Pay Off Student Loans Before Traveling?

This article helps you decide whether to pay off your student loans before traveling or to travel while still carrying that debt. You enter your loan balance, interest rate, monthly payment, and trip cost to see the long-term cost of delaying repayment. The calculator below shows how much extra interest you would accrue during your trip, so you can weigh that against the value of the experience.

Formula

The calculator estimates the extra interest you pay by pausing your loan payments during your trip. It uses the formula:

Extra Interest = (Loan Balance × Monthly Interest Rate × Trip Months) − (Interest You Would Have Paid with Normal Payments)

Where:

• Loan Balance – your current principal in dollars
• Monthly Interest Rate – annual rate divided by 12 (e.g., 6.8% / 12 = 0.5667%)
• Trip Months – how long you pause payments
• Normal Payment Interest – the interest that would accrue if you kept paying, approximated by the proportion of your payment that goes to interest

The second term subtracts the interest you would have paid during those months if you kept making payments. This gives a rough measure of the extra cost of pausing.

Worked Example

Using the default values: $30,000 balance, 6.8% annual rate, $350 monthly payment, $3,000 trip cost, 3-month trip.

1. Monthly interest rate = 6.8% / 12 = 0.5667% = 0.005667
2. Interest during trip without payments = $30,000 × 0.005667 × 3 = $510.03
3. Interest you would have paid with normal payments: $350 payment, first month interest = $30,000 × 0.005667 = $170.01, principal reduction = $350 − $170.01 = $179.99. Second month interest = ($30,000 − $179.99) × 0.005667 = $169.00, principal reduction = $181.00. Third month interest = ($30,000 − $179.99 − $181.00) × 0.005667 = $167.99. Total interest paid = $170.01 + $169.00 + $167.99 = $507.00.
4. Extra interest = $510.03 − $507.00 = $3.03
5. Total cost of trip = $3,000 + $3.03 = $3,003.03

The calculator rounds to $3.03 extra interest, so the trip effectively costs $3,003.03. The difference is small because the trip is short and the payment is relatively high.

When to Pay Off Loans First

Paying off loans before traveling makes sense if:

• Your loan interest rate is high (above 6-7%) and you have a large balance
• You have no emergency fund – traveling with no savings is risky
• You are close to paying off the loan (e.g., less than a year left)
• Your employer offers loan repayment assistance that you would lose by taking time off
• You plan to borrow more for the trip (credit card debt at 20%+ interest)

In these cases, the interest savings from paying off the loan often exceed the cost of delaying travel.

When Traveling First Makes Sense

Traveling before paying off loans can be rational if:

• Your loan interest rate is low (under 4%) – the cost of carrying debt is small
• You have a stable income and can resume payments after returning
• The trip is a once-in-a-lifetime opportunity (e.g., study abroad, family emergency)
• You have an emergency fund that covers 3-6 months of expenses
• Your loan has a grace period or income-driven repayment that keeps payments low

For example, a $10,000 loan at 3% interest costs about $25 per month in interest. A $2,000 trip that delays payment for 2 months adds only $50 in interest – a small price for the experience.

How to Decide: A Step-by-Step Approach

1. Calculate your monthly interest: balance × (rate/100/12). This is what you pay to carry the debt.
2. Estimate the extra interest during your trip using the calculator above.
3. Add that to the trip cost – this is the true cost of traveling now.
4. Compare that to the cost of waiting: if you delay the trip by a year, how much more will you pay in interest? That is the cost of waiting.
5. Consider non-financial factors: health, family, career opportunities, and personal growth.

Common Mistakes and Misconceptions

Mistake 1: Ignoring interest accrual during deferment. Many people think pausing payments means no interest, but for most federal and private loans, interest continues to accrue. Only subsidized federal loans don’t accrue interest during deferment.

Mistake 2: Comparing trip cost to total loan balance. A $3,000 trip doesn’t mean you’re “wasting” money that could go to a $30,000 loan. The real comparison is the interest you’ll pay on the $3,000 if you don’t pay it toward the loan.

Mistake 3: Forgetting to budget for loan payments after the trip. If you return with no savings and a higher credit card balance, you may default on your loans, which hurts your credit and can lead to wage garnishment.

Misconception: “I’ll make more money later, so I can pay off the loan then.” This may be true, but interest accrues in the meantime. A $1,000 balance at 6% grows to $1,061 in one year even if you make no payments.

Alternatives to Paying Off or Traveling

• Income-driven repayment (IDR) plans – lower monthly payments based on income, freeing up cash for travel
• Refinancing – if you have good credit, refinancing to a lower rate reduces interest cost
• Travel hacking – using credit card rewards to reduce trip costs, but only if you pay off the balance monthly
• Work abroad – teaching English, freelancing, or working holiday visas can fund travel while making payments
• Shorten the trip – a 2-week trip instead of 3 months reduces the interest cost significantly

Frequently Asked Questions

Does pausing student loan payments affect my credit score?

Pausing payments through deferment or forbearance does not directly hurt your credit score, but it may affect your credit utilization if you also use credit cards for travel. The key is to make all payments on time after you return. Defaulting is what hurts your credit.

What is the difference between deferment and forbearance?

Deferment is usually for specific situations like unemployment or military service, and for subsidized loans, interest does not accrue. Forbearance is for financial hardship and always accrues interest on all loan types. Both require application and approval from your loan servicer.

Should I use my savings to pay off loans before traveling?

Only if you still have an emergency fund left. Paying off a 6% loan is a guaranteed return, but if you then need to use a credit card for an emergency at 20% interest, you are worse off. Keep 3-6 months of expenses in savings.

How much interest will I pay if I delay payments for a year?

Use the formula: balance × (rate/100) × 1 year. For $20,000 at 5%, that’s $1,000 in interest. If you make payments, the interest is lower because the principal decreases. The calculator above can be adapted by setting trip months to 12.

Is it better to pay off high-interest credit cards before student loans?

Yes, because credit card interest (often 20%+) is much higher than student loan interest (typically 4-7%). Pay off the highest-rate debt first, then consider student loans.

Can I travel while on an income-driven repayment plan?

Yes, but your payments are based on your income, not your expenses. If you take unpaid time off, your income may drop, and you can recertify to lower your payment. However, if you have savings that count as income, your payment may not change.

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in balance | Loan balance | $ | 30000 | 0
in rate | Annual interest rate | % | 6.8 | 0
in monthly | Current monthly payment | $ | 350 | 0
in trip_cost | Trip cost | $ | 3000 | 0
in trip_months | Trip duration | months | 3 | 0
out extra_interest | Extra interest during trip | $ | (balance * (rate/100/12) * trip_months) - (balance * (rate/100/12) * trip_months * (monthly / (balance * (rate/100/12) + monthly))) | 2
out total_cost | Total cost of trip (trip + extra interest) | $ | trip_cost + extra_interest | 2