Is it best to pay off loans right away?

Question

I just received my FedLoan service papers and it states I can except to pay off my loans in 10 years or I can ask to be placed on an independent deferment plan and receive loan forgiveness in 20 years? They payments are relatively low $70, but are expected to double in a few years? I currently have less than $10,000 in student loan debt. Also it suggests I pay online using direct payment? For bonus question; do you write checks or use direct payment to pay off your loans?

Anonymous · Answer

It depends. Your priority should be to be putting money towards the investment that provides the highest return. If the interest rate on your student loan is 5%, are you able to find an investment opportunity (stocks, bonds, land, etc.) that is likely to return at least 5% or more? If so, then pay the minimum on your loan and place your money in those investments. If you do not have any savings on-hand to cover an unexpected expense (like a medical emergency)... that should be your first priority. I use auto withdrawal because the bank lowers the interest rate on my loan for doing so.

FinAidGuy · Answer

You would save more money by paying them off faster. I always use direct payments for my loan payment as I am sure it is going to get there and not get lost in the mail.

mzjavert · Answer

I never sign up for automatic withdrawals.  I will pay electronically but only on a payment by payment basis.  I actually prefer to write a check for bills like this.

Is it best to pay off loans right away?

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