News of people in their 20s or 30s who side-hustle to save so that they could pay their staggering student loans and are now living debt-free always have a spot at the headline. However, there is now a new study that claims that paying off your expensive student debt in a rush lacks evidence that it has a lot of benefits.
The paper which was entitled Understanding Student Debt: Implications for Federal Policy and Future Research says that borrowers with a debt of $15,000 of less are at the advantage of paying their loans quicker than the allotted ten years for federal student loan borrowers. But for those that have a debt of $24,000 or higher, little evidence exist of similar benefit.
Manuel González Canché who is a professor at the University of Georgia’s Institute for Higher Education and the author of the study says that they cannot say for certain that the borrowers should be paying for their debts as soon as possible. He adds that those with a higher debt may be better off sticking to the 10 year repayment plan. Trying to repay the debt as soon as possible may prevent them from starting a family, getting married or pursuing a graduate course.
Similarly, personal finance experts recommend taking advantage of the full repayment plan as long the loan in question comes with a relatively low interest. They say that this will allow the borrowers to first take care of the debts with higher interest rates like credit card debts. Paying little by little will also give them the chance to save some money that they could use to fund a home, as an emergency fund, or invest elsewhere. Of course, this is not recommended for those with private student loans that have variable interest rates of less generous terms.