5 Steps to Take Before Making Your Last Student Loan Payment

last student loan payment

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!

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