Accelerated Payments for Student Loans

If a former student becomes able to pay more than his or her monthly payments, then he or she can participate in accelerated student loan payment.

Normal Repayment

Student loan payoff periods vary from ten to twenty-five years. There are many repayment schedules that a borrower can choose from. These options include the following.

  • Standard Repayment: This is a fixed monthly payment that begins with a fixed rate of interest.
  • Graduated Repayment: This type of schedule allows monthly payments to increase as time passes. The increases occur slowly, as in every two years.
  •  Income Contingent Repayment: Here, monthly dues are adjusted as income changes. This is to insure that when a borrower has money coming in, he/she makes higher payments than he/she does when money is tight.

Accelerated Payment

A former student borrower who contributes more than demanded to his/her monthly payments is benefitting himself/herself by lowering the overall amount of interest that he/she must pay on the student loan. Accelerated payment is equal to prepayment because, in reality, the loan is being paid off faster and sooner than necessary. Unlike most other types of loans, student loans usually do not inflict penalties on borrowers who decide to pay on an accelerated schedule. If a former student borrower is able to make accelerated payments, he or she should take advantage of this opportunity.  If a student has multiple loans and excess money to dedicate to repayment, instead of consolidating the loans he/she should work to pay off the loan with the highest interest first.

It is important to note that paying more than what is owed for one month will not lower the next month's dues.  A borrower's monthly payments will remain the same unless a new repayment schedule is negotiated. The thing that changes on an accelerated payment schedule is the total amount that the borrower will end up owing.

Late Payment

If a borrower does not have a constant and dependable supply of income, he/she should not pay more than what is scheduled as payment for one month.  It is more important to save money to meet subsequent payments than it is to overpay in one month. Missing payments will put a borrower in long-lasting trouble and could lead to the loss of federal aid privelages, the suffering of a damaged credit history, and even the risk of being sued.      

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