Student loan prepayment
Why it makes sense to pay student loans off early
When you’re thinking about the structure of your student loan repayment, keep in mind you can make early payments no matter what plan you choose. Most students take the maximum period allowable to pay back their student loans, with some even applying for deferments when they encounter trouble making payments. But for other thrifty students, the idea of paying thousands of dollars in student loan interest on top of their original loan can be unsettling.
If you’re worried about how your interest rate will affect your private student loan repayment, you may be thinking about paying your private student loan off early. Most private student lenders don’t charge a prepayment penalty, allowing you the flexibility to start paying more whenever you want. Plus, starting payment in school or before the end of your grace period won’t trigger full repayment responsibilities. Check out some of the strategies you can employ to pay off private student loans early, thus limiting the amount of interest you'll pay over the life of the loan.
Begin federal student loan repayment during the grace period
Federal student loans include a provision that allows you a grace period during which you're not required to begin repayment for a certain period after graduation. For Federal Stafford Loans, that grace period is six months, and for Federal Perkins Loans, it's nine months. If you land a post-graduation job before that grace period kicks in, why not begin paying your loan earlier than you're required to?
Apply more money toward the principal to pay off federal student loans faster
Remember that the interest on federal student loans accrues, or builds up, on a daily basis. So paying earlier in the monthly cycle will shave a little off your outstanding principal, which in turn reduces the total accumulated interest. You can also pay a little extra each month as long as you make sure to apply it to the principal.
Use financial windfalls to prepay your student loans
At various times, you may come into money that was completely unexpected. Perhaps you receive an inheritance from a grandparent, a bonus at work or get an unexpected tax return. Rather than spending that money, why not consider using it - or at least a portion of it - toward your student loan's repayment? Some people also choose to use any pay raises they receive to pay down their student loans more quickly.
Learn more about affordable financing from Charter One
Another option to help reduce your overall student loan debt is to make interest-only payments while in school. The Charter One TruFit Student Loan offers this choice as a repayment option. To learn more about our TruFit student Loan call a student loan specialist at 1-800-721-3969, and we'll help walk you through the process.