Should I Pay Off Student Loans Early?
Save for emergencies and retirement, and get rid of credit card debt, before paying off student loans early.
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Whether you should pay off your student loans early depends on your current financial status. Your money may be better off going toward another goal if you haven't taken more important actions, such as:
- Saving at least one month of basic expenses for emergencies.
- Setting up automatic contributions to a retirement account like a 401(k) or Roth IRA.
- Paying off any debt — usually credit cards — that has a higher interest rate than your student loans.
Here’s why meeting these goals first is important, and how to pay off student loans early if your financial foundation is already strong.
What to do before paying off your student loans early
If you’re anxious to pay off student loans fast, pay a little extra each month while taking the following steps:
Start your emergency fund
An emergency fund is critical when dealing with a sudden loss of income or unexpected expenses, like car repairs or medical bills. If you’ve sent all available cash to your student loans, you may have to put those expenses on a credit card — costing you more money over time.
Ideally, your emergency fund should include three to six months' worth of expenses. But, that can feel about as intimidating as paying off student loan debt. Only 46% of U.S. adults have enough funds set aside to cover three months' worth of expenses, according to the FINRA Foundation's 2025 National Financial Capability Study — down from 53% in 2021.
Instead of stressing over the exact number of months you can cover, aim to save enough money to feel comfortable, but not so much that it kicks your other goals down the road.If all you can afford to put aside right now is one month's worth of expenses or even just $500, that will get you out of many common jams — and you can always add more once you’re in a better financial position.
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Pay off any credit card debt or other urgent loans
The average credit card interest rate in the U.S. was 22.83% as of August 2025, according to data from the Federal Reserve Bank of St. Louis. That's a much higher interest rate than you'll find on federal student loans and even on most private student loans, which means you'll lose more money in interest in the long run if you don't pay off your credit card debt first. The same rule applies to other high-interest loans, like personal loans.
Invest for retirement
Paying off your student loans early isn't typically a good use of your extra money if you're not yet saving for retirement. To start, make sure you get the company match on a 401(k) if you have one. If you have a 401(k) with matching dollars, that amounts to a guaranteed return on your own contributions. Even if your federal loans are at 6.8% — the highest rate for undergrads in recent years — you'll be leaving money on the table if you don't take advantage of that company match.
If you don't have any 401(k) match through your company, or if you're self-employed, save as close to 10% of your income as possible in an individual retirement account (IRA).
Once you’re putting aside money for retirement, you can keep track of your progress with a retirement calculator.
Are there fees for paying off student loans early?
Student loans have no prepayment penalties, so you won’t be charged extra if you pay off student loans early. This guide on how to pay off student loans early details strategies that work. Also, use a student loan payoff calculator to see how much each of these repayment strategies could save you.
Want to pay less for your student loans?
See if you pre-qualify for refinancing and compare real rates — not just ranges or estimates. Article sources
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