How Much More Than the Minimum Monthly Payment Should Borrowers Put Toward Student Debt?

Young man is making a budget at home.
Eva-Katalin / Getty Images

One of the most commonly advised approaches to paying off student debt is to pay a little more than the monthly minimum. But how much extra should borrowers put toward student loan debt?

Here’s what borrowers need to factor in as they determine how much above the minimum they can put toward a monthly student loan payment.

Why Should Borrowers Pay More Than the Minimum? 

Before we look into how much extra to put toward a minimum monthly payment, why should borrowers put any extra money toward student loans?  

Mark Kantrowitz, student loan expert and author of “How to Appeal for More College Financial Aid,” said the reason why paying extra on a student loan has such a big impact is because of the way loan payments work. 

“The payment application order applies each payment first to interest and second to principal. If you pay less each month, then less is applied to the principal balance of the loan. If you pay more, the extra payment goes entirely to reducing the loan balance,” Kantrowitz said.

Paying more not only helps pay off the debt quicker, but it reduces the loan balance upon which interest is charged. This reduces the amount of each subsequent payment that is applied to interest.

Make Your Money Work for You

Small Amounts Make a Big Difference

Can a borrower who pays an extra $50 or $100 each month on their student loan really pay off student debt faster? The answer is yes. 

Travis Hornsby, founder of Student Loan Planner, uses the example of a $36,000 student loan. Paying an extra $50 a month on top of a typical $350 to $400 monthly payment would allow the borrower to get out of debt a full year earlier. Paying an extra $100 in the same scenario allows the borrower to get out of debt almost three years sooner than anticipated. 

If you have room in your budget, Hornsby recommends putting at least $50 extra each month toward student debt. It may seem like a small amount, but Hornsby said borrowers want to feel like this extra money is making a big impact. Getting out of debt at least one year earlier is a noticeable enough impact for borrowers, especially those who want to save and earn more in other areas of their lives.

Review Your Budget

Borrowers unsure of whether they can put $50, $100 or another extra amount toward their debt should review their budgets to determine how much more about the minimum they can pay each month.

“You can’t make a meaningful plan to tackle debt until you know exactly how much money is coming in and going out of your household each month,” said Matt Schulz, debt expert and chief credit analyst at Student Loan Hero.

Once borrowers have an understanding of their budgets, Schulz said they can begin making serious choices about prioritizing spending, including debt payments. Borrowers who prioritize paying off student debt will be able to factor in how much extra they can spend on that student loan each month.

Make Your Money Work for You

The extra amount a borrower pays on their student loan will depend on their financial situation. Schulz said that while there are some situations where it can make sense to just pay the minimum, paying a little bit extra a month is still wise and can make a big difference.

“Every extra dollar you pay reduces the amount of interest you’ll pay over the life of the loan. That’s a really good thing,” Schulz said.

Work With a Student Loan Management Solution

Borrowers still deciding how much more to put toward a monthly payment may consider looking into a student loan management solution. These solutions offer tools and recommendations personalized to meet the borrower’s needs. 

Mindy Yu, director of investing at Betterment at Work, said student debt remains a major obstacle to consumers’ financial wellness and mental health. Because of this, borrowers are increasingly seeking out solutions to help both them and their families pay off student debt faster.

“Student loan solutions help borrowers not only decide how much to pay each month but also offer personalized recommendations on which loans to pay off first, provide a place to view repayment projections and more,” Yu said. 

Sign Up for Autopay

Another helpful recommendation for borrowers planning to make a monthly payment with an extra amount included is signing up for autopay. 

Enrolling in autopay means the monthly loan payment is automatically transferred from the borrower’s bank account to the lender. Kantrowitz said most lenders also provide a 0.25% or 0.50% interest rate reduction as an incentive.

Make Your Money Work for You

More From GOBankingRates


See Today's Best
Banking Offers