My son is applying an extra payment every 2 weeks to his student loan to specifically target his high interest rate loans. As we understand it, his regular payment will be applied equally across all of his loans. He has been able to choose which loans to put the extra payments on in an effort to get rid of the really high interest rate loans first. He owes about 104,000 and has some 7% and 6.5% rates that are growing quickly.
He is on a 10 year repayment and has no issue with the payment. But here is the question. If he were to extend it to 25 year repayment, he could keep paying the same amount each month but apply more to the loans he chooses because the required payment would be smaller. As far as I can tell there is no down side to this because he will still pay it off in less than 10 years. The upside would be getting rid of the higher rates faster. Does this make sense or am I missing something?
It gets messy if you simply pay more each month. Your son will default into pay ahead status. That's annoying. What you son is doing by assigning the extra payments manually is the smart way to go.
You can totally change the repayment plan, but there will be minimal to no net benefit if the payment he's making doesn't change - just more work. The slight potential net benefit is the possibility to snowball - make minimums on everything and put all the extra towards the highest interest rate loan first. Then move through the rest of the loans. But I think if you did the math, the actual interest saved would be marginal at best.