@mel159 – interest on a PLUS loan (and on just about every type of loan) is calculated on the balance remaining. Any payment you make will be applied first to outstanding interest, and next to principal.
It will be based on the remaining balance.
I think Kelsmom had the best advice.
But it also make sense to look at your overall budget. For example, you may decide that it make more sense to pay down $2500 of the PLUS loan and have $1000 of cash reserves – it really depends on your overall financial situation, and any reduction at all in the loan amount will be beneficial. My daughter ended up racking up lot of credit card debt while she spent time abroad in college … (partly because she had a credit card) … but a good idea to have something to fall back on.