What happens if I decide to repay my Federal Direct Student Loan early?
Yeah, you’ll save yourself the interest on it. Fed direct loans also don’t have a prepayment penalty, I don’t think, though you should look into that. Consider, however, what your interest rate is…..I have two sets of loans, one with a set rate of 6.65% and one with a rate of 2.85%. I’d pay off the 6.65% if i had the funds, but even if I won the lottery tomorrow I wouldn’t pay off the ones at 2.85% because you can make a lot more by investing it. A lot of online banks will give you a 4-5% return on your deposits, so it makes more sense to take the money you’d use to pay off the loan and just deposit it (or even buy low-risk bonds, etc., if they have a higher return than your interest rate) because that will be more beneficial for you in the long run.
