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Why you should make biweekly payments on your student loans
Get out of debt faster and save on interest.
Making payments on your student loans every two weeks can be an easy way to pay off your debt early with relatively little difference to your monthly budget. If you get a biweekly salary, you can easily line up your due date with your pay schedule. But it might not be the best solution if you’re currently struggling with your student loans.
3 reasons to make biweekly repayments on your student loans
There are three main reasons why you might want to make biweekly repayments on your student loans:
1. You can get out of debt faster.
Paying your loans once every two weeks makes your repayments slightly more frequent than paying them off once a month. You’ll end up making an extra payment each year with little effort on your part. Paying off your loans faster will push up your final due date and reduce the overall cost of the loans.
2. You can save on interest.
Since interest adds up over time, paying off your loans faster reduces your total loan cost. So why not pay every four weeks instead? Because paying half that amount earlier reduces your loan principal, so you end up paying less interest on a lower amount.
Let’s take a look at an example:
Say you had a $10,000 loan balance with a 6% interest rate. You owe $400 toward your loan balance this month. If you make biweekly repayments, you’d pay $45.50 in interest.
But if you decide to wait until the full four weeks are up, you’d pay about $46 in interest. While that might not seem like much, those savings add up over time.
3. You might not notice a difference in your budget.
As we saw in the example above, you can save without making larger payments toward your loan balance. You can make a difference in your interest cost by spreading your monthly loan cost into smaller, more frequent repayments. This makes biweekly repayments a helpful saving tip if you don’t have a lot of extra money to put toward your loans.
How much can I save?
How much you can save depends on your loan balance, your interest rate and how much you have left in your loan term.
Let’s take a look at how much you might save on a loan with a 6% interest rate with different balances and terms:
| Loan balance | Remaining term | Interest savings |
|---|---|---|
| $5,000 | 5 years | $40.00 |
| $10,000 | 10 years | $333.24 |
| $15,000 | 15 years | $980.73 |
| $20,000 | 10 years | $666.48 |
| $25,000 | 15 years | $1,634.94 |
| $30,000 | 15 years | $1,961.46 |
| $40,000 | 20 years | $4,513.65 |
| $50,000 | 25 years | $8,348.00 |
| $100,000 | 25 years | $16,698.53 |
As this table shows, the sooner you sign up for biweekly repayments, the more you save on interest and the faster you get out of debt.
How much faster will I get out of debt?
That depends on how much you have left in your loan term:
- 5 years left: 5 months faster
- 10 years left: 12 months faster
- 15 years: 21 months faster
- 20 years: 33 months faster
- 25 years: 47 months faster
How do I set up biweekly payments?
The best way to set up biweekly repayments is to schedule regular extra repayments on your student loans, rather than making them manually every month. Here’s how to get started:
- Contact your servicer. Reach out to find out if you can set up extra repayments on autopay. If you can’t, you’ll have to pay manually — ask your servicer about the process for extra repayments. Otherwise, move on to the next step.
- Split your monthly repayment in half. This is the amount you’ll ask to pay every two weeks.
- Set up extra repayments. Follow your servicer’s instructions to set up recurring extra repayments that apply to your loan principal and interest. Make both fall before your bill is due so that you don’t end up paying less than you owe the first month.
When might I want to avoid biweekly repayments?
Biweekly repayments might be an easy way to save, but they aren’t the right choice for everyone. You might want to stay away in the following situations:
If you can save more with autopay
Most lenders offer a 0.25% interest rate reduction when you sign up for autopay. If you’re not able to stay on autopay while making biweekly repayments, make sure the savings are worth the higher rate.
If you plan on applying for forgiveness
Applying for a program that would wipe out your full loan balance — like Public Service Loan Forgiveness (PSLF)? Repaying your loan faster means you’ll actually pay more in interest and toward the balance. These programs also might require you to enroll in a repayment plan that isn’t compatible with biweekly monthly repayments.
If you’re on an income-driven repayment plan
You likely aren’t signed up for an income-driven repayment (IDR) plan if your repayments cover your full balance and interest that adds up each month. But if you are on an IDR plan, you might not be able to save as much if you make extra repayments on your loan.
And you could actually make your loan more expensive if you decide to leave an IDR plan, since your lender adds any unpaid interest to your loan balance. This means you’ll be paying interest on interest.
Compare your student loan options
Bottom line
Making biweekly repayments is an easy way to save on interest and get out of debt faster without affecting your monthly budget. But it might not be worth it if you’re on an incompatible repayment plan, want to apply for forgiveness or would lose your autopay discount.
You can learn more about how repayments work by checking out our guide to student loans.
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