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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
You would think paying off your student loans ASAP is a great idea. However, it may not be the best course of action for all graduates. Should You Pay Off Student Loans Early? By Britt Erica Tunick Whether they are pre-law, pre-med, heading for an MBA or simply planning to finish their higher education with a bachelor of arts degree, the one thing nearly all college students have in common these days is a mountain of debt that and the unfortunate fact that there are fewer jobs waiting for them than ever before. For those lucky enough to find jobs upon graduation, it may be tempting to pay down student loans early. Doing so, however, is not always necessarily the best move you can make depending on your individual financial situation. Just as paying off a mortgage early can mean significant long-term savings, paying down student debt early can be equally beneficial by decreasing the overall amount that will ultimately be paid in interest. Eliminating or reducing the total amount of student debt can also be beneficial because it leaves graduates with more money at the end of each month money that can be invested and put to work so it will actually start generating interest. Another benefit of paying off or paying down student loans early is having less debt is more appealing to potential lenders, should graduates be interested in taking out a mortgage or any other sort of long-term loan. Eliminating student debt decreases an individual’s debt-to-income ratio. But paying down debt early is not for everyone. Individuals who have additional debt with a higher interest rate than their student loans, such as credit cards, should stick with the monthly payments owed on their student debt and instead focus on paying down their most expensive debt first. Student loans are also tax deductible, which means students should consult a financial advisor to determine whether paying off such loans early makes sense for them. |
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