As many people already know, borrowers typically do not need to pay off student loans while in school. Indeed, student loan lenders typically defer the student loans of current students, so that these borrowers do not need to worry about making payments and can focus on their studies. However, in some situations, paying off student loans while in school might make sense.
As previously mentioned, I borrowed a number of private and government loans to cover the cost of obtaining my undergraduate and graduate degrees. One of my student loans was a low-interest private loan that had a balance around $9,000. As a result, the payment amount on this loan was around $100 a month, which was not too difficult to manage.
While I was in school, I received student deferments on all of my student loans, which ensured that I did not need to deal with the hassle of paying off student loans while in school. However, during my last year of law school, I was unable to get a student deferment for this low-interest private loan. I think that the lender made a mistake in not continuing my student deferment, since I was pretty sure I qualified for a deferment as a law student.
However, paying off student loans while in school has a number of benefits, so I decided to begin paying off this low-balance and low-interest loan as a student. I had a work-study job during law school that paid me between $500 to $1,000 a month, so I had some money available to pay off this loan. Of course, it is best to use money you earn when paying off student loans while in school rather than borrowing more debt to pay off some loans so you don’t dig yourself a deeper hole in order to repay debt.
One reason why it might make sense to repay student debt as a student is because paying off student loans while in school can have a positive impact on your credit score. As a student, my credit score was pretty bad, and I was only able to get an extremely low credit limit on my credit card. Students usually have lower credit scores because they do not have a substantial credit history and can’t show much proof that they are responsible borrowers.
However, paying off student loans while in school, even if you repay one single loan, can show creditors that you are responsible. Indeed, my credit score gradually increased during my final year of law school with each payment I made on my student loan. In fact, the credit limit on my credit card doubled during that year. I rarely used my credit card, but it was still satisfying to know that I was being offered additional credit because of my payment history.
Paying off student loans while in school can also have a positive impact on your psyche. As a student, I had a difficult time continuing to borrow student loans to finance my education. Every semester, I would fill out all of the online forms to borrow more student loans, and I would see my student debt amount increase. Once this amount exceeded six figures, my student debt had an even bigger impact on my psyche, and I had a pit in my stomach whenever I thought about student loans.
However, it gave me a lot of satisfaction to pay off one student loan while in school. Even though I had to borrow additional sums of money to attend school, it felt good paying off one of my student loans. In some small way, I felt that I was taking control of my student debt story. Although it may seem like paying off student loans while in school might not have an impact on your bottom line, it is important to note that paying off some debt can have a positive influence on your stress levels.
There are certain strategies that you should keep in mind when paying off student loans while in school. Most importantly, you should only do this if you have the money to do so, and you should not borrow high-interest student loans to pay off low-interest student loans. Students need to have some liquidity, so it is unwise to pay off student loans as a student if this will leave you with little savings.
In addition, it is important to select the right debt to pay off as a student. If possible, you should try and pay off a student loan that is relatively small. This will ensure that your monthly payment amount is low, and is more manageable. The student loan I paid off as a student had a monthly payment amount of less than $100, which was relatively easy to pay off.
In addition, it is best to pick a student loan that has a high interest rate. This is because those loans will accrue interest at a faster rate than other loans which might have lower interest rates. Of course, if your only small student loans have low interest rates, you might consider still paying off this debt. However, if you have a choice when paying off student loans while in school, you should try and pay off the student loans that will accrue the most interest.
In the end, paying off student loans while in school has a number of benefits. Indeed, this can help boost your credit score, and can improve your psyche, especially if student debt stresses you out like it did for me. However, there are certain strategies that should be implemented when paying off student loans while in school.