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Should I Pay Off My Student Loans Right Now?

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You may be wondering, should I pay off my student loans while federally-held student loans are on an administrative forbearance with 0% interest and without a requirement to pay until Aug. 31, 2022. And on top of that there are discussions about forgiveness. If you don’t have a loan with COVID-19 relief being offered, then you may be wondering how all these discussions affect you.

Here’s the thing, you always want to make student loan repayment a priority, even now. Even if additional assistance comes from the government, you have to wait for that to happen. While you wait, you want to make sure that you are staying current with your student loans.

If you’re wondering if you should pay off your student loans, the overwhelming answer is YES! Student loans are very difficult to discharge in a bankruptcy, and not paying off your student loans can result in wage garnishment and other legal action.

Should I Pay Off My Student Loans Early

If you can, you should pay off your student loans early. There are no prepayment penalties on federal or private student loans, and we recommend taking advantage of this to save yourself money in the long run. Paying off your student loans early will save you interest over the life of the loan, which is money that you could utilize for other significant expenses like a down payment on a home. In addition, knocking down your student loan debt faster gives you more time to build up your credit score for other loans you may need.

Student Loan Forgiveness 2021

There has been a lot of talk about the government offering $10,000 to $50,000 various amounts of student loan forgiveness—beyond existing, beyond the current forgiveness programs,  which include  like Public Service Loan Forgiveness. You may be wondering, will this happen? Well, the answer is, we will only know once the decision is either approved by Congress, granted in an executable executive order, or authorized under an enforceable law. But until that happens, nothing is final or guaranteed. Due to the COVID-19 pandemic, federal student loans owned by the U.S. Department of Education are on an administrative forbearance (postponement) with a zero percent interest rate until Aug. 31, 2022.

PSLF Forgiveness Update: Time-Limited Waiver Opportunity

With respect to Public Student Loan Forgiveness, on Oct. 6, 2021, the U.S. Department of Education (ED) announced a time-limited waiver opportunity to its PSLF program rules. Under the time- limited waiver opportunity, borrowers could receive credit for past payments which would not have been previously classified as qualifying payments or instances in which payments were not made, specifically, servicemembers who were advised to put their loans in a deferment or forbearance status and did not make payments while on active duty. The months the borrower spent on active duty can be counted toward the PSLF.

Borrowers will need to submit a PSLF form—the single application used for a review of employment certification, payment counts, and processing of forgiveness—on or before Oct. 31, 2022 to have previously ineligible payments counted.

The time- limited waiver essentially waives all requirements except the employment requirement. If you have Federal Family Education Loans (FFEL) or Perkins loans, you will still be required to consolidate your loan with a Direct Consolidation Loan by Oct. 31, 2022. However, any payments made on your federal student loans, under any repayment plan (partial, full, or late), on any FFEL, Perkins, or Direct Loan, will count towards your 120 qualifying payments.

Under the new time-limited waiver, you need to have been employed or are currently employed by an eligible employer (government, 501(c)(3) not-for-profit, or other not-for-profit organization which qualifies), and working full-time. You can still qualify for the full-time requirement if you are working multiple part-time jobs (that totals at least 30 hours per week) with eligible employers. For more information on which employers meet PSLF Program requirements visit the PSLF Help Tool.

COVID-19 Student Loan Relief

And now, let’s address the COVID-19 student loan relief being offered right now and how you should take that into consideration. COVID-19 relief is only for borrowers with federal student loans owned by the U.S. Department of Education. Meaning, not all federal student loans will qualify.

As we touched on before,  loans that do qualify for relief under the CARES Act, (and all the subsequent extensions by the former President, former Education Secretary, and current President), are ED-owned    loans are in an administrative forbearance until Jan. 31, 2022 with a 0% interest rate until then. and have an interest rate of 0%. When it comes to determine your repayment strategy, be mindful that this relief is temporary. At some point, your loans will enter repayment.

There are some things you can do to take advantage of this time of relief, especially if you have not been financially impacted by the COVID-19 pandemic.

  1. Itemize your debt portfolio. Make a list of all the money you owe—credit cards, car loans, personal loans, student loans—and note the current interest rate on your debt. You may want to take this time to tackle some of your high interest debt. 
  2. Review your student loan accounts. Look at your student loan account, to see which of your loans even if they qualify for COVID-19 relief. Look at the amount you owe in principle and the amount you owe in outstanding interest.   Even if your loan is on hold, the day it was placed on the administrative forbearance you could have had outstanding interest on your loan. Take this time to pay off your outstanding interest.
  3. Work on lowering your outstanding principal balance on your student loans. The outstanding principal balance is the number used to calculate your daily interest charge for loans that use a simple daily interest formula. If you can start to pay that down, the amount of interest you are charged will be less.

