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Cristina
FiLifer

Cristina asked about a month ago in Education

What is the best way to pay off a consolidated student loan.?

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Mark Kantrowitz
FiLife Contributor
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Set up an auto-debit to have the lender automatically deduct the monthly payments from your bank account. Many will give you a slight discount on the interest rate (e.g., 0.25% interest rate reduction) if you do this.

If you are asking about paying off the balance in full, send a separate check for most of the balance to the lender with instructions to apply it to the principal balance of the loan. There are no prepayment penalties on education loans. It's probably a good idea to send the check for slightly less than the full amount of the loan, as opposed to getting a payoff amount from the lender, as this will get you a statement reflecting the application of the payoff check and will result in a triggering of the normal automatic loan satisfaction process when you make the last monthly payment. If you payoff the full amount the loan satisfaction process will have to be initiated manually, which sometimes leads to bureaucratic problems.

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Paul Kennard
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Good to know there are no prepayment penalties on education loans.

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