This isn’t quite as extreme as a two-year payoff but still allows the borrower to “get ahead.” Not only is it nice to have a shorter repayment, but the interest savings are nice too.
A borrower who pays 9.99 and finishes in 5 years will pay ,399.54 in interest alone, but he or she will still be saving ,584.18 compared to the 10-year repayment plan. Look for ways to save money on groceries, going out to eat, housing, entertainment, and transportation costs.
There seem to be some “mixed reviews,” however, about this topic as many people disagree.
Let’s take a look at an example of how much can be saved by paying off student loans early: The interest rate in this example is 6%, slightly less than the Stafford rate of 6.8%. Of course, the borrower was making a hefty monthly payment of 5. So let’s consider a more reasonable example: If a borrower could make a monthly payment of 9.99, the debt would be gone in five years.
Essentially, paying off student loans early boils down to two main benefits: Any time you are dealing with interest rates, you are dealing with growing costs.
In other words, the longer it goes unpaid, the more you will have to pay.
A better strategy would be to prepare for unemployment in order to protect yourself.
Having a job is a great thing in today’s economy, but with uncertainty ahead, consumers should not take their employment and income for granted.
It could be financially foolish to only make your minimum student loans payments because you assume you will keep your job.