Individuals normally do not need to make student loan payments while they are in school. The reasoning behind this policy is simple: students should focus on studying when they are in school and should not try to obtain employment or make other arrangements to pay off student loans as a student. In fact, students normally have a grace period of several months after they graduate during which they also need not make student loan payments. However, paying student loans as a student may be advisable in a number of situations.
During my last semester of law school, I considered making payments on my student loans. One of my smaller student loans entered repayment even though payments had been deferred in prior years because I was still in school. I considered applying for an additional deferment while I finished my last semester of law school so that I did not need to devote financial resources to my student debt.
However, I ended up deciding that paying student loans would be advantageous to me, and as a result, I did not request an additional deferment. The student loan that had entered repayment was rather small, and the original sum of the loan was only a four-figure amount. In addition, the monthly payment amount of this student loan was less than $100.
As mentioned in a prior article, I worked part-time jobs as a law student, which covered most of my living expenses and gave me money to spare. I reasoned that I could devote some money to this small student loan each month without too much hardship. If you have a part-time job as a student, paying off a small student loan shouldn’t distract you much from your studies or impose any undue hardship.
Paying student loans as a student may have a number of financial benefits. Perhaps most importantly, repaying student debt can help you build credit. Credit bureaus like to see individuals taking responsibility of their debt and staying in good standing on their loans. Being in a deferment period is different than actively paying off student loans, and the latter can have a positive impact on your credit.
For instance, I opened up a credit card at the beginning of my law school career, and I was only given a modest credit limit when I was first given this card. However, my credit limit increased during my last year of law school. I am pretty sure that the credit card company took my student loan repayment into account when increasing my credit limit, and paying student loans as a student can have a positive impact on your credit.
In addition, paying off student loans in school can have a beneficial effect on your morale. As a student, I got a horrible feeling every semester I borrowed more debt to finance my education. I knew that with the passage of time, not only would I need to borrow more debt, but interest would accrue, making my student debt burden even harder to manage. I even tried not to check my student loan balances, since it gave me a horrible feeling in the pit of my stomach to see the staggering numbers on the screen representing my outstanding student debt burden.
However, paying off my one student loan gave me a great sense of pride. I felt as if I was taking a small step in the right direction toward being liberated of my student loans. It was extremely reassuring to see the balance of even one of my student loans going down, and this gave me the confidence to believe that I could one day pay off all of my student debt. Students should not discount the fact that paying student loans as a student can improve their morale, and this may be another reason for students to make student loan payments while in school.
Ultimately, a number of financial considerations should determine if paying student loans in school is advisable in your situation. For instance, the size of the student loan, and the minimum monthly payment, will influence your decision. I was able to make monthly payments around $100 for my small student loan, but I would be unable to make payments for student loans that had larger balances than this. Oftentimes, borrowers have several different loans so they can pick the smallest one to pay off as a student.
The interest rate on your student loan may also influence paying student loans as a student. If your student loan has an interest rate closer to seven or eight percent, it might make sense to use available money to pay off this student loan. It might be difficult to reliably make more than this interest rate in investments, so available money would possibly be better spent paying off this student loan. However, if the interest rate on student debt is lower, it might make sense to devote available money to other financial goals since the “juice” is not running at a fast pace on this debt.
All told, paying student loans as a student may be advisable for students in a number of situations. Making student loan payments as a student can help borrowers build credit and can positively impact morale. Ultimately, however, a number of financial considerations should be evaluated when deciding if paying off student loans as a student is right for you.