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Can You Prepay Student Loans?

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Yes, you can prepay student loans. In fact, you can prepay all types of loans, even if the amount is not substantial. You can prepay a loan in full or only part of it. The full prepayment usually reduces the interest rate. The part prepayment reduces the principal amount unpaid. It reduces the EMIs and (again) the total interest that you pay.

Ideally, both types of prepayment are beneficial. Still, before making a decision, you should definitely talk to the specialist.

There are lenders, who charge the penalties in the case of the loan prepayment. In fact, they have no right to do it according to the Higher Education Opportunity Act of 2008. According to the Act, every borrower can prepay his loans without paying penalties.

Therefore, student loans no prepay off penalties exist. Before signing the agreement, you should check out Truth in Lending disclosures and the contract. These documents contain information about any penalties for the early payment. If the loan contains the penalty, you should negotiate with your lender to remove it or change the loan. Defend your rights and don’t let lenders cheat on you.

If the lender insists on the prepayment penalties, you can send a complaint to the to the Consumer Financial Protection Bureau (CFPB).

If you can’t figure out whether paying off the student debt earlier is beneficial for you, you should use a help of the prepayment calculator before applying to the lender.