If I have the money to start paying off my student loans now, even though it is still in the 6 month grace period, should I begin to pay them off or save the money up till the grace period is over?

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Posted by Jack Schmieg (MONEY FORUMS: 4, Answers: 0)
Asked on May 17, 2016 1:17 pm
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Instead of paying off the “highest” interest rate student loan, it may make sense to start with the smallest dollar amount. Additionally, make a schedule for yourself to make these payments weekly instead of monthly. Here’s why: first of all, once the smaller ones are paid off, you’ll have additional resources to put towards the rest of your loans. For example, if you have 2 loans that had minimum payments of $25 and $50, once the loan that had a minimum of $25 is paid off, you’ll be able to put 50% more towards principal on the second loan.

Try a schedule that looks something like this:
Month 1
Week 1 – Pay all minimum balances due
Week 2 – Fund smallest loan
Week 3 – Fund smallest loan
Week 4 – Fund smallest loan
Week 5 – Fund smallest loan
Month 2
Week 1 – Pay all minimum balances due
(repeat)

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Posted by Corey Purkat (MONEY FORUMS: 0, Answers: 2)
Answered: August 5, 2016 1:38 am
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Hey Jack, just to elaborate on Hannah’s point, a good emergency fund is foundational and probably a higher priority than paying debt off earlier than you have to (but just barely!). If you have a two-income household (usually you and a spouse), you can probably get by with about 3 months of expenses saved up. However, if your job security is not so great, your income varies a lot, or your the sole income earner, you may want to shoot for 6 months worth of expenses in the bank before paying extra (or early) on loans. Make sure your emergency fund is readily accessible….but don’t spend it unless you really have a money emergency. Once you hit your target emergency fund, go to town on those loans, preferably the higher-interest ones first. Great question – good luck!

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Posted by Dave Bowman, CFP® (MONEY FORUMS: 0, Answers: 2)
Answered: July 19, 2016 1:23 am
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It ALWAYS pays to pay off debt as soon as possible. Money sitting in a bank account will make <1%, and student loans will be, at a minimum, accruing 5% interest as you go (probably more like 6-8%). The only difference would be if the loan is Subsidized which means it is not accruing interest until after the grace period. In that case it would still be beneficial to pay off the debt. Less principle once the loan starts accruing interest, the less interest you will pay!

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Posted by Zac McCann (MONEY FORUMS: 0, Answers: 1)
Answered: June 20, 2016 4:49 pm
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I waited until the final day of my grace period to pay. It only makes mathematical sense because you can keep the money and let it in interest in a bank account rather than giving it to the student loan company before they even ask for it. There’s no reason to prepay anything unless you’re getting a discount greater than the opportunity cost of holding onto the money yourself. With your situation, we’re of course not talking about huge money. So either choice you make is fine. But know this information moving forward when it will make a big difference.

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Posted by Will Lipovsky (MONEY FORUMS: 0, Answers: 37)
Answered: May 30, 2016 2:50 pm
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Be sure you have a bit of money for emergencies, moving etc first, but then pay those suckers off. No reason to wait!

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Posted by Hannah Rounds (MONEY FORUMS: 1, Answers: 54)
Answered: May 22, 2016 5:39 pm
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Start paying now! You’ll save money on interest!

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Posted by Melanie Lockert (MONEY FORUMS: 0, Answers: 66)
Answered: May 17, 2016 10:40 pm
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