I am attending a rather pricey American university, and most of my money for tuition comes from grants and loans. Grants are great, but obviously I have to pay off loans at some point.

I have some money saved from various paid internships, and I began to start making monthly payments to my principal about a year ago. However, I have been told by some that I shouldn't start making any payments to my loans until I'm required to, ie after I graduate. I didn't understand this point of view, since to me it seems more logical to start paying as soon as I can.

Is it better to start making payments towards my loans as soon as I am financially able, even if I am still in school, or should I wait until I am required to begin paying them?

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    The details matter a lot here, what countries loan system are we talking about and if your country has changed the rules over time which set of rules are you on? Mar 1, 2016 at 20:57
  • I'll update with my country, but I'm not sure what rules to which you're referring.
    – jackwise
    Mar 1, 2016 at 20:59
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    I have no idea how the american system works (though it looks like the other answers have assumed you are american) but I do know that here in the UK the rules for student loans have changed dramatically in recent years with the new terms being far less favorable than the old. Mar 1, 2016 at 21:01
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    The advice given in the answers below is very good. Just one thing to keep in mind is the expense you'll have upon graduation. I've had friends take crappy jobs right out of college to get by until they found something better, and ended up getting stuck (due to a combination of factors, including the state of the economy at the time). The point is, you might need to take 6 months and an expensive relocation upon graduating, and you'll want the cash to frugally float yourself until you land a career job that will pay well. Just another thing to keep in mind.
    – Brad
    Mar 2, 2016 at 3:20
  • @Brad, excellent suggestion. It is always advisable to stay liquid and make sure you don't default. So to do that, take advantage of the 6 month repayment grace period during which you are not expected to pay yet and don't have the fear of going into default. While the instinct is to pay off as soon as possible, take advantage of the slack you are given to make sure you are stable and settled with regular income before you use limited resources on it. Its a balancing act for sure, but if you pay attention you will be fine. IDR will buy you some extra time without default to get on your feet. Mar 2, 2016 at 18:47

5 Answers 5


Everyone has made some good points that I was going to mention but to put it in terms that might make it easier to decide. As stated by others, paying off debt and being free is always the goal and desirable.

However, you must also consider the "efficiency" of what you do as well. For example, there are two common types of student loans (there are others but let's focus on these) and that is subsidized and unsubsidized.

The main difference? Subsidized loans don't earn interest on your balance while you are in school, it only happens when you graduate and come out of repayment grace period. Unsubsidized loans begin accumulating interest the moment they are disbursed, but you are not required to make payments on them until you graduate.

All student loans are deferred until you graduate and exhaust your grace period or other means of deferring your payment, say for example a postponement or forbearance. However, it is often recommended that on UNSUBSIDIZED loans, you pay down your principle while still in school to avoid that massive interest amount that will get added to it when you are officially in repayment. On the other hand, it is often (if not always) recommended that you hold off on paying SUBSIDIZED loans until you are done and go into repayment, as for all intents and purposes its not costing you anything extra to wait. Family and parent loans are considered and treated more like personal loans, so treat them as such.

Hope that helps. Also, don't forget to take advantage of the income based repayment options, as they will make the payments manageable enough to avoid making them a burden while you are trying to get a job and go post education.

Further reading:

Income-Driven Plans (Department of Education)

Income-Driven Repayment Plans (nelnet)

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    It's worth pointing out that you should only take income-based repayment if you can't make payments, since it will cause you to pay more in the long run. Mar 1, 2016 at 22:59
  • @BrendanLong, correct, whenever possible and the person is able, they should try to resolve debt, that's a given. But this I recommended as an option because it costs less than forbearance and/or defaulting which is detrimental on a student loan, it will dog you forever. But sometimes you need to have an IDR to keep it low enough that you don't default and are able to properly extend time to pay for it without having your credit decimated. I suppose you can call it the most efficient and effective means of buying time without negative effect on your credit. Mar 2, 2016 at 18:43

Its almost always better to pay off loans sooner rather than later. Being debt free is amazingly liberating.

However, in your case, I'd be reluctant to make significant headway on a loan repayment program. Here's why:

The best investment you can make, right now, is in yourself. Completing your education should be the top priority. The next would be to meet the requirements of a job after received after school is complete. So what I would do is estimate the amount of money it would take to complete school. Add to that an estimate of an amount to move to a new city and setup a household.

That amount should be held in reserve. Anything above that can used to pay down loans.

Once you complete school and get settled into a job, you can then take that money and also throw it at your loans.

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    Don't forget that it's often a good idea to build up an emergency fund if you don't already have one, in case you lose your job or in case of disaster. This should include enough to meet minimum payments, and keep you from losing your house/car/etc. Mar 1, 2016 at 23:41

Pay off your highest-interest debt first: credit card, car, maybe even mortgage. Pay minimums on all else. Student loans are typically low interest, so pay off anything else first, but double-check your rate of course.

Even if you have no other debt, you may still want to hang on to your savings instead of paying down your student loans if getting rid of your savings causes you to accrue debt. For example, if you have a low income and no savings, you may accrue credit card debt (high interest). Or you may want to buy a car with cash instead of getting a loan.

Even if this is not an issue, consider what you can do with your savings that others who lack them cannot do. You can put it into mutual funds, which may offer higher rate of return (albeit with risk) than your student loan interest. Or you may pay a down payment on a home. The very low interest rates of student loans are, to a person with savings, essentially a source of cheap money that doesn't need to be justified to a bank. You can use it as seed money to start a business, as funds for travel, for living expenses while in the Peace Corps, or whatever else. But if you pay down that principal, you bind yourself.

In short, pay down your student loans when there is no better use for the money.

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    At least where (USA) I am in CA having attended a private college on the East coast mortgage rates are far cheaper than student loans. The bigger difference here is student loans are far more flexible about repayment than mortgages. So it's often better to repay student loans over mortgages unless you think you might fail to pay one over the other. (just as a note to the above advice.. that the legal repercussions failure in repayment also matter)
    – Tai
    Mar 2, 2016 at 1:42

If you have sufficient money to support yourself until you have a career, then paying off your student loan principal on unsubsidized, federal loans, is probably your best bet. This is because interest accumulates before you're actually required to pay. If they are private, make the payment on the highest interest rate loans.

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    lowest balance is typically more desirable I think amongst equal rates - if nothing else, it simplifies things over time.
    – Joe
    Mar 1, 2016 at 19:04
  • Fair enough.. Although when taking the amount of interest accumulated/mo..paying principal on the highest will do the most damage among equal rates
    – DukeLuke
    Mar 1, 2016 at 20:53
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    If the rates are the same, paying the same amount of principal will do the same amount of "damage" regardless of the total due.
    – Joe
    Mar 1, 2016 at 21:13
  • Wow. Idk what I was thinking
    – DukeLuke
    Mar 1, 2016 at 21:31

All great answers. The only thing I didn't see mentioned was that student loans are not dischargable in a bankruptcy.

So for example if you took money that could have gone to student loans and poured it into other debt, then for some reason declared bankruptcy later, your student load debt would remain while other debt would be discharged; essentially that money would have been better spent on the student loan.

This isn't to advocate that you should pay down student loans with the intent of declaring bankruptcy, or that this makes it a better decision necessarily, just a factor that is sometimes forgotten.

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