Benefits of Paying Off Student Loans Early

Feb 14, 2022 2:57:19 PM

This blog post was written by Student Advisory Council member, Meadow Hall

According to the Federal Reserve, approximately 30% of Americans have some form of student debt. With student loans affecting so many Americans, and the current pause on federal student loan payments, when should you pay them off? Many people are waiting out student loan forgiveness programs, while others are trying to pay off their debts as soon as possible. Throughout this article, we will outline the benefits and potential negative effects of paying off student loans before they are due.


1. Decreasing Your Debt-to-Income Ratio

When you pay off your student loans, the amount of total debt you owe decreases. This means, assuming your income remains the same, your debt-to-income ratio (DTI) decreases. This is beneficial because your DTI is one of the many factors that lenders examine when you apply for new loans. Even if you have a good credit score, a high DTI can cause a lender to question if they are comfortable with issuing you a loan.

2. Pay Less Money

As time goes on, your student loans acquire interest and increase the total amount you have to pay. However, if you pay off your student loans early, this decreases the amount of interest that can build up. By paying loans off early, you increase the amount of money put towards the principal of your loan instead of paying it towards built-up interest.

3. No Penalties

There are no penalties for paying off your student loans early. It doesn’t increase the amount of money you need to pay, and there are no surprise fees.


1. Student Loan Forgiveness

If you pay off your student loans ahead of time, you miss out on possible loan forgiveness programs. There are many programs that you can apply for that will forgive your loans. For example, if you have made more than 120 payments while working for qualifying employers, you may be eligible for Public Service Loan Forgiveness. For more loan forgiveness information, visit  

2. Low-Interest Rates

Student loans primarily have low-interest rates compared to other loan products. If you have other debt, it likely has a higher interest rate than your student loans. Therefore, paying off your student debt early might not be the best option. Instead, you could focus on paying off the debt with higher interest sooner and continue to make regular payments on your student loans with low-interest rates. 

Ultimately, it is your decision whether or not to pay off your student loans early; however, we hope that this article will help you decide which option is best for your financial needs.

Tags: Student Finances, Debt Management, Loans