A recent article in The New York Times brought together many of the staggering statistics on college debt. Among the most shocking is that the total amount of student debt in the United States is nearing $1 trillion, which is more than double what it was a decade ago. College graduates have more debt, yet they’re also earning lower average salaries. This means it’s often a struggle to handle student loans while also preparing for the future, whether that means saving up to buy a home, saving for retirement, or being in the place financially to start a family.
If you have student loans, you’re eligible for a wide range of repayment programs. Many of them extend your repayment term for lower monthly payments, but exponentially increase the amount of interest you’ll pay. A wiser alternative in many cases is to focus on how to pay off a loan quickly.
Bi weekly payments are one of the best ways to do this because you’ll accelerate your repayment schedule while breaking up the payments into smaller, more manageable chunks.
How Bi Weekly Payments Work on Student Loans
Rather than making a monthly payment on your student loans, you’ll make a half payment every two weeks. This payment is smaller, so it’s easier to let the amount go, and the cycle of making bi weekly payments will probably line up with your paychecks. That way you can focus on budgeting the rest of each paycheck for your other needs.
As you make payments, you’ll eventually get to a month where you make three half payments rather than just two, because months have slightly more than four weeks. During those months, your extra half payment will go entirely toward reducing your principal balance because you have already paid the interest. These are what especially help you pay off a loan because you’re taking out big chunks of what you owe and also reducing the amount of each future payment that goes toward interest.
Just take a look at a repayment calculator to get an idea of how much you’ll save. With an ordinary payment schedule, you could take 10, 15, or 25 years to pay off your loans. When you’re making bi weekly payments, you’ll usually cut at least 10% off your loan repayment term. The repayment calculator will also show you exactly how much you’ll save in interest, which is money you can put toward other financial goals.
If you’re ready to tackle your student debt and pay off a loan ahead of schedule, sign up today to start making bi weekly payments. You’ll thank yourself when you’re debt free!