I just received my quarterly interest statement from T.H.E. I am surprised there was so much interest accrued. Can I make a one-time payment to avoid interest capitalization?
Paying down interest while you are still in school is not only allowed, it is recommended. If you are able to pay down any part of your interest, it will save you a lot of money in the long run. If you are a T.H.E. borrower and would like to make a payment, you can make an online payment by visiting our website at www.theloanprogram.org and logging in. If you would rather mail in a check, please send your payment to:
Great Lakes – Borrower Services
PO Box 3059
Milwaukee, WI 53201-3059
If you have additional questions, don’t hesitate to contact T.H.E. Ramen Report at ramenreport@theloanprogram.org or call one of our customer service representatives at 888-843-0004. Your question may be the next “Question of the Week”.
Your friend is correct - while you are enrolled you are always able to make payments to pay down the interest on your student loans. Before making a payment, you will want to consider your entire debt profile (for example credit cards /private educational loans). You should be sure that you are focusing payments on your highest interest rate debt first, before trying to pay down student loans that may be at a lower rate.
If you are able to pay down interest, it is most financially sound for you to do it before entering repayment, to avoid any capitalization. Paying down interest will result in a lower balance when entering repayment and may effect your repayment term options. Be aware that consolidation loans have up to 30 years to repay, but you must have over $60,000 in loan debt. If wanting to extend your payments, you must have $30,000 of Federal loan debt to be granted a 25-year repayment term.
Once your loan enters repayment, you have repayment plan options that allow you to make as low as interest only payments on your student loans for a set period of time . These payment plans are available to not only give borrowers an option to have a reasonable payment plan, but also because payment is required, paying interest only on debt with low interest rates opens up funds for borrowers to pay on higher interest rate debt. Of course, the overall cost of the loan will be higher than a level or standard plan, because you aren't paying down any of the principal balance.
Utilize THE's repayment calculators to determine what repayment option is best for you. Knowing your options is the first step in setting up a successful repayment plan.
I heard from a friend that it's possible to pay "interest only" on my student loan. When is it advisable to do this? What is the risk in paying interest only?