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Slaying My Student Loans With Automatic Biweekly Payments

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.

end-of-original-biweekly-payment-plan

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.

actual-ghs-history

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.

current-biweekly-amortization-schedule

At this rate, my last payment should be on March 30, 2018, almost nine months ahead of the original schedule.

tellerDon’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.

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I Refinanced My Student Loan

After I paid off my car loan in September, I put those big payments towards my Mohela student loan, which was $14,141.08 at the time. Last month, at $12,074.43, I refinanced the loan with my credit union, GHS Federal Credit Union. The old loan was 6.55% interest, $258.13 a month, with a scheduled payoff date of August 7, 2021

Studentloan

 

The new loan is 5.00% interest, $329.64 a month, and a scheduled payoff date of December 6, 2018.

GHSsummary

 

Since I had been making monthly payments of $1000.00 to Mohela, and plan to continue that with the new loan, the change in my minimum monthly payment doesn’t affect my monthly cash flow, and my planned payoff date is December 2016.

Studentloanamorttable

 

I had previously said that I wouldn’t refinance my student loan because I didn’t want to lose the leniency of the lender, just in case I couldn’t make the loan payments for any reason. But with a planned payoff date of December 2016, I expect that I won’t need to ask for leniency. In addition, I don’t want to deal with the possibility that my student loan could be sold to another lender without my knowledge.

I borrowed $11,000.00 from GHS rather than the full $12,074.43 amount to lower my monthly payment, and to force myself to pay off the remaining $1,074.43 right away, since the first payment of my new loan is due in January. I also set up automatic biweekly payments from my GHS checking account, so that I never have to worry about late payments. And since the loan for my other car is with GHS as well, it is so convenient to be able to log into only one account online to see my bank accounts and both loans, rather than having to log into multiple websites. I always have trouble remembering my password for my Mohela account.

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