How to Make Principal-Only Payments on Student Loans
Master the process of making principal-only payments on student loans. Cut interest costs and pay off your debt faster.
Making principal-only payments on student loans involves sending extra money directly toward your loan’s principal balance. This strategy aims to reduce the principal without affecting your next scheduled payment. By targeting the principal, you can reduce the total interest paid over the life of the loan and potentially pay off your debt sooner.
Understanding Your Loan Servicer’s Process
Before making any additional payments, identify your student loan servicer. For federal student loans, find this information by logging into your account dashboard on StudentAid.gov or by contacting the Federal Student Aid Information Center. The dashboard displays your servicer’s name and contact details. For private student loans, locate your servicer by reviewing original loan documents, checking recent monthly statements, or examining your credit report. If you cannot identify your private loan servicer, contact the original lender or your college’s financial aid office.
Understand how your servicer applies extra payments. Without explicit instructions, many servicers first apply additional funds to accrued interest, then to outstanding fees, before allocating the remainder to your principal. Some servicers might also apply extra payments by advancing your due date, meaning your next payment isn’t due for a longer period. This “paid ahead” status does not accelerate the loan payoff or reduce overall interest as effectively as a principal-only payment.
Review your servicer’s website, FAQs, or direct payment terms for guidance on designating extra payments. Look for sections detailing overpayment policies or options for applying additional funds. Some servicers allow you to choose how extra payments are allocated, such as applying them to the loan with the highest interest rate first. Gather your account number and specific loan group identification if you have multiple loans; this will be necessary when communicating with your servicer or making a payment.
Executing Principal-Only Payments
Once you understand your servicer’s requirements, you can make a principal-only payment. Online portals often provide options to direct extra funds. When making an online payment, look for specific fields or checkboxes like “extra payment,” “additional payment,” “apply to principal,” or “do not advance due date.” These selections instruct the servicer to apply the excess directly to your principal balance. Some portals may also offer a customizable “other amount” field where you can specify how additional funds should be allocated.
Contact your loan servicer directly via phone to ensure proper application. When speaking with a representative, clearly state your intention to make an additional payment solely to your loan’s principal balance. Emphasize that you do not want the payment to cover accrued interest, outstanding fees, or to advance your next due date. Using precise language, such as “I want to make an additional payment specifically applied only to the principal balance of my loan, not to accrued interest or future payments,” helps prevent misapplication.
If sending payments by mail, include explicit written instructions with your check. Write a clear note or letter stating that the payment is to be applied entirely to the principal balance of a specific loan, not to interest or future payments. Also write “Apply to principal” on the check’s memo line. Always include your loan account number and any relevant loan group identification to ensure the payment is correctly attributed.
Confirming Payment Application
After making a principal-only payment, verifying its correct application is a final step. Log into your online servicer account a few business days after the payment posts. Check your loan details to confirm that the principal balance has decreased by the exact amount of your additional payment. Also, confirm that your next payment due date has not changed or been advanced, unless that was your specific intention.
Regularly review your monthly statements or payment history. These documents should clearly show how all payments, including any extra amounts, were allocated between interest and principal. This ongoing review helps maintain an accurate understanding of your loan’s status.
If you discover any discrepancies or if the payment was not applied as instructed, contact your loan servicer immediately. Be prepared to provide documentation, such as payment confirmation numbers, bank statements, or copies of checks and written instructions. Maintain comprehensive records of all payments and communications with your servicer for resolving any potential issues.