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How Aggressively Should I Be Paying Off My Student Loans?

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Determining how aggressively you should be pay off student loans can be a difficult question to answer. While everyone may want their student loan debt to be eliminated as quickly as possible, there are many other significant factors to think about before you rush to pay them off.

Below are some of the different areas that you may want to think about before you decide to aggressively pay off your student loans.

Paying Off Student Loans: 4 Questions to Ask First

1. Do you have an emergency fund?

Paying down your student loan debt can be a great thing, but before you do that you should think about what would happen if you used all of your funds and then an emergency were to come up in your life.

If you have a house payment, if your family’s income relies on you, would you have the proper cash savings to address an unexpected expense? You should make sure to build up an emergency fund before you pay off your student loan debt aggressively. You never know when an emergency situation may arise and preparation could save you financially. This can help prevent stress as well as added debt if an emergency did come across your path.

Taking out additional loans to cover emergencies, could put expenses on your credit card, which may mean paying high interest fees, overdraft fees, and so on if you do not have the extra cash on hand.

2. Should you invest your money?

If you have student loan debt with low interest rates, then you may want to think about investing your money and paying just the minimum on your student loan debt. This is because you may be able to earn money by investing your money instead.

For example, if your student loan debt is at 2% but you can earn 5% through a low risk investment, then it may be worthwhile to look further into the investment and see if that is a better option for you. This is because you may be able to earn more money by investing your money instead of using that money to pay down your student loan debt.

However, this only works if you actually do your research and make that additional money work for you. Spending it on something that will not earn you a return will not help your case at all. If you aren’t going to use it for an actual investment, then it would probably be a better idea to just aggressively pay off your student loan debt instead.

3. Have you consolidated your student loans?

On the other hand, if your interest rate is high then it may be a good idea to pay off your student loan debt quickly. This is because you may not be able to earn a better return by investing your money, so paying off student loans may be more prudent.

Before you do that though, looking into consolidating and refinancing your student loans may be a good option. You may be able to lower your student loan payments and lower your interest rate by doing so.

4. How badly do you want your student loans gone?

In the end, you need to think about how badly you want your student loan debt to be gone and how your decision will impact you. There is no right or wrong answer, as each person who has student loan debt is in a different situation. Eliminating your student loans can be a great feeling and stress reliever though, and those are two significant positives of paying off student loans right there.


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