Student Loan Payments

Schedule an Extra Student Loan Payment on the Day the Interest Is Lowest

Understanding your loan’s interest cycle is one of the keys to ridding yourself of student loan debt. And an extra payment or two every now could help you lower your balance significantly—assuming your timing is right.

Because student loan interest is typically compounded daily, your balance grows throughout the month. But if you make an extra payment right after you pay off last month’s balance, more of your money will go toward paying down the principal balance than just your interest. Why is that? Because it hasn’t had time to accrue yet.

This will lower your balance overall, and your interest payments going forward. When’s the best time to do that? Well, the day after your last payment was due.

That is, quite obviously, not possible for most people to do all of the time, especially if you’re struggling to make your minimum payment as it is. However, if you get a lump sum, say, with your tax refund, are able to save up an extra payment over the course of a few months or recently got a raise, you can make some real progress toward paying down your principal balance.

You will want to check with your lender to ensure that extra payments are applied properly. Then, if you have the means, schedule an extra auto-payment for the day after your bill is due each month, even if it’s just for a few extra dollars. You can use this calculator to see how much an extra payment, even something as little as $20 or $50, can help reduce the amount of interest you’ll pay overall.

One key thing to check: that you aren’t just advancing next month’s payment. “Before you hit the ‘pay now’ button on your extra payment, you have to establish that it should be applied to your loan right away, rather than being treated as a payment for next month that you’re sending in early,” notes Forbes.

You want the extra to go toward the principal balance; that’s the whole point. You should be able to specify this through your lender’s online payment portal (for example, on Nelnet you’d select “Do Not Advance the Due Date”) but if not, call your lender and tell them how to apply it (and document the exchange and who you talked to).

Once you’ve made your extra payment, check your next statement to make sure it was applied correctly. That’s one less thing to worry about.

Mr. Edward Bishop III: As I readers follow each blog article look closely because they are designed to give you information on money, health, and your welfare. Our goal is to build a successful blogging campaign. We are using social media and our individual communication methods for that purpose also. Follow us on Ted-Ed TV Channel where we discuss issues of the week for our viewing audience, your comments and chat question are very much appreciated. Enjoy your articles!!

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