Susan Kelly
Feb 01, 2023
You may reduce the time it takes to repay your student loans and the amount of interest you end up paying by employing a few straightforward strategies. Repaying your student debts every two weeks is a great option. Monthly loan instalments are the norm. The loan's interest is calculated monthly and added to the principle at the end of the day based on a 360-day year.
There are 52 weeks in a year, not 48 as may be expected given that each month is divided into four weeks. The math works out to an additional annual payment if you pay biweekly instead of monthly.
This will significantly affect your repayment schedule, allowing you to pay off your loan sooner and at a lower total cost. If you make biweekly payments on a loan with a standard 10-year payback period, you'll have it paid off in around nine years rather than the entire ten years. If your original schedule were extended, more years would be cut off from your original payback schedule.
However, remember that most lenders operate on a monthly payment plan and cannot adjust to a biweekly one. In addition, the lender is unlikely to reduce the interest rate because you are paying biweekly. In this case, interest will be computed based on the principal balance as of the first day of the billing cycle.
Check with them about setting up automatic biweekly payments. Most lenders do not currently support automatic biweekly payments. However, this may change if biweekly payment schedules gain popularity. You'll likely have to do this on your own, so set a reminder to pay half every two weeks.
The lender sees your increased frequency of partial payments as a sign of good faith and will likely continue to accept them. Regardless of when payments are made within a given month, interest will continue to accrue daily on the loan's outstanding balance from the previous month's payment cycle.
It's important to remember that some student loan servicers give a minor discount of 0.25% for setting up monthly auto payments. This discount could be forfeited if you make manual biweekly payments instead.
Make sure that the total of both biweekly payments reaches the lender on or before the first of the month. You may incur fees if you don't pay at least the required minimum each month. To do this easily, you can start making biweekly payments from the start of the following payment cycle. Your payments will always be on time if you do this.
Apply your monthly payments to the principal loan amount. Check that your payments go toward the principal (the loan balance) and not toward interest or fees. It's important to remember that you can't tell your lender to put your payment toward interest instead of the principal.
Make payments every two weeks at the same time each pay period. If your lender is flexible and you are paid every two weeks, as many people, biweekly student loan payments, try to schedule your payments that way. This way, you can rest easy knowing that your biweekly payment will come out of your account without any problems. Remember that there will be two months out of the year when you receive three paychecks and, thus, three loan payments.
If you want to get out of debt quickly, you should make payments on all of your loans every two weeks. Alternatively, you might prioritise the debt with the highest interest rate to reduce your overall debt load. You Might Want to Refinance If you have a low enough income, you can deduct up to $2,500 in interest paid on refinanced student loans as long as the money was used for approved educational expenses.
However, if you refinance for more than your student loans are worth, you may need help to deduct all the interest paid on your taxes.
Most of the safeguards associated with federal student loans, such as the Public Service Loan Forgiveness Program, might be nullified if you refinanced with a private lender. Forgiveness, release upon death or infirmity, and leniency.
Consolidating or refinancing your debts could be another viable option. Loans for higher education are typically repaid over ten years. The William D. Ford Federal Direct Loan (Direct Loan) Program and the Federal Family Education Loan (FFEL) Program use this as their default repayment plan. There is a 30-year maximum repayment duration for debt consolidation loans.
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