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Should I Make Student Loan Payments While I’m Still in School?

Mel Jones
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Quick Answer

Making payments on your student loans while you're still in school can be a great way to save money, build credit and get ahead of your debt. But affording payments while in school can be challenging, especially alongside covering living expenses. Start by researching your loan type and creating a budget.

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Why There Isn’t a Single, Most Important Credit Score

There are several reasons why there isn’t one credit score on which consumers should place their sole focus.

No Score Is Universal

No single credit score can be considered most important because it's practically impossible to know exactly which score any given lender will see when they process your credit application. Lenders have considerable choice among commercial credit scoring systems, or scoring models, including at least 16 different versions of the FICO Score and four versions of the rival VantageScore®.

The Same Number Can Mean Different Things

The most common scoring models, VantageScore 3.0 and 4.0 and the general-use versions of the FICO Score, assign three-digit scores on a range of 300 to 850, with higher scores indicating greater creditworthiness. Even when they share the same scale, however, it’s important to know that a specific score can mean something different depending on the scoring model, and even which version of that model, is used to generate it.

A “Good” Score Depends on the Lender

Lenders typically select one or more scoring models after testing its effectiveness with their loan offerings and target customers. While one lender might fine-tune its scoring methods to identify the most creditworthy of borrowers, another might focus on riskier borrowers, and use scoring to better understand them. Some lenders even feed scores from the FICO Score or VantageScore models into their own custom-built scoring models to better understand potential customers.

Scores Can Vary by Data Source

Commercial scoring models generate scores using credit report data from one of the national credit bureaus (Experian, TransUnion or Equifax). Because your credit reports at all three bureaus are rarely identical, it’s virtually impossible to predict what score a lender will receive or use when deciding if you qualify for a loan, or when deciding what interest rate and fees to charge you. Recognizing this, many lenders use scores generated from two or even all three bureaus when performing credit checks.

Most Important Credit Scores by Role

The variety of credit score models and versions available today can make it tough to predict which score any lender will use, but different models and versions are more popular than others for specific lending applications. Here’s a list of the scores you’re likeliest to encounter in various settings.

Most Important Credit Score for Monitoring Your Credit

FICO Score 8. The FICO Score 8 is currently the most widely used version of the FICO Score. You can check it for free from Experian and other sources, so it’s easy to track. While there’s no guarantee the score you see when you check yourself will be identical to the one a given lender will see, FICO Score 8 will give you a good idea of how lenders will view your credit profile.

Most Important Credit Score for a Credit Card Application

FICO Bankcard Scores 8 and 9. The FICO Bankcard Score, which debuted in 1993, is fine-tuned for determining the creditworthiness of credit card borrowers. It uses a scale range of 250 to 900, and versions 8 and 9 of this score are widely used by credit card issuers. You can get your Bankcard Score through the three national credit bureaus and possibly your credit card company.

Most Important Credit Score for a Mortgage

FICO Scores 2, 4 and 5. Known as “classic” FICO Scores, these older versions of the generic FICO Score are widely used by mortgage lenders because they are included in criteria that make conforming mortgages eligible for purchase by the government-backed mortgage-funding corporations Fannie Mae and Freddie Mac. They use the traditional 300 to 850 score range.

  • FICO Score 2 is the “classic” FICO Score version available from Experian.
  • FICO Score 4 is the version of the classic FICO Score offered by TransUnion.
  • FICO Score 5 is the Equifax version of the “classic” FICO Score.

Most Important Credit Score for an Auto Loan

FICO Auto Score 8 and FICO Auto Score 9. Tailored for use by providers of auto financing, the FICO Auto Score uses a score range of 250 to 900. Versions 8 and 9 of the model are widely used by auto lenders, and available from all three national credit bureaus.

How to Improve Your Credit Score

While uncertainty about which score will apply to a credit application may seem nerve-wracking, the good news is that all scoring models tend to respond favorably to the same set of good credit management habits, including:

  • Pay your bills on time, especially all debt payments. Payment history accounts for about 35% of your FICO Score, making it the most influential factor in your scores.
  • Keep credit card balances low. Lenders see high credit card balances as an indicator of risk, so scoring models will lower scores if your total card balance exceeds about 30% of your total borrowing limit. That said, keeping balances under 10% of limits can help you achieve top scores. Credit utilization accounts for about 30% of your FICO Score.
  • Bide your time. Credit scoring models reward borrowers with long track records of responsible credit management. In other words, if you keep up with your payments and mind your balances, your credit scores will tend to improve over time. The ages of your open credit accounts, which serve as a measure of experience, are responsible for about 15% of your FICO Score.
  • Maintain a healthy credit blend. Scoring models tend to boost the scores of who can handle multiple types of debt at the same time. A mix of installment loans with fixed payments (student loans, mortgages, auto loans and the like) and revolving credit (accounts like credit cards that allow charging against a set borrowing limit) will tend to increase your score. Credit mix is responsible for about 10% of your FICO Score.
  • Seek new credit only as needed. The number of recently opened credit accounts in your credit report, and the number of hard inquiries reported by lenders when you apply for credit, account for 10% of your FICO Score. Lenders see too many new accounts or recent inquiries as indicators of increased risk, so they can hurt your credit scores.

