Hi,

I have an odd situation.  I have been on IBR for a few years, and plan on staying on it indefinitely.  Last time I reported my income, I was given a Partial Financial Hardship (which I am certain will only last 12 months).  My payment is now about $120, and the interest each month is about 500.  My strategy was to pay by loan the same 6 or 700 a month that I was paying before I was given this hardship status, and target those payments by loan to the ones that are at 7.9% interest rather than the ones that are at 6.8%.

However, I now see that interest is accruing on my loans that I am making the smaller payments on.  I don’t want to end up paying more in the end.  Should I be distributing my payments amongst all my loans so that I make sure I’m paying more than the interest each month on all of them?  When my Partial Financial Hardship ends in 10 months, will that interest capitalize?  And will that be more expensive than the amount I am saving by paying down the higher rate loans right now?

Thank you.

Are your loans consolidated? If they are, I don’t think you can direct payments like that. I have two consolidated loans, subsidized and unsubsidized. A few years ago, I was able to direct payments, and pay more towards the unsubsidized loan, which has a much higher balance.

But then suddenly I could not do that anymore. I think I read that the payments are now automatically weighted based on some formula that is out of the payer’s control. Whether you pay more than required each month is really a judgment call you must make, based on your financial situation. If I did not qualify for the 10-year loan forgiveness program, and I had the means, I would certainly pay as much as I could each month to slow interest accrual.