Are There Advantages to Making Student Loan Payments While in School?

Advantages of Making Student Loan Payments in School

BIG Ideas:

  • You can repay your student loan while in school or wait until after graduation.
  •  Interest on student loans usually accrues when funds are sent to the school, so paying interest in school can help lower the amount you’ll owe after graduation.
  • To afford loan payments in school, you’ll need to create a budget and have a source of income like a side hustle or part-time job.

Along your college journey, you’ve had to make many choices – from the school to attend to your field of study to how to pay for school.

If you choose student loans to help you afford college, you have another choice to make: when to start repaying your loan.

You could wait until after graduation when you’re given a six-month grace period to start repaying your loans. Or you could do full-on adulting and make payments while in school.

What’s the Right Choice for You?

Well, for some students, it’s a no-brainer. It’s hard to make loan payments while in school and living on a limited budget. Plus, with the repayment grace period after graduation offered by many lenders, you have extra time to find a job that can make it easier to meet your payments.

There are, however, some real advantages of making student loan payments in school. It can help you:

  • Save money in the long term. If you begin making payments sooner, you’ll lower the interest you’ll pay over the life of your loan.
  • Avoid interest capitalization. Interest on most student loans is charged when funds are sent to the school. So, if you don’t have a subsidized federal student loan where the federal government pays interest while you’re in school, interest on your loan could be capitalized, which means it will be added to the principal amount you borrow. That means you’ll end up with a bigger loan balance and paying more interest.
  • Reduce the amount you owe. When you make payments in school, it will reduce the principal and help you pay off your loans earlier in your post-college life. That’s a huge plus right there!
  • Make repayment easier. If you make payments in school, meeting monthly payments after graduation will seem easier when you have a full-time job.
  • Build good financial habits. To make student loan payments in college, you’ll need to create a budget, which is critical to successful financial management.
  • Qualify for loan forgiveness sooner. If you have a federal student loan, you could qualify for Public Service Loan Forgiveness, which requires you to make consecutive on-time payments. The sooner you make payments, the sooner you’ll meet this requirement.
  • Improve your credit score. Making on-time payments in school will also help boost your credit score, helping you qualify for other loans after you graduate.
  • Give yourself room for future goals. Lowering your principal by making payments in school will help you qualify for future loans and give you a little more flexibility in finding employment.
  • Master adulting. Paying your debt in school is a huge step toward financial independence and responsibility.

How to Pay Your Loans in School

Thinking you might go the pay-in-school route. You’ll need a plan. Start by taking inventory of all your loans (federal and private loans) to determine how much you owe and when interest starts accruing. Once you know what you owe, you can decide to pay the full amount due (principal and interest), the interest on the loan in school, or some other amount.

To help ensure you meet your student loan bill each month, create a budget. You may also want to get a part-time job or start a side hustle to bring in some extra income.

Make Sure Your Education is a Priority

Whether you decide to defer payments until graduation or to make payments in school, you shouldn’t sacrifice your education or add stress to your life that will keep you from making the most of your college experience.

Brazos is Here to Help Make College Affordable

For more than 40 years, Brazos Higher Education has been helping make education more affordable for students. As a Texas non-profit, we offer great rates and no fees on private student loans to help fill the gap where federal loans leave off. Contact us to learn more.