What are the benefits of paying student loans biweekly?

Most lenders offer student loan borrowers the option of making biweekly payments instead of monthly payments. And there are significant benefits to doing so: You’ll pay off your loans faster and save hundreds of dollars in interest payments.

Given how prevalent student loan debt is, extra payments can go a long way. After all, Americans owe a combined $1.75 trillion in student loan debt, according to the Federal Reserve. And the average amount owed by people carrying this debt ranges from $29,647 for North Dakota residents to $54,795 for people living in Washington, D.C., according to the Education Data Initiative. An extra payment a year can go a long way toward saving on interest.

Is it better to pay student loans twice a month?

By opting for biweekly payments on your student loans, you’ll make 26 half payments over the year instead of 12 full payments. The result is one extra full payment on your student loan every 12 months.

How much you can save with this method depends on how much you owe, your current payment and your current student loan interest rate. You can see the savings you might have through a student loan calculator.

Example

Let’s say you borrow $36,000 in Direct Unsubsidized Loans for your undergraduate education, which has a fixed interest rate of 5.50 percent. Using a student loan calculator, you can see the monthly payment for a 10-year term is $391. In one year, you’d pay a total of $4,692. Over the course of the loan, you’d pay $10,883 in interest.

If you break your payment in half and pay about $196 every two weeks, you would pay $5,096 in the same 12-month period, one full payment more than if you were making monthly payments. Your total interest paid would be $9,624 — a savings of over $1,000.

How to set up biweekly payments

Check with your loan servicer to see if you can set up automated biweekly payments. Not every loan servicer offers this option. If it doesn’t, pick a day during the week to make your payments and set a biweekly reminder on your calendar. Make sure you’ve adjusted your budget for the change in payment schedule.

For biweekly payments to help pay off your student loans, you’ll need to:

1. Split your monthly payment. Take your regular student loan payment and divide it in half. The resulting figure is the amount you’ll pay on a biweekly payment plan.
2. Pay that amount every two weeks.  Make both payments before your student loan due date.
3. Make sure your lender applies the payments properly. Contact your lender to ensure the extra amount is applied to the principal of your student loan instead of toward future payments.

How to budget for biweekly payments

Making payments biweekly means you’ll pay a little extra toward your student loans every year, so you may need to adjust your budget slightly. If you receive paychecks biweekly, try to line up your student loan payments to coincide with receiving your paycheck. That will make it easier to see how biweekly payments affect your monthly expenses.

Once you can compare the biweekly payment against your take-home pay, make sure you have enough income to cover other important bills and expenses. Factor in your rent or mortgage payment, car payment, insurance costs, utility bills and typical living expenses.

Other ways to pay off student loan debt faster

If you’re not sure whether you can afford biweekly payments on your student loans, or if you’re looking for the fastest way to pay off student loans, there are other strategies to consider.

Make payments every 3 weeks

Instead of making biweekly payments toward your student loans or 26 half payments per year, consider making your full monthly student loan payment every three weeks. With this repayment strategy, you would make more than 17 student loan payments per year instead of 12. It requires a bigger financial commitment, but the amount of time and money you save can be significant.

Consider refinancing student loans

Borrowers can also consider refinancing their student loans with a private lender, although refinancing federal loans with a private company means missing out on federal benefits like deferment, forbearance and income-driven repayment plans. If your main goal is getting out of debt, however, refinancing could be a good option.

When you refinance, you’ll get a new loan to replace your existing ones. However, you want this new loan to come with a lower interest rate. By getting a lower interest rate, you may be able to make larger payments toward your principal and shorten your repayment timeline.

Before you refinance student loans, see if you can qualify for the best student loan rates and terms and use a calculator to determine your new monthly payment and total savings. Make sure the savings outweigh giving up any federal protections.

Implement other debt payoff strategies

If you have multiple student loans and want to save money or pay off debt faster, you can also use the debt snowball or debt avalanche repayment methods.

• Debt snowball method: With the debt snowball strategy, you make the minimum monthly payment on all your debts, then put as much extra money as you can toward your smallest debt. As your smaller debts get paid off, you “snowball” those payments toward the next-smallest debt until all your student loans are gone.
• Debt avalanche method: With the debt avalanche method, you make the minimum monthly payment on all your debts, then pay as much extra as you can on the debt with the highest interest rate. As your most expensive debts get paid off, you “avalanche” those payments toward the loan with the next-highest interest rate until all your loans are paid off.

Enroll in Public Service Loan Forgiveness

You may consider enrolling in Public Service Loan Forgiveness (PSLF) if you work or are planning to work in the public sector. You must work for an eligible public service employer to qualify. With this plan, you make monthly payments for 120 months before your remaining loan amounts are forgiven.

While PSLF requires 10 years of on-time monthly payments to qualify, it can be a lifeline for people who struggle to afford the payment on a standard 10-year repayment plan and those who might spend decades in student debt.

Bottom line

Paying off your student loan can take years and cost thousands of dollars in interest. If you can adjust your budget and make 26 biweekly payments instead of 12 monthly payments, you’ll be able to pay your loan off faster and save a significant amount of interest.