You’ve patiently watched the balance on your student loans drop lower and lower with each monthly payment. Finally, after years of payments and thousands of dollars, your last student loan payment is in sight.
But making a final payment is not as simple as sending off a check equal to your current balance. Whether you’re paying on schedule or dropping a big lump sum to wipe out your debts, there are some things you should know. Here’s your guide to paying off a student loan completely.
1. Calculate what you can afford to repay
If the cash you have on hand is greater than the remaining balance of your student loan, great news: You can pay if off! But whether you should use that cash to make a lump-sum final payment might depend on your situation.
First, make sure you can pay off your student loan and still have enough money to cover your living expenses. Figure out how much a month’s worth of your living expenses cost. Anything above that is disposable income that you can afford to put toward repaying student debt.
However, leaving an emergency fund in your bank accounts is a good idea. Most experts recommend having at least two months of living expenses in savings, and maybe more depending on your situation.
If you have enough cash to make a lump-sum final student loan payment and keep your budget and emergency savings intact, go for it! You’ll save on interest and accomplish a major win.
If you’re not quite there yet, paying extra each month will help you pay less interest and reach your payoff date faster.
2. Find your payoff amount
If you’re in a position to make your last student loan payment this month or next, it’s a good idea to find your payoff amount.
Your student loan servicer has a current balance that shows how much you owe at the moment, but your payoff amount is different. It is the sum you’ll need to pay to fully satisfy the terms of your loan and pay off your debt. It can include any outstanding fees or interest that have been accrued but not yet added to your balance.
To find your payoff amount, you can usually log in to your servicer’s website and view your current account statements. Your payoff amount should be included there, clearly labeled along with a date through which it’s valid. You can also call your servicer’s customer service line to get your payoff amount, as well.
3. Sending your final payment
Once you know your payoff amount, you’ll know how much you need to send to your loan servicer to fully repay your student debts. When you’re ready, simply make a payment using your usual student loan payment method.
When making your final student loan payment, send it before the date through which the payoff amount is good. If not, you may not pay enough.
You could end up still owing on your student loan, but not paying it because mentally you’ve crossed it out as paid off. This could cause you to miss payments (because you don’t think you have any due), and possibly even delinquency or default.
4. Get (and save) your receipt
Once your payment goes through, you should get a letter from your student loan servicer confirming that your loan has been paid off. Carefully review the letter to make sure it’s accurate and that you’ve fully settled the debt. If you don’t get this confirmation automatically, reach out to your student loan servicer and ask for it.
Having this confirmation will protect you from any potential errors on the part of the loan servicer, or even on your credit reports. If they claim you still owe money for this debt, you have hard proof that you paid it off in full. Save one copy on your computer and print another one out for your financial records.
5. Make a plan to use your extra cash flow
By making your last student loan payment, you’re getting rid of a monthly expense and freeing up more cash flow. After you send in your final student loan payment, then comes the fun part: deciding how you’re going to use the new “extra” money in your budget each month.
If you have other loans you’re working to pay off, it’s always smart to roll over freed-up cash to pay extra on your remaining debts. Other financially responsible choices could include building your emergency fund, upping your retirement contributions, or even saving for your child’s college education.
Whatever you want to do with this money, be intentional about how you use it. Make sure it’s going toward important financial goals instead of getting eaten up by frivolous spending or low-priority purchases.
And last, but most importantly, congratulations on getting student-debt free!
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of March 18, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 0318/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|