Private College Student Loan

Do extra payments on government Direct Loans for students go straight to the principal?

If my payment on my student Direct Loan exceeds the agreed upon monthly payment does the extra amount come off the principal or interest or both.My int. rate is 3.5%.Should I put the extra money into a traditional IRA instead earning 4.35%APY currently?

Public Comments

1. Depends on the company. I used to work at Nelnet and you had to state on the statement that you want it to go to principal. If you don't specify on the statement they will push your due date further ahead so you dont owe for the next month depending on how much extra you paid. I would call them or look on your statement!
2. Mathematically, it makes sense to put the money in the IRA, but the freedom you will get from having that student loan payed off will outweigh the small mathematical advantage .
3. The extra payment goes directly to principle and pays the loan down faster (obviously). Student loan interest is tax deductible. If you put the money into an IRA, you can not touch it until retirement. You also have a limit on the amount you can contribute to an IRA, so you need to determine how much "extra" you are considering. I changed my minimum payment from just under $150 to $250 and I'm paying my loan off in 6 years vs. 10 years which for me is a better choice (I can still make additional or higher payments). Good luck