Student loan debt can be an incredible burden, and paying off your balance sooner than later is an admirable goal. However, there may be times when paying off your student loans early doesn’t make sense.

Depending on what your plans are and your current financial situation, here are a few situations where it may be better just to pay the required amount every month and nothing more.

1. You’re Working Toward Forgiveness

If you qualify for the Public Service Loan Forgiveness (PSLF) program, your remaining balance will be forgiven after you’ve made 120 qualifying payments and met other requirements. If you were to add extra cash to your payment every month, you’d only reduce the benefit you’ll receive from the program.

With other forgiveness programs, it may not be as clear-cut. With the Teacher Forgiveness program, for instance, the amount you can have discharged is capped at $17,500. If your balance is much higher than that, you may be able to time it so that when you receive forgiveness for a portion of your balance, you’ve also paid off the remainder that’s ineligible for cancellation.

2. You’re Part of a Loan Repayment Assistance Program

If you qualify for a loan repayment assistance program (LRAP) through a government program or a private employer, consider the total value you can get before you start paying down your debt faster.

With some government programs, for instance, you may qualify for tens of thousands of dollars in assistance, while private employers may offer much less. 

Take some time to run the numbers to ensure that you maximize the amount you can receive — after all, the less you have to pay out of your own pocket, the better. If you can qualify to get most or even all of your balance paid for you, stick with your regular monthly payment. 

3. Your Interest Rates Are Low

Student loan interest rates can vary based on the type of loans you have (federal or private) and when you received your loan disbursements. But if you have loans with relatively low interest rates, you may be able to get more use out of your money elsewhere. 

For example, investing in the stock market can have its ups and downs in the short term. But the average annual return on the S&P 500, a stock index used to represent the U.S. stock market as a whole, has been roughly 8% since 1957. 

So if your interest rates are lower than 8%, you may be able to get more long-term value with your cash by investing it than paying off your student debt. Consider refinancing student loans to potentially lower your interest rate.

Also, consider your workplace 401(k) if you have one. If your employer matches your contributions, that’s an immediate 100% return on your investment, making it a no-brainer compared with paying off student loans early.

4. You Don’t Have an Emergency Fund

Adding extra payments to your student loans every month can save you money on interest, but you can’t get that money back if you suddenly need it.

Forty-four percent of Americans don’t have enough savings to cover an unexpected $400 emergency expense, according to the Federal Reserve. If you feel like you don’t have enough of a buffer for a rainy day, you’re likely better off socking money away into your emergency fund than using it to tackle your student loans.

You may not save as much money, but if your car breaks down, a major home appliance needs repair or you lose your job, you’ll have something much more important: peace of mind.

5. You Have More Important Savings Goals

When it comes to personal finance, everyone has different preferences and goals, and that’s okay. If you have a goal — for example, to buy a home, save for retirement, help your kids save for college or whatever else — that’s more important to you than paying off your student loans, focus your efforts on that instead.

Of course, it’s important to consider the reality of your situation as you do this. If your student loan debt is crippling you financially, working on getting rid of it first may be a necessity. In some cases, it may even make sense to split up your extra cash and put some of it toward your student loans and some toward your other goals.

Whatever you do, it’s important to focus on what works best for you.

The Bottom Line

Student loan debt isn’t fun, and it’s natural to want to pay it off as quickly as possible. But it’s important to take a step back and look at the big picture before you make any decisions. Take a look at your financial situation and consider your short- and long-term goals to take the path that’s best for you.

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