Paying Ahead
Paying Ahead

Maximize your savings on interest charges

When You’re paying off your student loan, every little bit helps. One way to hold down your costs is to make interest payments while you're still in school. If you can afford it, paying the interest as it accrues can reduce what you owe in the long run.

Contact us to find out what your daily interest accrual is and start making interest payments before your loan enters repayment. Making even small payments can reduce or even prevent interest capitalization, and that can save you thousands of dollars over a 10-year repayment term.

When your loan enters repayment, pay more than your scheduled monthly payment if you can. The more money you’re able to put toward your loan, the faster you’ll pay it off—and the less you'll pay in the end.

If you want to jump-start your student loan repayment, make sure that your extra payments are applied to make the maximum impact. An extra payment is any amount that is in excess of your regular scheduled monthly payment. Contact us to provide specific instructions for applying your extra payments.

The best way to pay off your student loans and keep your total costs of borrowing as low as possible comes down to the following strategies:

  • Enroll in automatic payments to qualify for an interest rate reduction
  • Make payments when you are able, even when not in repayment
  • Make more than the monthly minimum payment
  • Request that extra money be applied to your highest cost loan
  • Regularly check your progress

  • What You Should Know
  • How Payments are Applied
  • Interest Accrual

What You Should Know

  • It's important to know what your daily interest accrual is so you can pay it whenever possible, and reduce the amount that is capitalized to your principal balance. Contact us to find out yours today!
  • There are rules in your student loan agreement we are required to follow. Payments must be applied first to interest and then to the unpaid balance.
  • However, when it comes to extra payment amounts, you can specify where your money should go. For example, you may want to target your extra payments to high-interest loans first or focus on paying off the loan with the smallest balance, while making your minimum monthly payment on the rest.
  • To specify how the extra funds are applied, you must be current on all ACPE loans and schedule your payment by telephone or provide written instructions with your check or money order for how additional payments should be applied.
  • You must continue to make the scheduled minimum monthly payment on all loans.

How Payments are Applied

If you pay more than the minimum amount required and you don't specify where your money should go, the extra payment will split across all loans in repayment. All payments are applied as follows:

  1. First, to any accrued interest
  2. Then, to the principal balance

If you have more than one loan, the extra payment will split across all loans in repayment, unless you specify otherwise.

Accelerated Repayment Schedule

Paying an extra amount or making additional payments may result in your loan being prepaid or paid ahead. During the time you are paid ahead :

  • You won't be considered past due if you stop making payments or pay less than your regular payment amount, but only until you're no longer paid ahead.
  • If you're signed up for an automated payment method, payments will continue being made.
  • Interest continues to accrue.
  • It's best to continue making payments in order to stay on top of the accruing interest and prevent any loans from becoming past due (delinquent).

How much extra you pay or how often you make extra payments will affect your repayment schedule over time. Making additional payments reduces the principal balance, so you owe less interest in subsequent payments. Making accelerated payments will lead to early payoff, plus reduce your total costs over the life of the loan.

Interest Accrual

Interest is money you pay in exchange for borrowing money. Interest is calculated as a percentage of the unpaid loan amount. Interest charges increase the amount of money you owe. Understanding how this works is important.

  1. Simple interest: Simple interest is a basic way of looking at interest. Interest is the money that you must repay in addition to the amount of the loan you borrowed, known as the principal balance.

  2. Simple interest formula: Calculating daily interest can be useful when you are trying to determine the amount of interest you owe on a payment. Simple daily interest is calculated by multiplying the principal balance (P) by the interest rate (R) divided by 365; Interest = P x R/365.
    P = 10,000
    R = 5% (.05)
    $10,000 x .05 divided by 365 = $1.37 per day

  3. How often interest accrues on your loans: Interest accrues daily on your loan principal balance. Although not all loans are the same, interest on ACPE's state education loans begins to accrue upon initial disbursement to your school. This means that interest is accruing during periods when payments are not required. Refer to your promissory note for information on when your repayment schedule will begin.

    You always have the option to pay the interest before it is capitalized, to keep your principal balance from increasing. Paying even small amounts on a regular basis can significantly reduce your long-term finance charges.

    Using the example provided above, the interest that accrues on a $10,000 balance in one week is $9.59, which is the cost of just a couple trips to Starbucks!

  4. When interest is capitalized: Interest on student loans is capitalized (added to the principal balance) at various times. Generally, interest is capitalized any time your loan goes from a non-repayment status, such as grace or deferment, to a repayment status. As a result, capitalized interest makes the amount you owe increase.