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How can I pay down principal on Sallie Mae student loan?

New Contributor

How can I pay down principal on Sallie Mae student loan?

I have a student loan with Sallie Mae and my monthly payment is automatically deducted.   I also make an extra payment every 2 weeks (small amount) but it all goes to interest.  Seems like I am wasting money with these extra payments.  I never see a reduction in principal.  Should I stop the extra payments since the whole purpose is to reduce the principal?

Message 1 of 9
8 REPLIES
Valued Contributor

Re: How can I pay down principal on Sallie Mae student loan?

if you have money to put towards it i would say continue to. especially since it is private and the interest is probably really high
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Message 2 of 9
Established Contributor

Re: How can I pay down principal on Sallie Mae student loan?

Student loans are simple interest loans.. meaning that when they receive a payment they will calculate a daily interest rate and apply that to the number of days since the last payment received.... so in essence --- by paying the extra payment you are prepaying the interest and allowing more of the monthly payment to actually go to principal.  It may not seem like much.. but if you were not making the extra payment your principal amount would be going down even slower than it currently is.

Message 3 of 9
Established Member

Re: How can I pay down principal on Sallie Mae student loan?

Is it one billing group with multiple loans in the group or just one student loan? 

 

If it's a billing group, call them up and tell them you would like them to be seperated. Then make payments on the one with the highest intrest rate.

 

If it's just one student loan, either, your extra payments are so small they are just paying the intrest that is accuring in between payments, which means your actual payment is going towards more of the prinical. Do you see a reduction in prinicipale in any of the payments you are making?

 

 

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Message 4 of 9
Established Contributor

Re: How can I pay down principal on Sallie Mae student loan?


203bravo wrote:

Student loans are simple interest loans.. meaning that when they receive a payment they will calculate a daily interest rate and apply that to the number of days since the last payment received.... so in essence --- by paying the extra payment you are prepaying the interest and allowing more of the monthly payment to actually go to principal.  It may not seem like much.. but if you were not making the extra payment your principal amount would be going down even slower than it currently is.


What bravo said.

 

If you were making the payments at the same time, there would be an option to apply the extra to principal. However, since your regular payment is deducted automatically and Sallie Mae statements come out the day after due date, you are essentially paying part of your next month's payment when you pay extra. But don't worry, once your next regular payment comes out, any overage from that should be applied to principal.


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Message 5 of 9
Established Contributor

Re: How can I pay down principal on Sallie Mae student loan?

Is this true for all student loans? Should I...

 

1. Is it better to send in two checks? One regular (automated dededuted) and the other one marked as "towards principal"?

 

2. Send in one check a month but double the amount required?

 

3. Or does it not matter at all which I do?

 

This is assmuming I am allowed to make multiple payments within my loan terms.

     
Message 6 of 9
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Established Member

Re: How can I pay down principal on Sallie Mae student loan?

The SM website allows me to choose what account to put the extra money towards (principle, not interest), I don't have the auto-deduction though, I pay once a month... I always just put all the extra money towards the account with the highest interest rate

Message 7 of 9
New Contributor

Re: How can I pay down principal on Sallie Mae student loan?

 


tim2 wrote:

I have a student loan with Sallie Mae and my monthly payment is automatically deducted.   I also make an extra payment every 2 weeks (small amount) but it all goes to interest.  Seems like I am wasting money with these extra payments.  I never see a reduction in principal.  Should I stop the extra payments since the whole purpose is to reduce the principal?


 

Find out the amount of interest the loan acrues MONTHLY.  Then pay whatever you can above that amount. Even a few dollars will start knocking down the principal balance.  Most people do not understand that student loan interest accrues DAILY.  *things I learned along the way*


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Message 8 of 9
Regular Contributor

Re: How can I pay down principal on Sallie Mae student loan?

My daughter has a Sallie Mae student loan as well and when asked they stated the payment will always go to outstanding balances, then interest, then principal.  So, your best bet is to save the money you are sending every two weeks and add it to your regular payment.  Then the extra will actually be placed on the principal and not the interest as that will be paid with your "regular" payment.


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