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Student Loans 101: Paying Down Your Principal

Study these tips to help you pay off your student loans ahead of time, which could save you money.

According to Pew Research Center, four out of ten adults under the age of 30 have student loan debt[1]. Unfortunately, that means many current and former college students are fretting about paying off costly student loans.    

Since there are no penalties for paying private or federal student loans ahead of time, it’s worth thinking about getting ahead on your payments, if you can afford it. This suggestion might seem absurd, particularly for recent graduates, but it warrants consideration. Interest accrues based on your current principal balance, so if you pay off the loan more quickly, you will pay less interest. In other words, the faster you pay off your loans, the less expensive it will be in the long run.

College students studying

Here are some pointers from Naimesh Patel, general manager for personal and student lending at PNC: 

1.  Start sooner than you have to.

Although many loans have a deferment period of at least 6 months post-graduation before payments are required, it’s a good idea to start paying your loans as soon as you graduate or even when you’re still on campus. If you have a part-time job in college, try to put aside some money every month that will go toward your loan so you can start paying down your principal before you graduate. Getting a head start and making consistent extra payments can help you pay off your loan faster, ultimately saving you money on interest. Plus, this will help you establish the habit of budgeting for student loan payments.

2.  Go big.

Make bigger payments than the minimum you owe each month or pay more frequently than you have to. Consider making payments each time you get paid or have some extra cash instead of waiting until your due date.

If you don’t have much wiggle room in your budget, try rounding up your payments. For example, if you owe $180 each month, aim to round up and pay $200. If increasing your payment every month doesn’t seem feasible, consider making an extra payment every three months so you’re making 16 payments a year instead of 12. Whatever method you choose, make sure you specify to the loan servicer that you want the extra money to go toward your principal balance rather than next month’s payment so that you’re paying down the loan balance rather than simply paying next month’s bill early.

3.  Prioritize.

If you have several different loans, prioritize making bigger payments on the ones that begin accruing interest sooner and at higher rates. Focus on paying those down first, while still meeting the minimum payments on your other loans.

4.  Consider refinancing.

Consolidating your student loans may help you by lowering interest rates, reducing monthly payments or adjusting loan repayment terms to better meet your needs.


View more resources and information about student loans »


Naimesh Patel
Naimesh Patel is the general manager for personal and student lending at PNC.

If you need more incentive to encourage you to make extra payments, you can calculate how much interest accrues each day on your loans by using the following formula: 

(Interest rate X current principal balance)/365

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