>>>More: How Does Student Loan Interest Works

How Long Does It Take to Pay Off Student Loans

According to, on average it takes around 20 years to be pay off an average debt amount of $32,731. While the road to paying back student loans looks different for everyone, there are tips and tricks to knock out your student loan debt within a timeframe that works for you.

How to Pay Off Student Loans

Choose a Repayment Plan

If you have federal student loans, you have several options to choose from. Depending on your repayment goal, you may want to choose a repayment plan with a short or long repayment term. Repayment plans with a shorter term will have larger monthly payments but you’ll pay less overall in total. Conversely, repayment plans with longer terms will have smaller monthly payments but you will pay more overall in total.

The federal student loan program may allow you to choose a 10 – 30 year repayment plan with a plan which bases your payments on your total outstanding loan amount), or an income-driven repayment plan which will base your payments on your income and not your total debt.

If you have private student loans, chances are you already picked your repayment plan when you initially borrowed the loan. But you can talk to your lender about flexibility with your repayment options, or loan postponement if you get into trouble. If you are looking for a way to change your private student loan repayment plan, you may need to consider private student loan refinance.


Another way to pay off your student loans is to think about refinancing, a method that could afford you a lower interest rate and save you money over the life of a loan. The higher your interest rate, the higher the cost of borrowing per dollar, and that can get pretty expensive when it comes to student loans.

Working with a private student loan lender to refinance your loans may be worthwhile. Many lenders offer competitive interest rates, and depending on your situation, you might be able to save a significant amount of money by refinancing. To capitalize on a low interest rate, you’re going to want to have a good credit score, or a cosigner who does. With a lower interest rate, every dollar you pay towards your loans is more effective because the cost of borrowing per dollar is cheaper. Even if you qualify for a student loan refinance on your own, you may get a better rate if you apply with a creditworthy cosigner.

Student Loan Repayment Strategies

If you are already in a repayment plan and you’re trying to think of ways to efficiently repay your debt, there are two common strategies used by borrowers: snowball or avalanche methods.

Snowball Method

The snowball method is a popular strategy used in paying back multiple loans at the same time. The idea is that when you have multiple debts and the money to make extra payments, you apply the additional funds to the loan with the smallest balance, while paying the minimum amount due on the larger balances. Once you pay off your smallest balance in full, you roll the money used to pay for that loan into your next smallest loan.

The effectiveness of the snowball method will vary from person to person. Some people prefer this strategy because they can feel a sense of momentum after paying off a smaller loan before tackling larger loans. On the other hand, others may prefer to throw the balance out of the equation and go for the loans with the higher interest rate.

Avalanche Method

The avalanche method is another technique used to pay back multiple debts. The aim of this strategy is to apply extra payments towards your loan with the highest interest rate and make the minimum monthly payment on all other debts. Once you’ve paid off the balance of the loan with the highest interest rate, you would move on to the loan with the next highest interest rate, rolling the amount you were paying on the first loan, into your payment on the next loan.

Unlike the snowball method, the avalanche method accounts for the fact that loans with higher interest rates cost more per dollar than loans with lower interest rates. However, unlike the snowball method, it may take longer to pay off your first loan, and get that momentum rolling.

Snowball vs Avalanche Method

Consider a borrower with two loans with a 10-year repayment term, a $15,000 loan with a 10% interest rate and a $5,000 loan with a 5% interest rate. This table shows the results of different strategies for applying an extra $100 a month toward the pair of loans. While targeting the smallest loan first for quicker repayment – the so-called snowball strategy – causes that loan to be paid off in just 3 years, both loans aren’t paid in full until 7 years and 1 month. Not only does targeting the loan with the highest interest rate first cause all the loans to be paid in full in just 6 years and 11 months, quicker than any other strategy, but it also saves an extra $1,386 more than the snowball strategy. Targeting the highest interest rate loan for quicker repayment is the most efficient strategy to save the borrower the most money and leads to the quickest payoff of the entire debt.

Repayment Strategy Smaller Loan Payoff Larger Loan Payoff Interest Savings
 No Acceleration of Repayment 10 years 10 years None
 Snowball Method 3 years 7 years, 1 month $3,091
 Avalanche Method 6 years, 11 months 5 years, 6 months $4,477

Want more tips on how to repay your student loan fast?