College Ave Corner

The Benefits of In-School Student Loan Payments

Even if it’s only $25 a month, making in-school payments on your student loans can save you a significant amount of money in the long run. Keeping pace with the continually rising costs of college isn’t an easy task. If you are anything like most students, you probably are considering student loan debt as a way to finance your education. Student loans are an incredibly powerful tool when used correctly. But before you sign that promissory note blind, you should work to fully understand your commitment. Student loans can be expensive, but if you are proactive, you can make student loan debt more manageable.

Do you want to save money on your student loan debt?

Making efficient student loan payments is the key to beating your student loan debt and saving money. You don’t need to wait until repayment begins to take control of your student loan debt. In fact, you can start yourself down a path of efficient repayment when you are still in school.

While 7 out of 10 students are now graduating from college with some form of student loan debt, most students don’t know that student loans can accumulate and capitalize interest during deferment. College is a time to grow, learn, and meet new people. After a long weekend of partying, or studying, the last thing most students want to think about is student loan interest. That being said, if you elect to pay some, or all, of your accumulated student loan interest while in school, you can save yourself quite a bit of money in the long run.

Many students use private student loans to fill a gap between the financial aid they received and their total cost of attendance. Private student loans, similar to federal unsubsidized student loans, accumulate and capitalize interest during deferment. In other words, if not paid while in school and during your grace period, your student loan interest charges will be added to the principal balance of your debt. From then on, your capitalized interest will accumulate interest charges in addition to the interest charged on the original principal balance of the loan. The end result – added and avoidable interest expenses. The more student loan debt you hold, the greater the interest expense.

Let’s look at an example of how in-school payments can save you money

Say you’re a freshman with four more years of school left who just borrowed $10,000. You’ve elected to pay the loan back over 10 years and received an interested rate of 6%.

Scenario 1: You pay $0/month while in school

If you don’t make payments while in-school, your loan balance increases to $12,700 when repayment begins due to accrued interest. The total cost over the life of your loan ends up being $16,920. This is your most expensive option.

Scenario 2: You pay $10/month while in school

By paying $10/month, you start paying down a portion of your interest immediately. By doing so, you reduce the total cost of your loan to $16,740, which saves you almost $180 compared to not making payments at all.

Scenario 3: You pay $25/month while in school

Instead, if you elect to pay $25 per month while in school, you reduce the total cost of your loan to $16,471, saving you almost $450.

Scenario 3: You pay $50/month while in school

Electing to pay $50 per month while in school reduces the total cost of your loan even further to $16,022, saving you almost $900!

Scenario 4: You pay full principal & interest while in school

The other option is to pay your full principal and interest immediately. This will result in a higher cost per month; however, it is the cheapest option in the long run. By making full payments, the total cost of your loan is reduced to $13,322, and you would save almost $3,600 compared to making zero in-school payments!


So, for the exact same loan – same interest rate, same principal amount, and same term – you could end up paying close to an additional $3,600 by deferring payments until after you graduate. While you might not be able to afford full principal and interest payments, anything can help – even if it’s just $25 per month!

Check out College Ave’s Student Loan Calculator to see how different repayment options can impact the total cost of your loan.

Already selected a deferred repayment option on your student loan(s)? Don’t worry. Most lenders allow you to make early or additional payments on your loan. So, even if you’re currently paying $0 a month, you can start paying whatever your budget allows to start reducing the total cost. Check with your specific lender for more details.

College Ave Student Loans allows borrowers to make in-school payments. College Ave allows borrowers to choose from four different repayment plans: deferred, flat payment, interest only, and full principal & interest. The flat payment plan requires students to make a $25 monthly payment, and the interest only payment plan requires students to pay only accumulated interest each month. College Ave Student Loans is rated as one of the leading student loan lenders due in large part to the amount of options the company offers to borrowers.

Making student loan payments in school might not be easy, but if you can do it, you will thank yourself later. College students live on extra tight budgets. If you are worried that you might not be able to fit student loan interest payments into your monthly budget, you should consider looking for additional work to supplement your budget. You could consider looking for a part-time job on-campus. On-campus jobs usually pay pretty well for the work required, and most managers understand when it comes to scheduling. You could even look for freelancing opportunities online. Websites like Upwork are great for students looking to make extra money by doing small projects during free time.

Push yourself this semester. Even if you don’t have an interest only payment plan, push yourself to pay your accumulated student loan interest each month. Every little bit counts when it comes to student loan debt. By being proactive while in school, you can end up with more money in your savings account.


This article was written by Nate Matherson, Co-Founder and CEO of LendEDU.

About LendEDU

LendEDU is a marketplace for student loans and student loan refinance created to help student loan borrowers find transparency without damaging their credit.