When it comes to student loans, we can all agree on the fact that the sooner it is paid off the better. Right?
You have been successful with getting on loan forgiveness programs and even participate in an income-based repayment plan.
But there is still a mountain of debt staring at you and all you wish is that you could pay it off faster. But how do you get it paid off faster?
Simple answer - by making more payments.
I hear your protest: “But I am not making more money as it is. How am I going to make more payments?”
I hear you. However, could you stick around for a simple mathematical calculation?
Let’s say your monthly student loan is $400. Let’s take that and multiply that by the number of months in a year - 12. By the end of the year you would have made payments totaling $4,800 (minus your interest).
Still with me?
Now, let’s say you take that $400 and split it into weekly payments which means you will pay $100 each week. If you stick to this weekly plan, in 52 weeks, you would have made $5,200 in payments.
That is an extra $400 over the monthly payments - a whole month’s payment!
Do you see how quickly we made an extra payment we did not “plan” on making and how that will eventually help pay off the loans faster? Throw in an extra $10 or $20 per week onto those weekly payments - if you can afford it - and you could move your case along even faster. Exciting, yes? Great!
Now let’s talk about the mechanics of setting up and paying your student loans weekly.
How To Set Up And Pay Your Student Loans Weekly
1. Make sure your loan servicer is fine with you making weekly payments instead of monthly. Most loan servicers are happy to be getting paid and so we don’t envision any problems here. However, for the sake of clarity, the suggestion here is to call your loan servicer and find out from them if they are okay with you making weekly payments on your student loan.
2. Take the total of your monthly loan payments and divide that by 4 or the number of weeks in the month. Most months have 4 weeks. Occasionally however, you will have that one month that has a “fifth” week. Depending on the day you decide to make payments this might be true for you or not. In any case, like the calculation we did above, if your total monthly payment is $400, your weekly payment will come to $100. Making the weekly payment when you encounter that occasional “fifth” week will keep you ahead. Adding an extra $10 or $20 to your weekly payments can go a long way as well to helping you reach your goal faster.
3. Select a day to make the payments each week and make sure all your weekly payments arrive before your monthly payment due date. To keep things consistent (and maybe even fun) you can keep a calendar or a phone notification of your loan payment due date each month and set up your weekly payments so that the total amount you are expected to pay monthly, arrives before the due date. So for instance, if you choose to make payments each Monday, it is important to make sure that the last payment you make will still reach your loan servicer before the due date. We want to steer clear of those pesky late fees.
4. Use automation to keep things consistent. Once you have determined that you can commit to making your calculated payments every week and most importantly, that it will not cause you to go into undue financial difficulty for the month, you can automate your payments to keep things consistent. The benefits of automation include:
On the other hand, if you ever decide to cancel automated payments for some reason, you might have to request the cancellation in writing which can take days to process. It is therefore important to find out your loan servicer’s policy on automated payments beforehand.
5. Last but not least, always check to make sure your payments have posted. Automated payments may take a day or two to process so it is advisable to be on top of making sure your weekly payments have posted so you are not getting hit with unnecessary late fees.
Even more so, if you're just getting started with weekly payments, you always need to ensure that your "payment due" is completed each month on time. Once you get going, this isn't a problem, but it could hurt you during your first month or so if you're not careful.
Paying off student loans is a dream a lot of people take years and years to achieve. These 10-year or even 20-year repayment plans add thousands of dollars in interest charges so that most people end up paying way more than they owed to begin with.
Paying your student loans off faster has the dual benefit of getting you to the end of living with student loan debt and helping you be free to take other major financial decisions in your life.
As we saw with the calculation we did at the beginning of the post, making weekly payments on your student loan will help you do exactly that.
What are your thoughts on this? Are you already paying your student loans weekly or even bi-weekly? Let’s hear about it in the comments.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.