College Ave does not charge a prepayment penalty on any of its student loans. You can make extra payments or pay the balance off entirely at any point without owing a fee, whether the loan is for undergraduate study, graduate school, a parent borrower, or a refinance.1College Ave. Do You Have Prepayment Penalties on Your Student Loans or Parent Loans The way College Ave calculates interest actually rewards paying ahead. But how your extra payment gets applied matters as much as sending it, and there are a couple of details worth knowing before you do.
No Penalty on Any College Ave Loan
College Ave states plainly that it does not charge prepayment penalties and that borrowers can reduce total loan costs by paying extra at any time.1College Ave. Do You Have Prepayment Penalties on Your Student Loans or Parent Loans That covers every product College Ave offers: undergraduate, graduate, parent, career, dental, law school, medical, MBA, and refinance loans.2College Ave. Student Loans with Low Rates and Flexible Repayment Options
This lines up with federal consumer protection standards. The Consumer Financial Protection Bureau has confirmed that all student loan borrowers have the right to make extra payments at any time without fees or penalties.3Consumer Financial Protection Bureau. You Have the Right to Pay Off Your Student Loan as Fast as You Can Without Penalty Your College Ave promissory note contains an explicit statement confirming the same thing, because Regulation Z requires the lender to say one way or the other; silence isn’t allowed.4eCFR. 12 CFR 1026.18 – Content of Disclosures
Why Extra Payments Save You Real Money
College Ave uses daily simple interest. The annual rate is divided by the number of days in the year to get a daily rate, and that daily rate is multiplied by your current principal balance to calculate how much interest accrues each day.5College Ave. How Is Interest Calculated on Student Loans This is why paying ahead works so well.
When you send a payment, the money first covers any accrued interest and fees. Whatever is left goes to reducing principal.6College Ave. Can I Make a Payment That Is Applied to Principal Only Once the principal drops, every future day’s interest calculation runs on the smaller number. The effect compounds. A lower balance means less daily interest, which means more of the next payment goes to principal, which drops the balance again. On a 10-year loan, even a few hundred dollars in extra payments during the early years can save a meaningful amount over the life of the loan.
Make Sure Extra Payments Actually Hit Principal
This is where borrowers quietly lose money. When you send more than your monthly minimum, some servicers apply the overage to your next bill instead of reducing principal right now. The industry name for it is “paid-ahead” status. Your due date advances, your next statement might show nothing owed, and it feels like you’re ahead of schedule. But the principal balance hasn’t dropped any faster than it would have on minimum payments alone, so the daily interest calculation doesn’t change.
College Ave’s system applies any amount beyond accrued interest and fees directly to principal.6College Ave. Can I Make a Payment That Is Applied to Principal Only Still, check your account after the payment posts. If your due date advanced and the next statement shows a reduced amount due, call customer service and ask them to apply the overpayment to principal instead of pushing the billing cycle forward. One practical habit: send your extra payment a few days after your regular monthly payment posts. That removes any ambiguity about which payment is the scheduled one and which is the additional principal reduction.
Paying the Loan Off Entirely
If you want to close the loan rather than just chip at it, get a payoff quote first. The balance shown on your dashboard isn’t enough, because interest accrues every day and the number will be slightly higher by the time your payment processes.
College Ave uses a 10-day payoff amount, which is your current balance plus ten days of interest. You can’t pull it from the online portal. You have to call customer service, and they’ll give you the figure over the phone.7Earnest Help Center. College Ave – How to Find Your 10-Day Payoff Information The quote assumes you’ll complete the payoff within those ten days. Depending on exactly when the payment lands, you may slightly overpay or underpay. Overpayments get refunded. Underpayments leave a small residual balance you’ll need to clear.
Two Trade-Offs Worth Weighing First
Paying off early cuts your total interest cost, which is the whole point. Two side effects are worth knowing about before you do it.
You Lose the Student Loan Interest Deduction
Federal tax law lets you deduct up to $2,500 per year in student loan interest from your taxable income.8Office of the Law Revision Counsel. 26 USC 221 – Interest on Education Loans For 2026, single filers with modified adjusted gross income up to $85,000 get the full deduction, phasing out between $85,000 and $100,000. Joint filers get the full deduction up to $175,000, phasing out between $175,000 and $205,000.9Internal Revenue Service. Publication 970 – Tax Benefits for Education If you pay $600 or more in interest in a year, your lender sends you Form 1098-E reporting the amount.10Internal Revenue Service. About Form 1098-E, Student Loan Interest Statement Once the loan is gone, so is the deduction. For most borrowers, interest savings from early payoff far outweigh the lost deduction, but the math is worth checking, especially if you’re deep in the phase-out range anyway.
Your Credit Score May Dip Temporarily
Closing an installment account can pull your score down a bit. You lose an active loan from your credit mix, and closing it can reduce the average age of your active accounts, which contributes to what credit bureaus call credit depth, roughly 21% of the score.11TransUnion. Do Student Loans Affect Credit Scores The dip is usually short-lived if your other accounts are in good standing. Paying interest on a loan you could eliminate, just to preserve a score, is an expensive way to protect a number.