How can I repay my student loan early?
Take a look at how you can repay your student loan early, if it’s a good idea to, and what you can expect to happen to student loans following the election in November.
Summary
There are many pros and cons to consider when deciding if you should pay off your student loan early.
It remains unclear what will happen to student loan forgiveness following November’s election, with the topic remaining divisive between the two leading parties.
Using their expert, in-depth knowledge and experience, a financial advisor can help you make the right financial decisions for your unique situation.
Should I repay my student loan early?
Student loans can be repaid early without incurring any penalties.
According to Federal Student Aid, “You may prepay all or part of your federal student loan at any time without penalty.
“Any extra amount you pay in addition to your regular required monthly payment is applied to any outstanding interest before being applied to your outstanding principal balance.”
But, if you’re able to repay your student loan early, you might be wondering if it’s a good idea.
There are multiple pros and cons to repaying your student loan, and you should be aware of them before you make a decision. Here are some to get started:
Pros of repaying your student loan early
The amount of interest you pay on your loan will be reduced.
You will be out of debt faster, which could have a positive impact on your credit score.
Your debt-to-income ratio will improve.
Cons of repaying your student loan early
You won’t be able to take advantage of the student loan tax deduction.
You will no longer be eligible for student loan forgiveness.
Your monthly payments will increase, which could take away money from other financial goals.
Deciding if you want to repay your student loan early is a big financial decision and one where getting expert financial advice is invaluable.
How do I repay my student loan early?
If you decide repaying your student loan early is the right move for you, there are multiple strategies you can use to help you achieve your goal.
Here are three strategies you can use to help you pay off your loan early:
1. Consider refinancing your student loan
Refinancing your loan can help you get a better interest rate or repayment period. This can help you repay your student loan faster without having to make additional payments.
With refinancing, a private lender pays off your existing loans and replaces them with one loan with a new interest rate and repayment schedule. To refinance your student loan, you need to have a steady income and a good credit score.
2. See if your employer offers a repayment match
According to a report by the Employee Benefit Research Institute (EBRI), in 2023, approximately 34% of employers provided student loan repayment assistance, with 33% planning to offer it in the future.
What exactly is offered will vary from employer to employer, but in most cases, they will match repayments up to a certain amount or contribute a monthly maximum to repayments.
3. Use any additional income
If you have additional disposable income, such as from a raise or a financial windfall, you could put this towards your student loan.
While this isn’t the most exciting thing to do with a sudden injection of cash, it can help you reach your goals faster.
When you utilize these strategies, it’s also important to ensure you’re keeping up with your other financial responsibilities, such as building an emergency fund, paying off other loans, and saving for retirement.
What will happen to student loan forgiveness after the election?
Student loan forgiveness has become a hot topic during the election campaign, with both candidates having passionate views on the topic.
Over the last four years, the Biden-Harris administration has been pushing for student loan forgiveness.
As part of this push, they extended the pause on repayments, brought forward a relief plan to the Supreme Court (which was struck down), and introduced the most recent Saving on a Valuable Education (SAVE) plan.
While still battling with the courts about its legality, the new SAVE plan is a type of income-driven repayment (IDR) plan that allows borrowers to have affordable payments tied to their income and forgive remaining balances after a certain number of years.
If elected, Kamala Harris will likely continue to expand student loan forgiveness programs, including IDR plans and Public Service Loan Forgiveness (PSLF).
President Trump’s plan is slightly more ambiguous.
While his presidency saw the introduction of the freezing/waiving student loan interest and payments as part of his emergency declaration during the pandemic, he is opposed to student loan forgiveness.
He has praised the overruling of Biden’s broader loan forgiveness plan. In June 2024, he stated that Biden’s efforts to forgive student debt were “vile” and “not even legal.”
While his official campaign website has little information on his administration's plans for student loans, his comments suggest he could attempt to roll back student loan programs if elected, with this outcome heavily depending on whether there is a Republican majority in Congress.
Get expert financial advice about your student loan
Repaying loans is a crucial part of your overall financial plan.
How and when you repay it will also have an impact on your credit score. Pay on time, and you can boost your score. Make a late payment or skip payments entirely, and your score will take a hit.
A financial advisor can help you manage your finances and ensure you’re making strategic and clever decisions. Using their wealth of knowledge about the financial industry, they can guide you to the right decisions for your unique situation.
Unbiased can match you with a financial advisor suited to your needs. Simply answer a few questions about what you’re looking for, and we’ll find your advisor.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.