Options for Student Loan Repayment
To prepay or not to prepay
Student loans generally carry a 10-year repayment cycle, but some lenders offer to extend repayment periods, sometimes up to 25 years, depending on the loan balance.
But what if you can afford to pay off your student loans more quickly? Consider prepayment if your lender allows it. You could save thousands of dollars in interest payments—money you can use for other things.
How much could you save?
Here’s an example of the effect prepayment could have on the total amount you pay over the life of a loan.
Let's say you have an outstanding balance of $20,000 on a 10-year loan, with a 6% interest rate. What would paying an extra $50 a month in principal (in addition to your monthly payment of $222.04) mean? It would cut more than two years off your repayment term and reduce your cumulative interest by more than 27%, thus saving you more than $1,800.
If you decide to prepay your loan or a portion of your loan be sure to tell your lender that you want the additional amount applied to the principal balance of the loan (not the interest).