First, whether to pay down student loans early is a borrower-by-borrower decision. Some people might think they can achieve a higher return in stock market investment than the student loan's interest rates, and some people just want to be debt free.
Before you decide to put extra cash towards your student loans, make sure you have enough cash saved in an emergency fund to cover six months’ living expenses. It won’t matter that you’ve paid off your student loans if you lose your job and have no savings to pay for rent and food.
If you do decide to move forward making extra student loan payments, the first thing you’ll want to do is to ensure you’re making bigger payments on the loans with the highest interest rates first.
You’ll also want to prioritize paying off loans with co-signers (if you have them). When a parent or a spouse cosigns your student loan it affects his or her credit, too. And it’s a morbid thought, but if you become disabled or die, the co-signer is on the hook for repaying the loan in full.
Repaying your student loans can get complicated, and your plan will likely evolve as your situation changes. Take medical students, for example, who have large student loans and several years of a residency before they begin earning enough to make full loan payments. A smart medical student will take advantage of many of the above options – deferment and interest-only payments while in residency, for example, and consolidation or refinancing once they start earning more.
Even big student loans don’t have to sentence you to eternal poverty if work with your lenders to reduce your payments while you’re earning less and then increase payments when you can afford it.