Thursday, November 18, 2010

Should you pay off Student Loans or pay Them off Over Time?

Nov 14, 2010 Christopher Pascale

On Graduation day, College Payments Should end - Sara Haj-Hassan

On Graduation day, College Payments Should end - Sara Haj-Hassan

Student loans seem to be a necessary evil for many today. In fact, they are so common, that most people think it is simply how one must go through school rather than going part time to pay it all off in cash, working for a company that offers tuition reimbursement, or joining the military to obtain a GI Bill.

While some or all of the options above are not available to some students, it is important to discuss whether it is best to financially attack student loans, or to string them along with minimum payments for as long as possible.

Paying off Student Loans Faster is Best

To be in debt, or not to be: that is the question.

The answer is almost always, to not be. Debt is a burden. It claims money each month before it is made and paying off things that were purchased years ago prevents people from making investments today that can grow and be built upon for the future.

For these reasons, it is best to pay off student loans more quickly. For those concerned about credit scores, having a loan that is paid off improves it. People worried about having fun should know that life is less fun with debt. Losing a job while having debt may lead to rushing into a position that makes life miserable. And don't get sick for too long, because debts do not care about circumstances. They want minimum payments with no excuses.

Now, the last statement may seem dramatic, especially since some student loan programs allow for hardship deferrals. But there are many more advantages to paying off student loan debt than there is to keeping it. Having said this, there are times when keeping it is better.

When to Keep Student Loans

Some student loans rates are lower than a mortgage can be had for. And when this is the case, those who have high interest credit card debt should focus on paying off these debts before low interest student loans. It's the same logic one would apply to paying down a home mortgage. The mortgage is an anchor on personal finances, but it shouldn't be the main point of one's focus until after 23% credit card balances and a 12% car loan is paid off.

Overall, student loan debts should be paid off quickly if they cannot be avoided. However, for those who have higher interest credit card debt or auto loans, it is best to pay them off first, which can be done using the debt snowball method.


  • On Graduation day, College Payments Should end - Sara Haj-Hassan

    On Graduation day, College Payments Should end - Sara Haj-Hassan

  • Student Handbooks Should Include a Financial Guide - Kay Garston

    Student Handbooks Should Include a Financial Guide - Kay Garston

  • A Dream College can be a Debt Nightmare for Years - Ross Parker

    A Dream College can be a Debt Nightmare for Years - Ross Parker

  • Working Students Have Less Debt - JR Goleno

    Working Students Have Less Debt - JR Goleno

  • Beautiful Scenery is not Worth Tens of Thousands - Syo Dash

    Beautiful Scenery is not Worth Tens of Thousands - Syo Dash

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