Family Budgeting: Not Sure What To Do With Your Refund? What About Putting It Toward Your Student Loan?

Girl with tax refund

First, you may pay more toward your principal balance. Doing this helps lower the amount of interest you pay over the life of your loan. If you have multiple loans, you will usually save the most money by applying the extra payment toward the loan with the greatest interest rate first.

The second option is to prepay future monthly payments, which might give you greater financial flexibility during the time period that you prepaid.

Whichever option you decide, make it clear in a note or over the phone to your student loan servicer so payments will be applied how you intend.

Of course, it is important to know that if you are delinquent on any of your student loans, payments are first applied to outstanding interest and principal.