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Coasting to Student Debt Elimination

Aggressive repayment is often treated as the responsible option, but coasting and making minimum student loan payments has serious advantages

Written By: Michael P. Lux, Esq.

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Student debt often represents a financial emergency, where quick elimination is the priority. While there are many circumstances where student loans are a major risk, this isn’t always the case. Sometimes eliminating student debt is one of many financial goals, and coasting to a zero balance makes the most sense.

Taking a less aggressive approach to student debt may be the best choice for your mental health and financial health.

What is the Difference Between Coasting and Aggressive Repayment?

Most borrowers use one of two main repayment strategies:

Aggressive Repayment – The goal behind aggressive repayment is to minimize interest spending. The longer student debt lingers, the more interest it generates. If you pay off your loans as quickly as possible, you minimize interest spending.

Coasting – If you are paying the minimum payment on each student loan, you are coasting to the finish line. This approach is often frowned upon, but there are times where it is the best strategy.

On the surface, coasting looks and sounds like the lazy approach, while aggressive repayment sounds more responsible. However, these first impressions can be misleading.

The Loans that Should Get Paid Off ASAP

Before discussing the advantages of coasting, it is worth mentioning that there are times where coasting is an objectively bad idea. If any of the following apply to you, aggressive repayment is probably the ideal repayment strategy.

  • High-interest student loans – Not all student loans are created equal. A loan with a 3% interest rate is a great candidate for coasting, while a loan with an 11% interest should get paid off as quickly as possible.
  • Cosigned student loans – If someone was generous enough to cosign one of your student loans, do them a favor and pay it off whenever possible. Cosigned loans make it harder to get credit in the future and are a source of stress for many cosigners. Knocking out cosigned debt is a great way to say thanks. If the cosigned debt is otherwise an excellent option for coasting, look into getting a cosigner release.
  • Borrowers with poor impulse control – Even if the loans are suitable for a relaxed repayment strategy, the borrower might not be. Coasting is a mistake if it leads to irresponsible spending or other poor financial habits.

The Benefits of Coasting to Student Debt Elimination

Costing advantages come from a simple fact: if you make minimum student loan payments, you have more cash each month for other goals.

Saving extra money for retirement is an excellent reason to coast. Suppose your employer offers a generous match, or your investments earn far more than your student loan interest rate. In that case, you will come out ahead by directing your resources towards these savings opportunities.

Borrowers may also choose to coast to save a downpayment for a house. The accounting math gets tricky when comparing these options, but for many borrowers, the math is secondary. There are many advantages to homeownership, and only some of them are financial. If buying a home is an important goal, coasting on your student loans may help make that happen. However, there are also times where student debt gets in the way of buying a home. Before selecting a strategy, borrowers should understand the many ways student debt impacts getting a mortgage.

Coasting to debt elimination may have mental health benefits as well. If student loans are a constant source of stress and pinching every penny to maximize payments has become all-consuming, changing strategies could make sense. Here again, every borrower is different, but if your student loan repayment strategy is causing sleepless nights, it is time to explore another alternative.

Finding the Right Approach: If you coast on your student loans, you will spend more money on interest. However, you will have extra money for something else. If that something else justifies spending extra money on student loan interest, coasting makes sense.

Shortcuts to Start Coasting Sooner

If shifting your financial goals sounds appealing, there are a couple of shortcuts available that make coasting more feasible.

For borrowers with federal student loans, chasing after forgiveness is already a form of coasting. If you are trying to maximize the amount of debt forgiven, it means minimizing payments and freeing up cash each month for other goals. Public Service Loan Forgiveness is the most frequently discussed forgiveness option, but there are many different paths to student loan forgiveness.

Private loans don’t have forgiveness options, but refinancing can convert high-interest student debt that needs to be paid off right away into a low-interest student loan better suited for coasting. The hurdle for borrowers wanting to refinance is that it requires a job and a decent credit score. However, for those that qualify, there are excellent options suited for coasting.

The best choice might be a 20-year fixed-rate loan. While stretching out payments for two decades might sound excessively long, it also means minimal monthly payments. With 20-year loan interest rates currently very low, it is a viable strategy.

Right now, the following lenders are offering the best rates on 20-year fixed-rate loans:

RankLenderLowest RateSherpa Review
1Splash Financial6.08%*Splash Financial Review
2ELFI6.64%ELFI Review
About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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