Should I pay off my student loans early?

"I really want to get rid of my student loans. Should I use my savings to pay them off now?" I wish someone had told me before I went to college that student loans would be an emotional drain, not just a financial one. That monthly payment can feel like it's going into a black hole, perhaps because what it's gotten us is so abstract: We can't host a dinner party at our education or take our friends for a ride in our transferable skills. Scientists have even researched the inner turmoil loans can create. A 2015 study published in the journal Social Science & Medicine found that the more money 25- to 31-year-olds borrowed to pay for school, the poorer psychological health they reported. It's easy to wipe out your savings account or your 401(k) to eliminate your loans if you have the savings to do it. But there are other important and, yes, boring things you should do with your money, especially if you're earning an average income and have goals beyond kicking your loans to the curb. So instead of throwing all your cash at your student loans, think of putting your money into buckets, says Betsy Mayotte, a student loan expert and director of consumer outreach and compliance at American Student Assistance, a nonprofit that provides student loan education. "Everybody should be contributing something to their emergency fund, something to retirement, and something to their debt, every single paycheck," she says. Here's how to do it. SOLIDIFY YOUR SAVINGS Before tackling your loans head-on, Mayotte suggests setting up an emergency fund. Without emergency savings, you might put unforeseen expenses on a credit card - which likely carries a higher interest rate than your student loans - and not pay it off right away. Start small and set aside $25 or $50 a month until you've got at least $500. That pot of money will be there for you if, say, your car breaks down, and will keep you from going further into debt. Plus, more than half of student loan borrowers say their debt keeps them from buying a house or starting a business, according to a December 2015 survey by American Student Assistance. You can't do either without some money socked away, which would be hard to do if you follow the advice in articles with headlines like "How One Grad Paid Off $80,000 in Student Loans in One Year." Next, start filling your retirement bucket. Contribute to your 401(k) at work, especially if your employer matches your contributions with its own money. Again, just $50 a month is better than nothing, but contribute as much as your employer match if it's available to you. Consider a Roth IRA if you don't have a 401(k) option. TAKE ADVANTAGE OF STUDENT LOAN FORGIVENESS Before you focus on aggressively paying down your debt, check to see if you're eligible for student loan forgiveness. These programs can lower the total balance you need to repay, which should factor into how much money you put toward your loans. It's crucial to talk to your school or student loan servicer and to dig into your loan information, so you don't miss out. "Part of it is, people don't want to look at it, so they don't know the options that are available," says Mark Struthers, a financial planner in Chanhassen, Minnesota. Public Service Loan Forgiveness, for instance, will forgive your remaining federal student loan balance after you make 120 on-time monthly payments. It's best to repay your loans on an income-driven repayment plan in the meantime. Those plans cut your monthly bill to 10 percent to 20 percent of your income, and you can send any extra money to savings instead of your loans. Teachers and borrowers of Perkins loans, which are for students with high financial need, have forgiveness options, too. AUTOMATE YOUR EXTRA PAYMENTS If you've got your emergency fund, you're saving for retirement and you're not counting on a forgiveness bonanza, you're ready to crush that student loan balance with what's left. Make additional payments online and target your highest-interest loans first to save money on interest. Or ask your student loan servicer to increase the amount that's automatically debited from your bank account every month. No matter how you do it, paying extra toward your loans when you're ready will get you a little closer to all the other ways you want to spend your money. If you're like me, you've had a list running for years. Cabin in Montana, here I come. ----- This column was provided to The Associated Press by the personal finance website NerdWallet. Email staff writer Brianna McGurran: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe. Published: Wed, Aug 10, 2016