How to Save Hundreds on Your Student Loans Before You Graduate

06/02/2015 06:38 pm ET | Updated Jun 03, 2016

As an independent, transparent marketplace for student loans, Credible helps borrowers understand all of their student loan repayment options.

Nearly all student loans have options to defer payments while attending college; however, making payments on your student loans while still in school can save you thousands of dollars just by the time you graduate. Here’s what you need to know about making payments on student loans while still in college and some student loan calculators that can help.

Subsidized vs. Unsubsidized

Subsidized student loans are federal loans that the government pays the interest on while the student is still attending college. These loans are granted to students who meet certain financial qualifications. On the other hand unsubsidized student loan and private student loans accrue interest while the student is in school.

Compounding Interest

Although students are not required to pay on their student loans while in college, interest on those loans still accrues, which means that each month interest is owed on your loan is added to your principal balance. The interest due is compounded onto the loan quarterly. So every three months the outstanding interest balance is added onto the principal balance.

With your interest rates compounding it can make your loan balance balloon. After graduating your loan will be thousands more than the initial balance and you will end up paying much more for your loan. Paying the interest while attending school will help you to avoid this situation.

Another benefit is that interest paid on student loans is tax deductible. Each year when you file your taxes you can write-off up to $2500 worth of student loan interest payments.

Student Loan Calculators

There are calculators available on the Internet that will show you how much money you will save by paying on your interest while attending school. Here are a couple of calculators to look at:

Interest Savings Calculator

  • With the interest savings calculator by You Can Deal With It, you can enter up to 8 different loans.
  • It compares the interest you will pay on the loan if you do or don’t make payments while attending school.
  • It shows you the total amount of money you could save and how much your monthly payment could be reduced.

Student Loan Deferment Calculator 

  • Deferment Calculator by FinAid to input all of your original loan details: original principal balance, payment, interest rate, loan term and how frequently the interest compounds.
  • It then calculates how much interest will be charged on the loan during the time of deferment.
  • It shows you what your new balance will be when you enter into repayment and the difference in interest if you made payments while in school.

What should I do? 

Speak with your student loan provider, private or federal, about how much interest is charged on your loan monthly. Some private lenders actually offer lower interest rates to borrowers who intend to pay while in school. This is a very favorable option as you can save on your actual interest rate and total repayment.

 If you can, saving on interest and being proactive about how much you could save by paying while in school is always a good idea. Look into your financial situation; what you can afford, and make decisions that can help reduce your total debt.

 If you want to explore your private loan options, visit Credible.