Should I pay extra on student loans or invest instead?

Compare the loan rate to your expected investment return. At 6.5%, prepaying is a guaranteed 6.5% return — competitive with market averages and risk-free. Below roughly 4-5%, investing (especially with an employer 401(k) match, which beats everything) usually wins mathematically. Above 7%, prepay.

Do extra payments automatically reduce my principal?

Not always — some servicers apply extra amounts to the next month's payment ('paid ahead') instead of principal. Set the extra payment to apply to principal explicitly, and check your statement the following month to confirm it happened.

Which loan should I pay extra on first?

Highest interest rate first (avalanche) minimizes total interest paid. If you have both private loans at 9% and federal loans at 5%, extra dollars go to the private loan. The snowball method (smallest balance first) costs somewhat more but the quick wins help some borrowers stay consistent.

Should I refinance instead of prepaying?

Refinancing federal loans into a private loan can lower the rate but permanently forfeits income-driven repayment, deferment, and forgiveness options — a bad trade if your income is unstable or you may qualify for PSLF. Private loans have no such protections to lose, so refinancing those on rate alone is more clear-cut.

How does the extended 25-year plan compare?

It cuts the monthly payment substantially but roughly triples the years of interest accrual. On $45,000 at 6.5%, extending from 10 to 25 years lowers the payment by about $200/month but adds tens of thousands in total interest. Use it for cash-flow relief, not as a default.

Tools · Money Basics

Money Basics · loans & debt

Student loan payoff calculator

Standard 10-year, extended 25-year, graduated, or extra-payment — see exactly what each plan costs over the life of the loan.

Your loan

Total balance$45,000

Interest rate6.50%

Extra monthly payment$150/mo

Repayment plan

Standard 10-year

$511

Paid off Oct 2036 · 10 years · total interest $16,316

Standard 10-yr payment

$511

$16,316 total interest

Extended 25-yr payment

$304

$46,153 total interest

Months saved with extra

34 mo

$150/mo extra ↓ clock

Interest saved with extra

$5,020

vs. minimum payment

The honest tradeoff

Extended plans lower the monthly — but more than double lifetime interest. Graduated plans help in the first 5 years when your income is lowest, but cost more overall. Even small extra monthly payments ($100–$200) shave years off the loan at 6-7% rates.

Quick answer

What does $150 extra a month do to a $45,000 student loan?

On $45,000 at 6.5%, the standard 10-year payment is $511 a month and total interest comes to about $16,316. Adding $150 a month pays the loan off in 86 months instead of 120 — 34 months sooner — and saves about $5,020 in interest. Extra payments go entirely to principal, so every additional dollar shortens the loan.

$510.97/mo

Standard payment

Months saved

$5,020

Interest saved

86 vs 120 months

Payoff

Frequently asked questions

How we built this tool

How we model each plan

Step 1

Standard plan is fixed-rate amortization

Same 10 years, same monthly, same formula as any mortgage. Most borrowers default to this — it's usually the cheapest option.

Step 2

Extended stretches to 25 years

Halves the monthly but more than doubles lifetime interest. Useful if you're drowning, catastrophic if you keep it forever. Refinance when you can.

Step 3

Extra payments attack principal directly

Every extra dollar reduces principal immediately, shrinking the interest base. At 6-7% rates, $100/mo extra can shave 3+ years off a standard plan.

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