How do I pay off large chunks of my school loan and avoid any interest trickery?
As a side note, you never have to pay the exact amount on the bill. You can always pay more. If you pay 10k now, you’re right, that means you won’t receive bills for a while. But you can still pay. Just pay the same amount (some amount greater than your normal bill) every month, regardless of what is due (or when). Then, if for some reason you come upon really hard times, you have some amount of leeway while you deplete that buffer. Ideally, you never do, but it is there as an out if necessary. Their stupid coupon book means nothing, all you need to see is that your payment is not larger than the balance of the loan. Good luck!
Keep in mind that even if they don’t advance your payments, they may simply be chopping off payments from the back end Yeah, just to be clear, it always works this way – either your next several payments are chopped off, or the last several are. I’m pretty sure that the loan company is never “screwing” you into paying additional interest when you pay it ahead of time. In fact I think they might even be doing you a favor by letting you put the regular payments off for several months or years – time value of money, and all. What happens when you start repaying a loan and get on a payment plan is that the entire amount due, principal AND interest, are “amortized” into 36, 60, 120, or however many equal payments. The amount of interest or principal you’re repaying in any given month is really a mathematical fiction, mainly of interest to tax attorneys, as long as you stick to the plan. However, when you make an over-payment, the plan changes. The amount of principal shrinks; hypothetically
Keep in mind that even if they don’t advance your payments, they may simply be chopping off payments from the back end. If this is what you want, fine. Otherwise, you might want to ask them if they can re-calculate your monthly payments over the lifetime of the loan based on the new, lower principal amount.
You should contact your lender and ask about making a payment to pay down the principal of your loan. If it’s a federal loan, start here. You can’t necessarily just write something on the check, you may need to use a special form or send the payment to a specific place. Your 4.7% interest rate is still reasonably low, though, so you really may want to keep that cash around to have a rainy day fund or even consider investing it in something that may pay you more than 4.7% after taxes (although that will carry risk with it). And you should definitely fund your IRA/401k or other tax-advantaged investments before you pay down student loans. You will probably never be able to borrow money at such a rate again.