The Bottom Line

While no single credit score can claim the title of “most important,” credit scores in general can be very important to your financial future. Taking steps to improve your credit, and marking your progress by tracking your credit score for free are great ways to prepare for home buying, seeking a car loan or otherwise using credit in pursuit of your dreams.

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Making payments on your student loans while you're still in school can be a great way to save money, build credit and get ahead of your debt. However, your strategy to tackle your loans might differ depending on whether you borrowed from a private lender or the federal government.

Some private student loans require you to make payments while still in school. In contrast, no federal loan payments are due until after you graduate, no matter what type of federal loan you have.

It might be daunting to consider paying back student loans while you're still taking classes. If that's the case for you, setting reasonable goals can help you make progress without being overwhelmed. For example, you might focus on just paying the loan interest before the principal is due. Read on to discover the benefits of paying early and strategies to help you afford those payments and avoid debt.

Benefits of Paying Down Your Student Loan While in School

Paying down student loans early has a lot of advantages. Here are a few reasons it's a good idea to start paying your loans while still in school:

  • It saves you money. Paying down your loans while in school means less interest will accrue, saving you thousands of dollars over time.
  • You'll save on interest. With certain loans, the unpaid interest from the grace period you're granted while in school is added to your principal balance ("capitalized") when you graduate and begin repayment. If you pay at least the accrued interest before your loan comes due, you'll avoid paying capitalized interest. This is one reason it's essential to know what type of loan you have: The government pays the interest on a direct subsidized loan while you're in school, but if you have unsubsidized loans, that's not the case.
  • You'll be establishing good financial habits early. Paying student loans while in school requires you to manage your money more closely than if you weren't paying on loans. You'll need to make a budget, track spending and learn how to use a bank account at the very least. Taking control of your finances as early as possible can help you in the long run, and the sooner you start, the better off you'll be.

How to Pay Your Student Loan While in School

If you have federal loans, your loan payments won't come due until six months after graduation or leaving school, so you have to be proactive if you want to pay your loans while you're in school. Here's what you need to know and do before making payments:

  1. Devise a strategy. First, you'll want to choose the right strategy to tackle your loans. For federal loans, you can use a simulator to sort through different payment scenarios to see which will save you the most money.
  2. Connect with your lender or loan servicer. If you have federal loans, you'll need to make sure you have an account set up on the official Student Aid website. If you have a private lender, you'll need to create an account through their website if you don't already have one. A loan servicer is a company the government assigns to handle your loan account's billing and other services. You can find this information in your dashboard.
  3. Link your payment method. To make payments, you'll need to have a bank account to pay electronically or by phone. Some plans even give you a discount if you schedule an automatic monthly electronic debit of your loan payment from your checking or savings account.

Once you're all set up, make a budget and start tracking your spending so you can watch your progress toward your debt repayment goals.

Ways to Avoid Taking Out More in Student Loans

It can be challenging to find the money to cover both your tuition and living expenses, let alone commit to monthly loan payments. If you're worried about your growing student loan balance, there might be ways you can reduce the amount you'll need to borrow. Consider the following strategies:

  • Make a budget and live below your means.
  • Find a part-time job, even if it's just during summer and winter breaks.
  • Look for grants and scholarships.
  • Take summer courses at a local community college and transfer credits.
  • Try to graduate early.
  • Ask for financial gifts for the holidays and other life milestones in place of physical gifts.
  • Consider less expensive colleges or universities.

It's never too early to start saving and making wise financial decisions. Avoiding student loans from the start can save you time, money and energy that might otherwise go toward paying down loans.

The Bottom Line

Making payments on your student loans while in school can save you money, help build your credit and more. Before deciding whether or not to make student loan payments while in school, research the type of loans you have and review your options carefully. In some cases, it might make sense to start making at least small student loan payments while you're still in school while in other cases it doesn't. Do your research first to make the best decision for your unique situation, and before you know it, you'll have big financial wins and a graduation cap in hand.

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