could attract a penalty, pushing you even further into debt. Worse still, you cannot escape a student loan even with bankruptcy.

Just wondering when a crisis may arise can leave you feeling extremely stressed, especially if you have a large amount of student loans to pay off. Paying off your student loans early can help tremendously. You will have a smaller debt to pay off and a financial crisis is less likely to derail you completely.

2 Things To Think About When Paying Off Your Student Loans Early

Getting the benefits of paying off a student loan early is great. However, it is important to pay it off right. Here are a few things to think about:

Pay off your most expensive loans first. The first loan cleared should be the one with the highest rate of interest. Clear the loan with the lowest rate of interest last.

Before putting your extra funds towards paying back your loans, make sure you have enough money to pay for your everyday expenses. Also, make sure you still have enough money to cover you in case of any emergency. Stretching your budget thin to pay off your student loans faster isn’t always a good idea.

Use College Raptor’s free Student Loan Finder to compare lenders and interest rates side by side!


Lender Rates (APR) Eligibility
Earnest company logo.
Variable APR: 1.74% - 5.64%*
Fixed APR: 2.44% - 5.79%*
Undergraduate and Graduate
Lendkey company logo.
Variable APR: 1.90% - 5.25%*
Fixed APR: 2.49% - 7.75%*
Undergraduate, Graduate, Parent PLUS
Credible company logo.
Variable APR: 1.80% - 9.99%*
Fixed APR: 2.15% - 9.99%*
Undergraduate and Graduate
Laurel road company logo.
Variable APR: 1.89% - 5.90%*
Fixed APR: 2.50% - 6.00%*
Undergraduate and Graduate
Commonbond company logo.
Variable APR: 1.98% - 7.04%*
Fixed APR: 2.59% - 6.94%*
Undergraduate, Graduate, Parent PLUS
Fixed APR: 2.44% - 6.22%*
Undergraduate, Graduate, Parent PLUS
VISIT ISL Education Lending
Variable APR: 1.87% – 6.52%**
Fixed APR: 2.30% – 5.96%**
Undergraduate, Graduate, Parent PLUS
VISIT Nelnet
Variable APR: 2.94% - 4.79%*
Fixed APR: 2.99% - 4.89%*
Undergraduate and Graduate
VISIT College Ave
Variable APR: 1.86% - 6.01%*
Fixed APR: 2.47% - 5.99%*
Undergraduate and Graduate, Parent PLUS

*APR includes a 0.25% interest rate reduction for enrollment in automatic payments.

**Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.

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