Definitely “call the government” to be sure of the terms for your individual loan, but in general my understanding is that at least in the past if you pay off the principal of your loan early, you can request IN WRITING that they refigure your interest payments.
My understanding is that each payment you make toward loans first the loan org credits the interest payment that you need to make EACH MONTH and then the next few payments as they choose, which are usually all filled with interest, not principal. You can take control over this and have them apply it to the principal. Understanding how this works is crucial to paying off your loans early.
Each month your interest/principal ratio in what you owe is slightly different and it favors the lender. The loan org usually puts all of your interest n your first payments, then the principal. In other words if you have a 10-year loan repayment schedule, the first 5 years you pay virtually all interest, then comes the principal. After 5 years of payments, you wake up and discover that you still owe the balance of your loan, virtually untouched. That’s frustrating. The interest is not evenly spread across all loan payments, as most people assume, unless this has changed since I did this. To find out how your interest is spread, you should request in writing a schedule of your loan payments that details what each payment covers in terms of interest and principal. That way you know where your payments are going, toward interest? or toward principal? The loaning agency is required, I believe, to provide this for you if you request it in writing. Each time you make a payment, make sure that you don’t just send a check and assume they will take care of you. They will use that check to take care of themselves and put it toward interest first. Assume this is how they act in order to keep yourself safe. If you’re sending in more than your required payment of that month and you’re trying to pay down the principal fast, this is what you want to do.
The loan agency usually wants you to pay that month’s loan amount at the very least, then any extra they will apply to your next several months’ payments, which are usually all loaded with. You don’t want this to happen. You want anything extra to go to principal.
What you need to do is to 1) send the check and state IN WRITING that you want to apply your payment first to that month’s payment (if you are required to do so) and then explicitly state you want anything extra to apply to the PRINCIPAL. 2) Ask them for written CONFIRMATION that this has happened. 3) Ask them to send you REFIGURED payment schedule based on your remaining balance. To reiterate, be sure to ask after each payment to 1) apply it to the principal, rather than interest and 2) to refigure your loan repayment schedule and 3) to have them send to you a pdf or in writing through the mail a new schedule of payments, so that you can see a) how much principal is gone and b) how the interest is apportioned over the life of your loan.
okay??? You can do this. My husband and I put ourselves through undergrad and grad schools without any help from parents at all, and we paid off all of our loans in a single year, by working several jobs that year, no car, no vacations, and eating very simple food. Lots of hard work, but we were free after one year. Also, we kept the loan companies “honest” by using the technique above.
After you do this, you should maybe consider going into finance . . …you’re a smart cookie and have a lot going for you if you’re already taking this all on.