Automating your finances can be a great way to stay on top of due dates and never worry about missing a loan payment. But even if you’ve set most of your bills on autopilot, you’ll likely find there’s more to consider when setting up automatic student loan payments.
Though there are opportunities to save money by enrolling in student loan automatic payments, the process can be confusing and do more harm than good if you don’t know what to expect.
This guide will walk you through the process, along with some considerations to keep in mind, including:
- How to sign up for automatic student loan payments
- Things to remember about autopay
- Pay off your loan faster with weekly payments
- Save interest costs with student loan refinancing
Before you automate your student loan payments, make sure your repayment plan is practical for your current financial situation. Otherwise, you could be committing to a monthly payment that you cannot always afford.
Options may be more limited for private student loans, but federal student loans offer several income-driven repayment plans that can limit your monthly repayment to a set percentage of your disposable income, making autopay more practical.
Pros of student loan autopay
- Never miss a payment. You’ll never forget to make your student loan payments, making it far less likely that you’ll end up in delinquency or default. As with any other automatic debit process, your student loan payment will be deducted from your bank account on the same day every month.
- Save on interest. When you automate student loans payments, most loan servicers provide a 0.25% interest rate reduction. This may not sound like much, but it could add up to hundreds of dollars of savings over the life of your loan. For example, on a $20,000 loan, dropping from 5% to 4.75% interest would save you $293 over 10 years.
- Make extra payments. You can set up an autodebit amount that’s greater than your monthly minimum. This is an excellent way of paying off your student loan faster. Granted, you could always send in a little extra if you decide to pay by check every month, but it’s easier to talk yourself out of it that way. When it’s already set up through autopay, you’re committed.
Cons of student loan autopay
- There’s overdraft risk. You’ll need to make sure you have the money in your account to cover the autopay amount every month. If not, you’ll be looking at an overdraft or insufficient funds fee through your bank, not to mention a late payment.
- There’s less flexibility. The automatic payment will come out of your account every month, even if you mail in an extra payment that exceeds your monthly minimum. For instance, if your monthly minimum payment is $250 and you want to pay an extra $50 that month, don’t mail a check for $300 assuming it will stop the automated $250 from being deducted from your bank account.
- It’s tough to cancel. If you want to cancel your automated student loan payment, you will likely have to do so in writing and well before you want the payment stopped. For instance, if you have a FedLoan Servicing payment, the servicer will need up to 10 business days to process a written request for cancellation. Other servicers may have similar policies, so make sure to check.
As you likely know, your student loan servicer is the company that manages your loan for the lender. It is this servicer you turn to with questions and concerns about your loan, including automating student loan payments.
You can call the servicer directly with your questions, although you’ll often find that the information you need is on its website, sometimes including a user-friendly process for setting things up. Expect this set-up process to include provision of your bank account information, including your routing number and account number.
Federal student loans
The federal government uses nine different federal student loan servicers, all of which offer the automatic payment option. More information for each servicer is provided below, as well as phone numbers if you have a question or need help troubleshooting the process.
- FedLoan Servicing (PHEAA), 1-800-699-2908
- Great Lakes Educational Loan Services, 1-800-236-4300
- Navient, 1-800-722-1300
- Nelnet, 1-888-486-4722
- Cornerstone, 1-800-663-1662
- HESC/EdFinancial, 1-855-337-6884
- Granite State (GSM&R), 1-888-556-0022
- MOHELA, 1-888-866-4352
- OSLA Servicing, 1-866-264-9762
Private student loans
While there are many federal student loan benefits that don’t exist with private student loans, fortunately autopay discounts aren’t one of them. Many private loans come with this perk, including some from big names such as Sallie Mae, Citizens Bank and College Ave.
In fact, you might even find autopay rate reductions that are more generous than what’s offered by the federal government. PNC, for instance, will offer a 0.5% discount if you automate repayment.
If you have private loans, check with your lender for its policies.
If you don’t know for sure whether you have federal loans, private loans or a combination — or if you’re just not clear on whom to contact — then check out our guide to tracking down your student loan servicer.
Meanwhile, even if you switch to autopay, make sure to keep tabs on your monthly deductions. While one of the biggest benefits of automatic payments is dependability, never take it for granted. It’s a good idea to check your account every month to be sure your student loan payments, as well as any other automatic debits, are being deducted according to schedule.
Another way to pay less interest on your student loans is to make weekly payments (if your loan servicer allows it). Switching from monthly to weekly means you’ll pay a little bit extra over the course of a year (since some months will include five payments instead of four) — but it also means you’ll pay down your loans more quickly and cut the interest charges you’re racking up.
Here’s how it works: Let’s say you pay $200 a month on your student loan. Over the course of 12 months, that adds up to $2,400. Now think about your monthly payment in weekly increments — that’s $50 per week since most months have four weeks.
If you multiply $50 by 52 weeks, you’ll end up paying $2,600 per year, sneaking in an extra $200 toward your debt. That’s an entire month’s payment!
Using the interest rate reduction that comes with automatic debit and making weekly payments are two ways to save a little bit of money. Another option is to refinance your student loans, which could net you a lower interest rate and save you a bundle over the life of the loan.
Student loan refinancing can also make your monthly payments more manageable if you take out a loan with a longer term than what you have left on your current repayment.
Note, however, that a longer repayment means you’ll pay more interest over time. Also, if some or all of your loans are federal, refinancing will turn them private, meaning you’ll give up some of your protections (including income-driven repayment plans and certain government loan forgiveness options). Then again, if you expect a smooth repayment, you might not need those protections and can focus instead on saving the most money.
Be aware that private lenders also tend to have strict qualification requirements for student loan refinancing, including good credit and a stable income. This means you might need a cosigner to get approved to refinance.
Emily Long contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.