How to Correctly Make an Extra Student Loan Payment

Choosing to put extra money toward your student loans each month is a wise decision. If you have extra money and would like to get rid of your student loan debt quickly, extra payments will help reduce the amount of time it takes to pay back your student loans and save you money in interest as well. However, if you've been making extra payments and notice your balance is not being affected as much, it may be time to re-evaluate your strategy to make sure your extra student loan payment is being carefully distributed.

Organize Your Debt and Decide Which Loan You'd Like to Tackle

Sit down and organize the federal or private student loans you have and determine which one needs to go first. Submitting an extra payment each month is great, but if you don't assign it somewhere to go, you might not see the results you were planning on.

If you're trying to pay down your loan balance fast and stay motivated throughout the process, you might want to direct your payment toward your smallest loan first to get rid of it then work your way up to the loans with the larger balances.

If you'd rather pay the least amount of interest over the life of your repayment term, you'll want to put extra money toward the loan with the highest interest rate or the loan that is costing you the most money each month. For example, if you have a $1,000 loan with a 6.8% interest rate and a $5,000 loan with a 4% interest rate, while the larger loan has the highest rate, the amount is smaller so it may not be costing you as much as loan for $5,000. Therefore, you might want to direct some of your extra payments to the larger loan.

Talk to Your Lender or Send an Email Request with Your Payment

To ensure that your extra payments are helping your student loan balance decrease properly, you'll need to contact your lender to confirm how payments are applied.

Depending on which type of loans you have and who your lender is, extra payments may be applied in a specific way. Most lenders will pay interest first with the extra payment, then cover any fees or additional charges and finally put the remainder of your payment toward your loans.

You may be able to read about how your lender applies extra payments on their website or you can always call them to ask. Their strategy for applying extra payments will most likely dictate when you submit an additional payment.

For example, since your lender will pay any interest that has accrued first when you submit an extra student loan payment, you may want to submit your payment right after you've submitted your monthly minimum payment since that payment should have taken care of the majority of the interest that was accumulated that month. Or you can submit bi-monthly payments if that works better with your schedule.

When you submit an extra student loan payment, make sure you email or call your lender to let them know how you'd like it applied. If you can set up an automatic withdrawal to eliminate this step – great – but don't skip it. It may seem tedious to do each month, but it will optimize your extra payments and help ensure that you get rid of your student loans faster.

Confirm that Your Payment Was Applied Correctly

After your payment has been submitted and processed, be sure to check back to make sure your payment was applied correctly. Log into your account online to check your balance and see which loan your extra payment was applied to. Don't wait for your monthly statement to come out to do this. If your lender made a mistake, the sooner you bring it to their attention, the easier it will get fixed.

Stick with Your Original Due Date

Paying extra on your student loans will most likely push your next due date forward and show a credit on your balance. If you make an extra lump sum payment and your due date is pushed forward a few months, don't stop paying on your student loans in the meantime. In fact, it's best to stick to your regular monthly payment schedule at a minimum just to stay ahead.

If you stop paying on your loans just because you have a credit, they will still accumulate interest each month and that may cancel out the positive effects of your additional payment.

The main idea is to get ahead and stay ahead with your student loan payments.

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