If the PLUS loan was disbursed less than 120 days ago, I have excellent news for you: Pay off the $3,500 NOW, and you will actually be cancelling $3,500 of the loan. The 4.288% origination fee and all interest accrued will be canceled. This is true for any Direct Loan. So … contact the servicer immediately & tell them you want to cancel $3,500 of the loan … ask them how to do this. They have to let you do it if the loan was disbursed within the past 120 days. If you have issues, PM me (I am a financial aid director). Be clear to them that you want to CANCEL that portion.
If it has been more than 120 days, it still makes sense to repay now … because it will result in repaying less over the long run (due to interest). Tell them you want to use it FIRST to repay outstanding interest & THEN to repay principle.