It’s no secret that many Americans are struggling under the weight of their student loan debt. Twenty-one percent of student loan borrowers with less than $15,000 in outstanding debt were behind on their payments in 2021, while 17% with $15,000 or more were behind, according to the Federal Reserve.
Student loans also come with a lot of paperwork, and one important document you may need to request is a student loan payoff letter. Learn more about what a student loan payoff letter is, when you might need one, why it’s important, as well as some ways you can pay off your student loan debt faster.
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A student loan payoff letter — also known as a "payoff verification statement" or a "payoff statement" — is a statement from your student loan lender that outlines your payoff amount, monthly bill obligation and other account information. A student loan payoff letter is only valid for a specific amount of time after the lender issues it. You can get a student loan payoff letter whether you have private student loans or federal loans, or a combination of both.
A student loan payoff letter doesn’t prove that you’ve paid a loan in full — instead, it shows how much you still need to pay in order to completely pay off your student loan debt. This amount differs from your current balance, as your balance doesn’t include the interest you owe. A student loan payoff letter can also include any fees you haven’t yet paid.
Keep in mind that a payoff statement isn’t the same as your monthly statement, and if you need one you’ll have to request it from your loan servicer.
Commonly, student loan payoff letters include:
Now that you know what a student loan payoff letter is, here’s a closer look at when you may need one.
When you refinance a student loan, you’ll need to provide your student loan payoff letter to your new lender.
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When you’re planning to pay off your student loans, a student loan payoff letter can help you create a repayment plan and budget, as it gives a clearer idea of how much you truly owe. Because interest accrues daily, you won’t get the full picture by reviewing your current balance, which doesn’t include all the accrued interest or fees through the payoff date.
When you’re applying for a mortgage, the less debt you have, the better. Your student loan debt affects your debt-to-income ratio, which lenders look at when considering you for a mortgage. Your DTI can also affect what mortgage rate and terms you’re offered. Use your student loan payoff letter to create a debt repayment plan so you have less debt when you apply for a mortgage.
If you need a student loan payoff letter, the process of obtaining one is pretty straightforward.
To get a student loan payoff letter, you need to contact your student loan servicer. If you have multiple student loan servicers, you’ll need to identify each and contact them individually to request a letter from each loan servicer.
Once you have your student loan payoff letters in hand and you know exactly how much you owe on your student loans, you can sit down and create a plan for paying off your student loans faster.
If you’re ready to refinance, Credible lets you easily compare student loan refinance rates in one place.
