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Why It May Not Be A Good Idea To Pay Extra Towards Your Student Loans

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Most people with student loan debt want to pay it off as soon as possible. That is why they often pay extra towards their student loan. It does make sense to pay extra in some cases. However, student loan borrowers who pay extra may actually be wasting money.

If you are on an income-based repayment plan, then you probably do not have a lot of extra money to put towards your student loans. However, even if you do have extra money, it still does not make sense to put it towards paying off your loan. The remaining balance is forgiven at the end of the term if you are on an income-based repayment plan. That is why it is better to put that money towards an emergency fund.

If you are applying for Public Service Loan Forgiveness, then you do not want to pay extra. The purpose of student loan forgiveness is to get the maximum amount forgiven. If you pay more, then you will not get as much forgiven. Additionally, the extra amount that you pay may not count towards the Public Service Loan Forgiveness.

Even if you are not on an income-based repayment plan or Public Service Loan Forgiveness, it still may not make sense to pay extra. It is better for you to put this money towards other things such as 401K or an emergency fund. You can also put this money towards paying off other debts.

In some cases, it may make sense to pay extra. If you have no debt and an emergency fund, then you may benefit by paying extra. It may also make sense to make higher payments on your loans if you are on the standard 10-year repayment plan. Making the minimum payments will not benefit you if you are on a standard repayment plan.

If you have a private loan, then you do not have a lot of refinancing options. That is why you can benefit from paying more on your loan.

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