What Is a Student Loan Payoff Letter and Why Do I Need It?

A student loan payoff letter, also called a payoff statement or loan verification letter, outlines your loan’s essential details, including the balance, payoff date and estimated interest charges.

You may need to provide your payoff letter when applying for other types of financing, such as mortgages or student loan refinancing. Here’s how to get it, along with some other cases when it might be required.

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Plus: How to pay off your student loans faster

What is a student loan payoff letter?

Despite its name, a student loan payoff letter doesn’t mean you’ve paid off the debt. Rather, it shows your monthly dues, total payoff amount and other important account information.

Unlike your monthly statement, your payoff statement includes future interest costs based on your loan’s final payment date.

How do you get a payoff verification statement?

A payoff letter is available for both federal and private student loans, the main difference being where you need to go to get one.

Federal student loans

To request a payoff letter for your federal student loans — which make up the vast majority of all U.S. educational debt — borrowers must contact their student loan servicers.

The contact information for the current federal loan servicers is listed below. You can reach by phone or, in most cases, you can also request your student loan payoff letter via the servicer’s website.

Private student loans

The details for getting your private student loan verification letter or payoff letter vary by company. In almost all cases, however, you’ll get the document from your lender.

A difficulty that can arise is if your private student loans were sold to a different institution. So if you’re having trouble tracking down your lender and loan balances, you can access your credit report, which should have a complete rundown of all outstanding debt in your name.

Once you have the contact info for your lender, reach out by phone or online to request a payoff letter.

When do you need a payoff statement?

Here are three examples of when a student loan payoff letter could be required.

1. Getting a mortgage

Student debt can limit your options with home ownership. Research has found that about half (51%) of nonhomeowners said student debt held them back from buying a home.

When looking to buy a home, your debt-to-income (DTI) ratio plays a significant role. Your DTI ratio is calculated by dividing your monthly bills by your gross income — as such, a high student loan balance could cause your DTI to rise, making lenders nervous.

When you apply for a mortgage with student loans, lenders may ask for your payoff letter to calculate your DTI, ultimately deciding whether to offer you a mortgage and, if so, at what interest rate.

2. Refinancing your debt

Refinancing your student loans before buying a house could be a smart move for borrowers looking to save money and take charge of their debt. With a student loan refinance, a lender pays your current student loans and issues a new loan, ideally at a lower interest rate.

Note that while refinancing can streamline your payments and save money, it’s best to avoid refinancing federal loans — by doing so, you’ll lose certain government benefits, like access to income-driven repayment plans and student loan forgiveness programs.

To complete the refinancing process, you’ll likely need to contact your current lenders to request your student loan payoff letters. The refinance lender will then use these documents to confirm the details of your student debt.

3. Paying off your loans

If you want to pay off your loan balance in full, you should request a payoff statement from your loan servicer. As mentioned above, your monthly statement won’t necessarily include all outstanding interest and fees if you pay off your remaining debt.

Note that the amount listed on the payoff letter is only valid for a specific time. If you pay the letter’s amount after the time frame expires, you may have to make an additional payment once the final interest charges are calculated.

Make sure you confirm that the amount listed is current. It can be frustrating to think your debt is paid in full only to discover you still owe money. Or worse, you could forget about the loan and end up delinquent.

How to pay off your student loans faster

Your lender payoff letter shows your current student loan balance and how long you have to pay it off. However, if you want to save on interest, you can focus on paying off your loans well before the final deadline.

Here are some tips for paying off your debt more quickly:

• Automate your payments. Autopay can help you never miss a payment. Plus, many lenders offer an autopay discount (often 0.25%).
• Switch to biweekly payments. Your lender may let you pay your student loan bill every two weeks, which equals one extra payment per year.
• Pay extra toward your principal. Consider putting any cash windfalls toward your student loans. Contact your loan servicer to ensure the extra payment goes to the principal balance instead of a future loan payment.
• Focus on one loan at a time. Try tackling one loan at a time to maximize your motivation to pay off your debt. You’ll still need to make minimum payments on all your loans, but wiping one loan off the balance sheet can be incredibly rewarding. Read more about strategies to get out of debt.
• Refinance. Refinancing to a lower interest rate allows more of your payment to go toward the principal, helping you get out of debt quicker. But as noted above, this is a much better idea for private student loans, and not so great if you have federal ones.