Enrolling in autopay, or automatic bill payments, can make it easier to manage and pay your student loans. Rather than having to make payments every month, autopay does it for you. Your monthly student loan payment comes out of your bank account on time and you don’t even have to think about it.
Autopay has other benefits, too, including potentially saving you money. Read on to learn how automatic repayment plans for student loans work, and why you may want to consider using autopay.
Key Points
• Autopay ensures consistent, on-time student loan payments and reduces the risk of missed payments and late fees.
• Enrolling in autopay can lower interest rates, saving money over time.
• Consider the impact of autopay on monthly budget and cash flow, and ensure bank accounts have enough funds to avoid an overdraft.
• Review accounts regularly to check balances and catch any mistakes.
• Adjust autopay settings as needed to align with financial goals, such as paying more than the minimum due toward student loans.
Understanding Student Loan Autopay
When you sign up for student loan autopay, you are authorizing your lender or loan servicer to automatically deduct your monthly student loan payments from your bank account. You are not responsible for sending the payments yourself. Instead they happen automatically on a recurring basis.
This is how autopay works: Each month, your student loan payments are automatically transferred from your bank account to your loan servicer through an electronic payment system. Typically, your loan servicer will send you a notice of payment in advance of every withdrawal so that you can keep track of them. It’s important to check that you have enough money in your account every month so there isn’t an overdraft.
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Key Benefits of Using Autopay for Student Loans
Besides convenience, there are several other advantages of putting your student loans on autopay.
Interest Rate Reductions
One of the major perks of enrolling in autopay is the potential for an interest rate reduction. Many federal and private student loans offer a discount of about 0.25% just for signing up for autopay.
While the discount may sound small, it can add up over the life of the loan.
Never Miss a Payment
If you miss a federal student loan payment, your loan becomes delinquent the first day after the missed payment. With some private student loans, missed payments may result in late fees. Failing to make payments could also impact your credit, which could make it harder to get a credit card or take out a car loan.
With autopay, your student loan payments will be on time. Just make sure you have enough money in your bank account each month to cover the amount
Potentially Help Build Your Credit Score
Making on-time student loan payments via autopay will be reflected on your credit reports and help you establish a positive payment history. Since payment history accounts for 35% of your credit score, using autopay could help build your credit score over time.
How to Set Up Autopay for Student Loans
Most federal student loans offer autopay, and many private student loans do as well. In fact, as you’re shopping for and comparing private student loans, you can check to see if autopay is an option the lenders offer.
You can set up autopay on your loan servicer’s or lender’s website. Simply confirm that you want to enroll in autopay and provide all the relevant information, including your bank account number and routing number. By default, autopay may be set to pay the minimum amount on your loans. If you’d like to increase the amount paid, you can indicate that during the sign-up process.
If you have federal student loans and you’re not sure who your loan servicer is, sign into your account at StudentAid.gov and scroll to the “My Loan Servicer” section. There, you’ll find your loan servicer’s name and contact information. If you have private student loans, go to your lender’s website to enroll.
You can also set up autopay for student loan refinancing. Simply follow the same instructions as above.
Recommended: Refinancing Private Student Loans
Potential Drawbacks to Consider
While there are benefits to using autopay for student loans, there are also some disadvantages to consider.
• Making just the minimum payment: By default, autopay is often set to deduct the minimum student loan payment each month. If you’d like to pay more every so often to try to repay your debt faster, you’ll need to log into your account and change the payment amount.
• Overdrawing your account: Unless you’re diligent about making sure there are enough funds in your account each month, autopay can make it easier to end up with an overdraft. This could result in your bank charging you overdraft fees.
• Not catching payment mistakes: With automated payments, it’s easier to forget to check your account, which means you may miss errors. For example, your loan servicer might apply a payment incorrectly. Be sure to keep track of your student loans to help ensure that you spot — and correct — any mistakes.
Making the Most of Autopay for Student Loan Management
An automatic repayment plan for student loans can be a great way to stay on top of your student loan debt so that you don’t miss a payment. But don’t just set up autopay and forget it.
Instead, review your account regularly to stay on top of your balance and check for any errors. And increase your payment amount when you can — just log on and change the amount. Making extra payments over time can help you repay your debt faster.
The Takeaway
Whether you have federal or private student loans, or you’re doing a student loan refinance, autopay is an easy and convenient way to make sure your loans are paid on time every month. Autopay is simple to set up and many lenders offer an interest rate discount just for doing so.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
How much can I save with an autopay interest rate reduction on my student loans?
Autopay typically allows you to save about 0.25% on your student loan interest rate. The discount may seem small, but over time, it can add up.
Can I change my autopay payment date if needed?
Yes, you can change your auto payment date. To do it, contact your loan servicer’s customer service department by phone or email and be sure to include your account number. Note that this kind of change request may take three to five business days to process. Your new due date will become effective during a future billing cycle, so ask your loan servicer for written notification of the date.
What happens if I don’t have enough funds in my account?
If you don’t have enough funds in your account, you’ll likely face an overdraft fee. Your bank might also decline the transaction and charge you a non sufficient or insufficient funds fee. Try to stay on top of your account to make sure you have enough money in it before your payments are due.
Do all student loan servicers offer interest rate discounts for autopay?
Many student loan servicers offer interest rate discounts for autopay. The discount is typically about 0.25%. Check with your loan servicer or lender for more information.
Can I use autopay for both federal and private student loans through SoFi?
SoFi does offer autopay for private and refinanced student loans. However, things work a little differently with federal loans. Because SoFi is a private lender, a borrower would need to refinance their federal student loans first in order to use autopay. Just be aware that refinancing federal loans makes them ineligible for federal benefits like deferment and income-driven repayment plans. To set up autopay, simply log into your SoFi account and click on “Set Up” on your Loan Summary page.
photo credit: iStock/Igor Alecsander SoFi Loan Products
SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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