Student loan debt is not going anywhere anytime soon, unless of course you pay it off. Now, you may be pondering whether to pay off student loans fast or ride it out for the entire length of the term. IF you do decide to ride it out, you will pay quite a bit in interest over the course of the loan and we are sure that you can find some extra ways to spend all of that money.
It is imperative that you never skip a monthly payment on your student loans as this can have quite a few negative consequences. If you do have some extra money on hand and you want to pay down your student loans quickly, you should put some extra money towards them.
You may be thinking, “why would I want to take MY extra cash and put it towards my loans, it won’t help anyways.” It actually will help and it will benefit you greatly. Let’s take a look at just how it can help now.
1. Saves You Thousands in Interest
If you have never sat down and figured out how much money you pay or will pay in interest over the term of your student loan repayment, you may be in for a big surprise. It is no joke that student loans are expensive, but by the time you finally reach the pay off, you have spent double the amount that your original student loan was worth.
With our student loan calculators, let’s do some calculations to help you see just how much you can save by sending in extra money when you can.
You have $35,000 in student loan debt at a 6.8 percent interest rate for a term of 20 years. Your monthly payment is $267 and your loan total at the end of the pay off period is totaled at $64,121 for a total interest payment of $29,121. Wow!
If you paid just an extra $10 per month towards your loan for a total monthly payment of $277, you would only spend $26,670 in interest saving you over $2,400 just with $10 a month.
Now, if you put an extra $50 toward your payment for a monthly payment of $317 per month, you would only spend $20,102 in interest for a total savings of $9,019.
Okay, last one. If you send in an extra $100 per month, your monthly payment would be $367 and your total interest paid would be $15,481 for a total savings of $13,640.
As you can see, the more you put towards your student loan debt NOW, the more you reap in the long run.
2. Pay Off Your Debt Sooner
In addition to saving thousands, you will pay off your debt a lot sooner when you apply more money to your loan. Therefore, if you have a student loan term length of 20 years, you could possibly pay it off in just 10 years or less, depending on how much money you want to put towards it.
Many students find that putting large cash sums toward their student loan debt helps too. For instance, think of your tax return, a bonus at work, cash gifts, etc. No one wants to be stuck in debt forever and the quicker you pay it off, the less you have to worry about it later on in life.
3. Better Financing Opportunities
Lastly, you will receive better financing opportunities once your student loan debt has been paid off. While your student loans will not hurt your credit if you pay them on time, etc., it can become a burden when you want to start applying for loan or financing different things such as a vehicle, home, etc.
The sooner and quicker you pay down this debt, the less debt there is to show on your credit history and lenders will be more inclined to finance you. Also, you may be more likely to be approved for student loan refinancing – where lenders offer a loan to pay off pre-existing loans, leaving the borrower with a new loan, interest rate, and repayment term.
Final Thoughts on Paying More Than the Minimum Towards Your Student Loan Repayment
If you thought that paying more than the minimum towards your student loan debt was not worth it, we have shown you that is can be. You will save yourself thousands of dollars over the course of your student loan term and we are sure you can use that extra money elsewhere.
The fact is, you can send in just an extra $10 or $15 per month and you will still SAVE a lot of money in interest. If you have the means to send in additional money, we recommend that you do so. Trust us, it pays off in the end.
Author: Jeff Gitlen
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