Sometimes it’s smart to pay off your private student loan or federal loan ahead of the interim period. You can do so by paying more than the specified installment amount each month. Getting done with your debts early can offer you more flexibility, convenience, and freedom.

However, there are times when it’s better to wait. If you’re planning to pay off your loans early, this blog will help you identify whether it’s the right time.

Will You Be Able to Cope With a Sudden Crises Situation?

Before you start paying more each month, ask yourself if you have enough funds in your bank account to deal with an emergency. You never know when you encounter an unprecedented job loss, health condition, car repair, or other crises. If you don’t own an emergency fund, it’ll be challenging to cover any unexpected expenses, and you’ll ultimately have to take another loan or use your credit card.

Paying off your federal or private student loan is a good idea if you have at least 3 to 6 months worth of emergency fund in your savings account. If not, stick to the minimum monthly loan payment amount.

Do You Have Any Pending Credit Card Loan?

credit card

If you still rely on your credit card to pay for regular expenses and haven’t paid off your previous credit card debt, there’s no need to pay off your student loan ahead of schedule. Clearing your credit card balance should be on top of your priority list in this case. Private student loans can wait because you have loan refinancing options that allow you to cut down on your monthly interest expense. But when it comes to credit card debt, the interest rates can be skyrocketing. As of July 2020, the average credit interest rates were recorded at 20.21 percent. The chart below represents the monthly shifts in the credit card APR.

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On the other hand, interest rates on federal student loans have plunged by 39 percent this year. The current rates as of July 2020 are: 

  • 2.75 percent for undergraduate students (reduced from 4.529 percent last year).
  • 4.3 percent for graduate students (reduced from 6.079 last year).
  • 5.3 percent on Parent PLUS and Grad PLUS loans (reduced from 7.079 percent last year).

Since credit card interest rates are significantly higher than the student loan rates, you should be more concerned about paying off your credit card debt than the early payment of student loans.

Do You Have to Pay High-Interest Rates on Your Student Loan?

If your federal or private student loan rates are high, it’s better to pay them off early to reduce your accumulated income expense. Though the federal student loan interest rates are on a low right now, they can grow up to 8.5 percent or more. With higher interest rates, the majority part of your monthly loan installments go to the interest, and you end up paying significantly more than the principal amount (learn the difference between a principal and an interest payment here). In this case, getting done with your student loan payments ahead of schedule can save thousands of dollars in interest expenditure.

However, you can also have your private and federal student loans consolidated through ELFI student loan refinancing. It allows borrowers to pay their loans over a flexible period of 5 to 20 years at reduced interest rates. With a good credit score of at least 680 and a good debt-to-income ratio, you could easily get your education loans refinanced.   

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Are You Contributing Enough to Your Retirement Fund or Your 401(K) Account?


Whether you have a student loan or not, it’s critical to invest in your Individual Retirement Account (IRA) for a secure financial future. If you don’t have enough funds to support your retirement, don’t consider paying off your student loans early. Instead, invest those extra dollars to your retirement fund for a prosperous future.

Some employers offer 401(k) matching as an employment benefit that increases your retirement savings in the long run. 401(k) matching is a retirement plan in which the employer deposits a certain percentage of their salary to your 401(k) account after matching your contributions. If your employer offers this plan, it’s good to invest any extra money you have in your 401(k) account to reap its full benefits.

Read more on making student loan payments while saving for retirement here.

Are You Already Investing in Your Long-Term Life Goals?

If your finances are stable enough for you to contribute to your long-term goals while also making extra monthly payments for your student loan, then it’s a good idea to pay your student debts early. You don’t need to rush your student loan payments at the cost of your long-term life goals, such as buying a house, buying a car, launching a business, or saving for retirement. 

Don’t Let Your Education Loans Diminish Your Mental Peace.


If you feel like your student loans are becoming a burden on you, stopping you from achieving other life goals, or adding to your stress and anxiety, consider tackling them as soon as possible. 

Getting rid of any liability on your shoulders will give you peace of mind and a sense of freedom that you otherwise wouldn’t experience with debt clouds lingering over your head. 

Pro Tip: Boost Your Savings With ELFI Student Loan Refinancing

After reading this blog, if you think it’ll be beneficial for you to pay off your student loan ahead of schedule, consider getting your loans refinanced by ELFI. Refinancing will help you save more and get rid of your education debts quicker.

If you’re uncertain whether education loan refinancing is for you, here are some more benefits and all your concerns answered to help you make an informed decision.