Jun 03

Top 10 Reasons to Pay Off Your Student Loans ASAP

Gold top 10 winnerWhy I’m So Passionate About Student Loan Payoff.

After 6 years dragging myself through the ivory tower, I owed over $30,000 in student loan debt. That student loan debt was like a giant “debt elephant” sitting on my shoulders. Paying off my student loans was one of the best financial decisions I’ve made to date. I’m only 30, but I suspect I’ll still consider the pay down one of my biggest financial accomplishments, even 30 years from now. Do student loans make you miserable? If they don’t, they should.

While rational people from both sides of the student loan “debate” (pay them off as fast as possible vs pay them off slowly because they’re “good debt”) disagree about why it makes sense to pay or “keep” student loan debt. Obviously you need to consider your own personal financial situation. But for me, the benefit of paying off my student loan debt, well outweighed the opportunity cost of spending that “paydown” money on other things.

Top 10 Reasons to Pay Off Your Student Loans ASAP:

  1. Interest rates. Take a look at the chart below; and these are, “low” compared to most private loan interest rates…need I say more? Still thinking you should “hold on” to the loans for the tax deduction? The amount of money you “save” from the deduction is far less than the amount of interest you’ll pay over the life of the loan. Pay them off!
    Direct Unsubsidized Loans Fixed at 6.8%
    Direct PLUS Loans (Parents and Graduate or Professional Students) Fixed at 7.9%
    Perkins Loans Fixed at 5%
  2. Bankruptcy. Federal student loans are NOT default-able in bankruptcy. If you have the income necessary to pay the loans back and can’t prove an “undue hardship” your student loans will not be legally discharged in bankruptcy and you’ll still have to pay them.
  3. Wage Garnishment. If you default on your federal student loans your paycheck can be garnished. Yup that’s right, the feds can take the money you owe them directly from your employer.
  4. Mom & Dad. Did mom, aunt Sally or your grandparents co-sign your private loans or Parent Plus loans? If you aren’t able to pay them, they’re on the “hook.” Imagine grandma and grandpa slaving away during their retirement years trying to pay off your education, sad!
  5. Defaulting Ruins Your Credit. If you’re delinquent paying your private student loans your credit will be trashed. Late payments ruin your credit score and impact your ability to sign up for utilities, buy a car, rent an apartment and even get a job.
  6. Future planning. When all of your friends start buying homes and you start getting the housing “itch”, you don’t want to be denied a mortgage because you have $120k in outstanding student loan debt. While student loans don’t impact your credit score they are included in your debt-to-income ratio. If your debt-to-income ratio is too high, your mortgage application will be denied.
  7. Kids. Maybe you can’t afford to have kids when you want them because you have to keep working to pay off your student loans. Imagine dropping them off at the babysitter on your way to work when you wanted to be a stay at home mom.
  8. Jobs. Working a job you hate? Think what it will be like to be “chained” to a job you hate for the next 10 years because you can’t afford to take a lower paying position that you’d love.
  9. Kids part II. Paying for your kid’s college at the same time you’re paying off your own student loans? Ouch!
  10. Financial peace. Probably the most important and most inspirational reason to pay off your student debt. You can’t have true financial peace knowing that you owe money to someone else. Kick Sally Mae to the curb!

Which of the top 10 motivated you to pay off your loans. Still paying them off? How’s it going?Image: Sam_Churchill


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  1. Michael @ The Student Loan Sherpa

    Number 10 is definitely the reason for me. I have a little over 9 years to go, but each day I’m thinking about it and working at it.

    1. KK

      #10 was absolutely what motivated me. Keeping plugging away, you’ll be there sooner than you think.

  2. Thomas | Your Daily Finance

    Still working on paying the loans off but of the 10 the biggest reasons are to have financial peace of mind and planning for the future.

    1. KK

      Having that financial peace really is priceless. It’s such an amazing feeling not to owe anyone anything.

  3. Michelle

    Love this post! I want financial peace NOW! 🙂

    1. KK

      I didn’t really realize how different I would feel without debt. It’s pretty awesome to finally be “free”.

  4. John S @ Frugal Rules

    Nice post! Quite a few of these motivated me as I was paying off student loans. It just felt like I would never get out from under them and once I put my focus on paying off the debt I was finally able to make some solid progress.

    1. KK

      Thanks John. I think that was the key for me too. I just had to get “in there” and believe I could do it. Once I started i was amazed at how fast I was able to pay off the debt.

  5. SuburbanFinance

    I couldn’t agree more. Interest sucks and student loans can be a budget buster. Paying them off as soon as posisble will give you a much more settled feeling.

    1. KK

      Interest totally sucks! I felt like a totally different person when I was finally debt free.

  6. DC @ Young Adult Money

    These are all really solid reasons to pay down your student loans. For me, I am waiting to have children (planning on waiting to have children…) at least in part because of student loans. It would be nice not to have that cash outflow each month when we have kids. My student loans actually motivated me to start my site and to continue to work on my side hustles to help fund repayment.

    1. KK

      We’re hoping to have a family in a few years and I think I’ll want to stay at home with our kids. I knew I would feel guilty if I had a ton of debt but wasn’t working full-time. Now I can stay at home if I choose, or not but either way i won’t feel bad about my decision because we’re debt free.

  7. Debt and the Girl

    All good reasons to pay off debt now. Financial peace is def. important to me!

