4 Reasons You Need to Make Extra Payments on Your Student Loans

Making extra payments on student loans

When I graduated from college and landed my first job, I felt overwhelmed by my student loans. My balance was higher than my nonprofit salary and I had no idea how I was ever going to get out of debt.

I started reading personal finance blogs that talked about making extra payments on student loans to pay them off faster — and I rolled my eyes. I was on a tight budget; I sometimes couldn’t find the cash to put gas in my car, let alone extra money for my loans.

But I knew I had to do something to tackle my debt and get it under control. Here’s why making extra payments on student loans is so important, and what you can do to find the money.

Why you should be making extra payments on student loans

When you work full-time, you may feel exhausted. The last thing you want to do is work another job or side hustle. But if you can find the motivation, working a little more can pay off in a big way.

Here are four reasons why you should put an extra $100 towards your student loans each month.

1. You’ll save thousands of dollars (seriously)

When I left school, I had about $35,000 in student loans at a 6.80% interest rate and minimum monthly payment of $400. If I paid only the minimum, it would have taken me 10 years to pay off the loans. In addition, I’d pay $13,334 in interest on top of my original loan balance.

If you were in the same situation and boosted your payments to $500 a month, you’d reduce the overall interest charges by $3,693. That’s $3,693 you could save for retirement, put towards a down payment on your first house, or use to book a vacation.

How much could you save by paying an extra $100 a month on your student loans? Use the calculator below to find out.

Student Loan Prepayment Calculator

  • Monthly Payment

  • Interest Paid

  • Total Amount Paid

  • Time to Repayment

OriginalPrepaymentSavings
Monthly Payment
Interest Paid
Total Amount Paid
Time to Repayment

2. You’ll be debt-free faster

For federal student loans, borrowers are automatically enrolled in a Standard Repayment Plan of 10 years. A decade is a long time; I didn’t like the idea of being in my 30s and still carrying student loan debt, so I was determined to pay it off faster.

Putting an extra $100 a month towards your debt does more than save you money in interest. In my case, bumping up my monthly payments to $500 meant I would be debt-free years ahead of schedule.

Student loans are a huge burden hanging over your head — getting rid of them faster frees up your mind (and money) to focus on more important things.

3. You can build up savings more efficiently

If you’re debt-free, that means you can boost your savings more quickly. Once you pay off your student loans, you can dedicate more money to your savings account.

If you put that $500 into the bank each month when your loans are gone, you’d have $12,000 saved in two years.

Invest that same amount of money in a 401(k) or IRA with an annual return of 6 percent, and you’ll earn $3,040 on your investment over two years.

4. You may be able to buy a home more easily

Interested in owning your own home? When mortgage lenders review your application for a loan, they look at your debt-to-income (DTI) ratio.

This is a number that shows how much debt you have relative to your salary. The lower the ratio, the better. Your lender wants to know you can easily afford your mortgage payments along with your other monthly obligations.

Your student loans can hurt your DTI ratio. If you have a large student loan balance, your monthly bill can eat up a significant part of your salary, making it more difficult to get a mortgage. Putting more cash towards your student loans now will help reduce your DTI ratio later on, improving your chances to get a mortgage for the home you love.

Finding more money to pay off your debt faster

You might understand why extra payments are so important, but scraping together the extra cash can be difficult. While plenty of people will tell you to track your spending to “find” more money, that advice doesn’t always work. If you’re already strapped for cash, you likely aren’t blowing money on Starbucks, fancy dinners out, avocado toast, or shopping sprees.

That was the case for me. I was on a bare-bones budget with nothing left to cut out. My home was a tiny studio apartment; I didn’t have television; I brought my lunch to work; I lived off a lot of peanut butter and jelly sandwiches. I wasn’t living extravagantly — I was barely squeaking by.

Making extra payments on my student loans was essential, but my salary just couldn’t cut it. That’s when I realized something: Instead of cutting my expenses, I had to boost my income.

I took whatever little side jobs I could. I cleaned houses, ran other people’s errands, and watched pets. While my side gig income varied wildly early on, I was able to make an extra $100 student loan payment every month.

That didn’t seem like a lot at the time, but it added up quickly. I saved thousands by paying off my loans years ahead of schedule, just by working a few extra hours a week. If you’re struggling to find extra money, consider launching a side hustle. Working a little bit each month can give you the money you need to pay off debt more quickly.

Check out 10 side hustles you can start this week for ideas on how to earn cash for your student loans.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderRates (APR)Eligible Degrees 
Check out the testimonials and our in-depth reviews!
2.75% - 7.24%Undergrad
& Graduate
Visit SoFi
2.57% - 6.39%Undergrad
& Graduate
Visit Earnest
2.57% - 7.12%Undergrad
& Graduate
Visit CommonBond
2.99% - 6.99%Undergrad
& Graduate
Visit Laurel Road
2.74% - 7.26%Undergrad
& Graduate
Visit Lendkey
2.89% - 8.33%Undergrad
& Graduate
Visit Citizens
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.