Should I Make Student Loan Payments While I’m Still in School?

Quick Answer

Making payments on your student loans while you're still in school can be a great way to save money, build credit and get ahead of your debt. But affording payments while in school can be challenging, especially alongside covering living expenses. Start by researching your loan type and creating a budget.

Shot of a young female using the laptop while laying on the couch at home.

Making payments on your student loans while you're still in school can be a great way to save money, build credit and get ahead of your debt. However, your strategy to tackle your loans might differ depending on whether you borrowed from a private lender or the federal government.

Some private student loans require you to make payments while still in school. In contrast, no federal loan payments are due until after you graduate, no matter what type of federal loan you have.

It might be daunting to consider paying back student loans while you're still taking classes. If that's the case for you, setting reasonable goals can help you make progress without being overwhelmed. For example, you might focus on just paying the loan interest before the principal is due. Read on to discover the benefits of paying early and strategies to help you afford those payments and avoid debt.

Benefits of Paying Down Your Student Loan While in School

Paying down student loans early has a lot of advantages. Here are a few reasons it's a good idea to start paying your loans while still in school:

  • It saves you money. Paying down your loans while in school means less interest will accrue, saving you thousands of dollars over time.
  • You'll save on interest. With certain loans, the unpaid interest from the grace period you're granted while in school is added to your principal balance ("capitalized") when you graduate and begin repayment. If you pay at least the accrued interest before your loan comes due, you'll avoid paying capitalized interest. This is one reason it's essential to know what type of loan you have: The government pays the interest on a direct subsidized loan while you're in school, but if you have unsubsidized loans, that's not the case.
  • You'll be establishing good financial habits early. Paying student loans while in school requires you to manage your money more closely than if you weren't paying on loans. You'll need to make a budget, track spending and learn how to use a bank account at the very least. Taking control of your finances as early as possible can help you in the long run, and the sooner you start, the better off you'll be.

How to Pay Your Student Loan While in School

If you have federal loans, your loan payments won't come due until six months after graduation or leaving school, so you have to be proactive if you want to pay your loans while you're in school. Here's what you need to know and do before making payments:

  1. Devise a strategy. First, you'll want to choose the right strategy to tackle your loans. For federal loans, you can use a simulator to sort through different payment scenarios to see which will save you the most money.
  2. Connect with your lender or loan servicer. If you have federal loans, you'll need to make sure you have an account set up on the official Student Aid website. If you have a private lender, you'll need to create an account through their website if you don't already have one. A loan servicer is a company the government assigns to handle your loan account's billing and other services. You can find this information in your dashboard.
  3. Link your payment method. To make payments, you'll need to have a bank account to pay electronically or by phone. Some plans even give you a discount if you schedule an automatic monthly electronic debit of your loan payment from your checking or savings account.

Once you're all set up, make a budget and start tracking your spending so you can watch your progress toward your debt repayment goals.

Ways to Avoid Taking Out More in Student Loans

It can be challenging to find the money to cover both your tuition and living expenses, let alone commit to monthly loan payments. If you're worried about your growing student loan balance, there might be ways you can reduce the amount you'll need to borrow. Consider the following strategies:

  • Make a budget and live below your means.
  • Find a part-time job, even if it's just during summer and winter breaks.
  • Look for grants and scholarships.
  • Take summer courses at a local community college and transfer credits.
  • Try to graduate early.
  • Ask for financial gifts for the holidays and other life milestones in place of physical gifts.
  • Consider less expensive colleges or universities.

It's never too early to start saving and making wise financial decisions. Avoiding student loans from the start can save you time, money and energy that might otherwise go toward paying down loans.

The Bottom Line

Making payments on your student loans while in school can save you money, help build your credit and more. Before deciding whether or not to make student loan payments while in school, research the type of loans you have and review your options carefully. In some cases, it might make sense to start making at least small student loan payments while you're still in school while in other cases it doesn't. Do your research first to make the best decision for your unique situation, and before you know it, you'll have big financial wins and a graduation cap in hand.