Late last year, on December 10, 2015, I refinanced my public student loan with a private loan of $11,000.00 from my credit union to take advantage of the lower interest rate of 5% rather than the original rate of 6.55% with Mohela. My first payment of $329.68 was due in January 2016, and the last payment is due December 2018 (3 year loan).
To pay off the loan faster, I immediately set up automatic biweekly payments of $164.82 to start on December 25, 2015, and occur every two weeks. I just asked the loan officer if I could have the amount automatically deducted from my account (with the same credit union). He calculated when the deductions would have to occur, and set them up. This way, not only do I make the required monthly payment of $329.68 ($164.82 X 2), but I actually make one additional monthly payment since there are 13 payments of $329.68 (26 payments at half the monthly payment) rather than 12.
At that rate, my last payment will be three months early, on September 14, 2018, rather than the scheduled December 8, 2018.
Then in June 2016, I walked into the credit union and asked the teller if I could increase my biweekly payment from $164.82 to $180.00. The teller filled out the paperwork for me, I signed the bottom, and the first $180.00 biweekly payment was deducted from my account on July 8.
Two weeks later, I walked back into the credit union, spoke to another teller, and increased my biweekly payment again, to where it currently stands at $205.00, which started on August 5. My monthly payments now total $410.00 ($205.00 X 2), and I still make 13 monthly payments a year.
At this rate, my last payment should be on March 30, 2018, almost nine months ahead of the original schedule.
Don’t let student loans, or any loan for that matter, scare you into thinking that you’re in a hopeless situation. Not only are biweekly payments easier to manage, and ease the stress on your cash flow, but they actually pay the loan down faster (here is the biweekly payment calculator to calculate your loan payments). The scheduling of my automatic student loan payments means that I never have to worry about missing my biweekly payment.
And whenever I want to increase my payments, I just walk into the branch and speak to the teller.