Q: I have some wiggle room in my budget, and am thinking about accelerating the payment schedule on my student loans. Is that the best use of my money?
The short answer? It depends. If you have extra money on hand, don’t have any consumer debt and aren’t working toward any other big financial goals, then yes—I’d aim to pay off your student loans early. Doing so can help you save thousands in interest over time.
However, if you don’t have a sufficient emergency fund, are paying off credit card debt or haven’t started saving for retirement, double-down on these efforts first. Having a cash cushion to cover an unexpected bill, zeroing out high-interest debt and starting to save for retirement (or upping your contributions) are all more pressing goals.
Once you’re on track in these areas, though, you can up your monthly student loan payments. Even an extra $25 to $100 a month—whatever works for your budget—can make a difference in the long run. And as you check those bigger goals off your list, you can shift your focus to aggressively paying down your student loans.
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December 6, 2016