Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
Updated on Wednesday, June 3, 2015
Making a monthly payment to chip away at student loan debt can seem as if you’re merely throwing money into the abyss. Those a few hundred dollars a month towards tens-of-thousands of dollars in debt (with interest attached) can take a decade or more to eliminate. But don’t start to despair quite yet. Yes, it can feel like an overwhelming amount of debt – but there is a small tweak you can make to your repayment plan to shave off time and interest owed.
This glorious student loan repayment hack is as simple as dividing in two: making bi-weekly student loan payments.
What are Bi-Weekly Payments?
Let’s say you have $30,000 in student loans at a 4% interest rate. You’re making a monthly payment of $225.
At this rate, it will take you 177 months (nearly 15 years) and cost $9,780.96 in interest to repay your loans.
But instead of making one monthly payment of $225, you can split your payment into bi-weekly payments of $112.50. Just divide your monthly payment in half. You’re still paying $225 a month, but this small tweak will save you $1,175.52 and shave 18 months off your student loan repayment. Both federal and private lenders usually allow for the bi-weekly payment structure.
Why Bi-Monthly Payments Work
So how does this financial miracle happen? Simple math of course.
The year is made of 52 weeks, so you’ll be making 26 of those bi-weekly (half) payments. This means you actually end up making 13 full payments a year instead of 12.
Before you freak out about how you can afford to make 13 payments instead of 12 keep in mind this payment structure probably applies to your job too. If you get paid bi-weekly, then there are 2 months a year you get paid 3 times.
Other Ways to Reduce Time and Money Spent on Student Loans
If you get a bonus or unanticipated money, never hesitate to throw more money towards your loans to help chip away the principal balance. Just make sure the money is being applied to the current principal debt and not future bills.
We’d also recommend you round up. If your minimum payment each month is $225, shoot for paying $250 per month. Adding 25 extra dollars per month will add up quicker than you think, especially if you’re paying bi-weekly.
One Potential Glitch to Keep in Mind
A bi-monthly payment structure can save you a lot of money, but you have to be sure to execute it correctly.
Both your half payments must make it to your student loan provider before the due date. If you fail to submit the payment on time, it could result in a penalty for paying below the minimum required.
A simple way to keep this process going smoothly would be to set up auto-pay. Just make sure that you readily have funds available in your checking account to cover the payment when it’s due. A best practice would be to time it with your bi-weekly paycheck getting deposited.
Looking to Refinance or Consolidate?
Dealing with a bi-weekly payment on just one student loan would certainly be easier than doing it for multiple providers. If you’re considering consolidating or refinancing your student loans, then be sure to check out our student loan refinance table. You should always do your due diligence and evaluate potential rates, benefits offered (like unemployment protection) and the perks you may lose by consolidation or refinancing. Keep in mind, refinancing federal loans comes with certain consequences like losing eligibility for forgiveness or income-based repayment programs.