September 15, 2021

How Do Extra Student Loan Payments Make a Difference?

Extra payments on student loans can take decades off of the life of your loan, want to know how to take advantage of paying off student loans early? This article is for you.

6 min read

Qoins Staff

@qoinsapp

We preach it all the time: extra payments towards your debt help you save money. But anyone can say anything nowadays. So we’re going to dive into exactly how extra payments help you save money, specifically student loan debt.

How It Works

Extra payments towards the principal balance of your student loan will not only help you pay off your debt sooner, but it will save you money on interest!

If you pay off your owed debt sooner, then you’re paying interest for a shorter period of time. Therefore, you’re paying less interest in total.

Let’s break it down with an example:

The average student loan debt per person is $35,000

The average student loan interest rate is 5.8%

Let’s say you’re looking to pay off your loan in 20 years

Your monthly payment comes out to $247 a month

With this example, you’re paying $24,280 just in interest

That’s insane. Not only is 20 years a long time to be struggling with debt, but knowing you’re paying $24,280 extra just in interest is awful. Your loans may have gotten you through school and into the career you dreamed of, but now you have this overwhelming number hovering over you for the next two decades.

Sure it is scary, but it’s not hopeless. Most financial advice you’ll receive starts with “pay off your debts first”. This is because debt holds you back from using that cash on other things you need in life like an emergency fund, bigger purchases, or even investing.

So how do you actually pay off a 20-year loan sooner?

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Extra Payments Make the Difference

It’s simple, just make extra payments to your debt. You may think you’re strapped for cash by already paying $247 monthly towards your loan, but even a small addition to that can make a big impact.

Let’s break it down again, with the same example as before:

If you were to add $75 to your monthly payment and make it $322 total

You’d pay off your loan in less than 13 years and save $9,370 on interest

$322 can be daunting, but if you break it down, it’s really not that bad. You could already be spending $75 a month elsewhere and not even realize it. Maybe you have subscriptions you don’t use or eat out more often than you should.

Cutting a few monthly costs could save you that $9,000+ on your student loan. Giving up the gym membership you don’t use or cutting fast food out of your diet could literally save you thousands.

If you don’t have any unused subscriptions and think $75 monthly is still too much to fork over, break it down weekly or even daily. $75 a month is $18 a week or only $2.50 a day. If you’re a coffee fiend and go to Starbucks every morning, you could save not only thousands but also the time you’re stuck in debt by just brewing your own coffee at home.

If you already practice amazing spending habits and still feel like you can’t shovel together the extra $75, think about your spare change. Maybe you ditched your pink little piggy bank long ago in this digital era, but there’s still change at the end of all of your transactions.

With Qoins, you can save this spare change or set up automations to make that extra student loan payment. Your first payment is FREE, so download the app to give it a shot. Automate the extra payment and be debt-free in almost half the time you normally would have been.

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