    1. KK

      Sounds cheesy, but it really is a priceless feeling.

  8. Mike

    I know lots of younger ppl getting the “housing itch” and their student loans are holding them back. Great points in the article.

    1. KK

      Some people have “baby itch”, I had “condo itch” 😉

  9. Debt Blag

    This is great! They don’t make me miserable (and I don’t want them to), but yes, I’m also very passionate at getting rid of mine as part of my greater financial goals.

    1. KK

      Mine made me pretty miserable. But I’m probably a little dramatic.

  10. Jordann @ My Alternate Life

    I completely agree! One of my big reasons to pay off my loan soon was that it has a variable interest rate. Interest rates right now are as low as they are ever going to be (I was paying 5.5%) so I was pretty motivated to pay them down while they aren’t costing me as much. Good post!

    1. KK

      Good point. All of my loans were fixed rate, but with variable rates you don’t want to get stuck with high rates when they go back up.

  11. Jana @ Daily Money Shot

    #9 is definitely our primary motivation for paying off my husband’s student loans. We have 12 years left before the child starts college so there’s really no reason for us not to get it done.

    1. KK

      No kids here yet, but I’d be pretty unhappy if I were still paying my loans when I was paying for my kids’ college.

  12. Mike@WeOnlyDoThisOnce

    Also, gives you more time to start other types of savings such as emergency funds and 401(k)s.

    1. KK

      Great point Mike. Once you’re “free” you can focus on building a better future and “planning” for emergencies.

  13. Nick @ ayoungpro.com

    Never had student loans, but this is a great list for debt payoff in general. 🙂

    1. KK

      Definitely. Many of these points are true of a lot of types of debt.

  14. Liquid

    Great reasons dude. Better to pay off the loans now when interest rates are still low than when it gets back up to the historical average again 🙂 I didn’t know the feds could force you to pay back the loans through your wages like that. Hope that never happens to anyone I know. Luckily for me I didn’t have too much debt graduating from college, but I still tried to tackle my student loans aggressively, and managed to pay off the balance a few years ago 🙂 I did however buy a home first because I thought building up an asset column was more important at the time, but student loans was certainly my second biggest priority.

    1. KK

      We paid off out loans before buying a home, but I can understand doing those in reverse in some circumstances. Congrats on your “freedom” 😉

  15. Jon @ MoneySmartGuides

    I agree! I urge people to pay off their student loans ASAP as well. You never know where life will take you. In a few years, you might want to buy a house. Not having that monthly student loan payment will allow for more savings of a down payment or make it easier to get by each month. Or, maybe you’ll want to travel for six months. Doing so without an income is much easier when you don’t have a monthly debt obligation to pay.

    1. KK

      Absolutely. You never know what you’ll want to do in a few years and having to hold back on your dreams because you still have loans is a total bummer. Being debt free opens up so many options you might otherwise not have.

  16. Girl Meets Debt

    I am going to bookmark this post in case I ever need a reminder why I need to pay off my student loans NOW! Thanks lady. Great post!

    1. KK

      You bet, glad I could be a motivator. Keep fighting, I know how hard you’re working to pay everything off. You’ll be there sooner than you think!

  17. Holly@ClubThrifty

    These are all good reasons =) Plus I read that interest rates are going to double on U.S. government backed student loans starting July 1st. Yikes!

    1. KK

      Yikes indeed (or maybe not). I’m hoping that will convince some people that taking out such huge amounts of debt isn’t a great idea. Maybe it will motivate them to go to a cheaper school, or look into other options-working etc.

  18. Brian @ Luke1428

    Great list KK! I think most people underestimate the psychological boost that comes from paying off any type of loan. There is something that changes in your spirit when you no longer have that chain wrapped around your financial life. It does bring great peace of mind as you pointed out.

    1. KK

      You bet. Knowing that I was no longer chained to my loans was like lifting a huge weight off my shoulders. I’m not longer a slave to that monthly payment and I can now spend my money they way I want to.

  19. Laurie @thefrugalfarmer

    Love this, KK. I can’t imagine how wonderful it feels to have that $30k monkey off your back. You now have the financial freedom to make decisions based more on what you want to do, instead of what you have to do. Priceless!!!!!

    1. KK

      Absolutely priceless. And has really changed our ability to give to others and make good financial decisions. Kicking that “monkey” to the curb.

  20. anna

    Great list and I agree about financial peace – my main motivation to get rid of pesky debt!

    1. KK

      I think it’s the best motivator for most people 🙂 Certainly was for me.

  21. Glen @ Monster Piggy Bank

    I like your last point the best. Knowing you don’t owe anyone is a great feeling. I can’t wait until I have the same feeling with my mortgage.

    1. KK

      Yup, mortgage is definitely the next thing we started focusing on (well a down payment and buying our place, then the mortgage). Right now we’re considering buying an investment property which would help us pay down the mortgage even quicker.

  22. Edgar @ Degrees and Debt

    Ugh, I hate student loans! I am about to get two more that kick in once I finish the masters that have been deferred. I am not looking forward to it and plan to do whatever I can to pay more and reduce the debt and timeframe.

    1. KK

      I remember the same feeling when I was finishing my masters (ugg!). Just make a plan and attack them. You’ll do fine because you’re dedicated to knocking them out.


    I remember the same feeling when I was finishing my masters (ugg!). Just make a plan and attack them. You’ll do fine because you’re dedicated to knocking them out

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