The question at the top of many people’s minds is: How can I pay my student loans off faster? Yet all some experts seem to want to talk about is why it’s unwise to take out student loans in the first place. To someone who already went to college and has loans to repay, this is far from helpful.
If you’ve got student loan debt, there’s one easy trick you should know about that can help you pay it off faster without annihilating your budget: Make biweekly payments on your student loans.
How Biweekly Payments Work
The concept of biweekly payments is simple — so simple that the immediate value might not be apparent. Here’s how it works:
Split your monthly payment in half. Pay that half amount every other week. Let’s say you’re paying $1000 per month on your student loans. Instead, pay $500 every other week. The easiest way to do this is line it up with your paychecks.
So, if you get paid every other Friday, for example, then deduct one half of a monthly student loan payment from your paycheck and apply it to your loans. It may take some adjustment if you’re used to paying once a month, but it’s worth it.
Why? Because paying every other week means there will be two months in the year that have three half payments go out instead of two and that equals one whole extra payment per year.
How Much Money This Trick Can Save You
One extra payment doesn’t sound like much, right? Let’s give it a test! Here’s a breakdown of my own loans:
- I owe Sallie Mae approximately $12,000; I owe Great Lakes approximately $36,000. This equals a total of approximately $48,000.
- My interest rates are consolidated at a fixed 4.5%
- My monthly payments break down to $134 and $250 for a total of $384.
- I used this calculator to see how much biweekly payments could save me and this was the result: Making payments biweekly can save me approximately $2,100 and take a whopping 19 months off my plan!
In other words, by splitting my monthly payments of $134 and $250 in half and paying $67 and $125 every other week, I’ll save over $2,000 in interest and I’ll pay my student loans off almost two years faster. All by simply switching the way I pay!
Who This Works for, Plus One Important Reminder
Biweekly payments can work for you whether you’re paying on private or federal loans. In fact since private loans come with much higher interest rates, this method could save you even more money.
But, in order to make biweekly payments work for you, there’s one very important thing to remember: both of the half payments need to be in before the next month’s due date. If only one makes it in before the due date, you’ll end up getting penalized for paying under the minimum.
Whether you get paid once or twice a month (which could make initial setup slightly more challenging) or biweekly, be careful to time your payments correctly so that you never end up paying under. Once you do that, you can sit back and watch your loan balances decrease faster!