When Should You Pay Your Student Loans Each Month?
By sending your payment on your student loan due date every month, you can stay current on your debt. But if you want to pay off your loans faster, you could opt to make one or more extra payments before your bill is due.
You might also be able to switch your student loan due date and customize your payment plan based on what works best for you. Let’s review your options:
Paying on your student loan due date
You’re usually set up to make a payment once a month on (or by) the student loan due date your servicer or lender decides. If you can afford it, set up autopay so your lender automatically withdraws your payment from your bank account each month.
Not only can you “set it and forget it” so you never miss a payment, but you’ll likely get a 0.25% interest rate discount for using autopay. That said, your student loan due date might fall at an inconvenient time each month.
If you’re interested in paying your loan before the due date, you could contact your servicer and ask to move it to another date.
Shifting your student loan payment due date
If you’re able to make an additional full payment or two, you can get ahead on your loan and push your next due date into the future — if your lender allows this.
Once I was a few months ahead on my loans, I didn’t have to pay for months. But I wasn’t going to let that interest grow while waiting to make another payment.
I wanted my loans paid off early. Since no payment was due for months, I could make a monthly payment any day of the month I wanted without penalty.
Another option is to request that your servicer not advance your due date so that you can make multiple extra payments per month.
Remember that most federal and private student loans offer a six-month grace period after you graduate, leave school or drop below half time, during which you won’t have to make payments. However, you do typically have the option to make payments anyway. Doing so could reduce the interest you’ll pay overall and cut the amount of time it takes to pay off your loans.
Splitting your monthly payment in two
Another approach is to make biweekly student loan payments instead of monthly ones. Let’s say your student loan payment each month is $500. You don’t have to pay the whole $500 at once — instead, you can split it with multiple payments, as long as the total is $500.
Most people don’t get paid once a month, so looking to pay student loans monthly might not make sense for your situation. Instead, you can contribute $250 every payday on a biweekly student loan payment schedule.
If you are paid twice each month (24 paydays a year), you’ll still be paying the same $500 a month — it’s just broken up so the timing of your student loan payment matches the timing of your income.
If you are paid biweekly (26 paydays a year), you would make the same $500 minimum payment each month. But for two paydays each year, you would be making a bonus payment.
That’s the same as making a full extra payment each year. And since you’re used to paying your student loans every time you get a check, it may not feel like you’re spending more.
Paying a little extra with 26 paydays can shave time off your student loans. It’s all about lining up your student loan payments with your paydays.
Paying a little extra every payday
If contributing every payday sounds good to you, you can set up automatic payments so you don’t have to think about it. But if you want to pay off your loans sooner, consider adding a little extra to your biweekly payment. You would not only cut your repayment term, but also save money by avoiding future interest charges.
When I had to pay student loans, I made a payment every payday and regularly increased that amount. I started paying half of my payment twice each month but then realized that adding an extra $10 would cut an extra few months off my loans. Then I increased it to $20 extra each payday, then $40, then $50.
If you focus on your budget and work hard to maximize your income, you can potentially afford to add just a little extra — maybe even $5 or $10 per payment. It all still adds up.
This is part of the strategy I used to pay off $40,000 in student loans two years after graduation.
How to choose the right payment schedule for your needs
Maybe you’re paid monthly, so monthly payments make the most sense for you. Perhaps you’re paid weekly, so a smaller payment every Friday works for you. Or you’re a freelancer with irregular income, and making large payments less frequently is your best option.
No matter which payment schedule you choose, create a budget so you can allocate as much extra money to student loans as possible while also meeting your other financial needs.
One strategy could be to adopt the 50/30/20 budget, which suggests spending no more than 50% of your income on needs, no more than 30% on wants and no more than 20% on savings. While creating a budget, you might find that you have room to cut your cable bill, for instance, which means you can cut money from your wants and reallocate it to debt repayment.
When extra loan payments don’t make sense
In some cases, working to pay off loans fast by making extra payments may not be your best financial plan. If you’re working toward another major goal, such as buying a home or moving to a new city, paying the minimum on your loans and saving additional money may make more sense.
Additionally, saving for retirement should be a priority, too — especially if you’re young and have time for your money to grow. You may save more money in the long run if you invest in a 401(k) or individual retirement account (IRA) while paying the minimum on lower-interest student loans.
You can usually change your payment plan anytime as long as you meet the minimum, so test out different strategies on when to pay student loans to see what works best for you. Plus, make sure to communicate with your loan servicer to make sure you’re staying up-to-date on all your student loans.