Using an AutoPay option offers lots of convenience and peace of mind when repaying federal or private student loans. The way AutoPay systems work is that you set up your account so that all of your monthly payments are paid automatically from your savings or checking account. The set-up process is quick and easy, can be completed online, and your lender can walk you through the steps if you have any questions.
After that’s done you don’t have to bother with watching the calendar, writing and mailing a check, or even logging in to your student loan account to authorize the transaction. Everything is done on time, too, which eliminates the worry about late charges or negative credit report consequences that are triggered by a delinquent payment.
Can AutoPay calculate changes to my variable rate student loans?
One good question that you may be asking, however, is how do you set up AutoPay if you have a student loan that includes a variable rate. After all, these kinds of loans are tied to prevailing interest rates that do not necessarily remain the same from month to month and year to year.
If rates rise, for example, your monthly payment could increase. Then again, if rates fall, the amount you have to pay could shrink. The good news is that the AutoPay systems that lenders use take all of that into consideration, and make the necessary adjustments and month-to-month calculations whenever a change in your rate or payment occurs.
Do I receive confirmation of payments to track the withdrawal amounts?
You will also be informed of the exact amount of the withdrawals to help you track your payments. You will typically receive a billing statement that can either be mailed or sent electronically, about two weeks before a payment is due. That notification includes the payment amount and withdrawal date.
You should, of course, make sure that before the request for AutoPay funds hits your bank account you have enough on hand to cover the withdrawal. If you need to make a deposit in order to add sufficient cash to your bank account, it is wise to do that a few days ahead of time. Sometimes there is a slight delay, for instance, between the time you make a deposit and when it shows up as available funds in your checking or savings account.
Can repaying a student loan with AutoPay actually save me money?
Most lenders off a 0.25% discount on your interest rate if you sign up for student loan AutoPay. While that amount may seem small, it adds up over time and can potentially save you hundreds or thousands of dollars over the lifetime of your loan. Lenders offer this discounted rate because they benefit from AutoPay, too, since it reduces the risk of late payments.
In addition to the reassurance that your loan will be automatically paid, you also enjoy the hassle-free peace of mind of not having to manage your payment every month. Even if you are traveling or totally forget to make your payment, the AutoPay process will have your back – as long as you maintain an adequate bank balance to cover the payment.