College can be expensive, and for many graduates, one of their first major responsibilities right out of college is learning how to pay off student loans. Unfortunately, there’s no real shortcut to making your debt disappear. Fortunately, if you have a checking account, you have an important tool that may help you. Let’s look at how to pay off student loans with your checking account, and some helpful tips to get you started.
How your checking account may help
When you’re figuring out how to pay off student loans, it’s easy to overlook your checking account. In reality your checking account can be a powerful financial tool for tackling student debt. Here are just a few ways your checking account might help you pay off student loans and take control of your finances.
Setting funds aside
A checking account can be used to earmark funds specifically for student loan repayments. You can allocate a portion of your income to your checking account, perhaps by indicating a minimum amount or even considering a separate account just for repayments. This may help ensure you have the necessary amount available when the due date comes around. Practices like this may help you maintain a consistent repayment schedule.
Avoiding interest charges and late fees
Many checking accounts offer online bill pay where you can set up reoccurring payments for your student loans through the bank’s mobile app or through their bill pay online. Automated payments may also be scheduled through the creditor. Tools like these may be helpful in avoiding late fees and additional interest charges.
Managing your debt and personal finances
Some checking accounts offer budgeting tools that might help you analyze your spending and improve your financial literacy in ways that may benefit you throughout your life. Learning to use these tools might provide new insight into your spending habits, which could help you make consistent payments.
How to pay off student loans faster
A checking account may come in handy when paying off student debt. But how about possibly paying off student debt faster? Let’s explore a few strategies that could potentially accelerate your loan repayment process.
Making bi-weekly payments
By splitting your standard monthly payment in half and paying that amount from your checking account every two weeks, you’ll end up making the equivalent of one extra monthly payment every year. This is because the 52-week calendar divides into 26 bi-weekly segments. Bi-weekly payments may help you reduce your principal balance faster and save some interest over time.
While saving isn’t always easy, you can designate any additional payment atop your standard repayment installment to go toward your principal balance. Paying extra might help you reduce the amount of interest you’ll accrue and help pay off your student debt faster. This strategy usually just means adjusting the automatic payment amount in your checking account to include any extra you think you could manage each month. It might also be worthwhile to consider putting any extra money you receive beyond your usual income, such as an unexpected windfall or a cash gift, as a one-off payment towards your loan balance as well.
How to set up a checking account to pay student debt
Automatic payments may be one of the faster ways to pay off student loans. This process typically involves linking your checking account to your student loan provider and setting up automated payments that allow your lender to receive them on a specified date. The exact steps may vary depending on your financial institution, but you’ll generally be required to do the following:
- Log in to your student loan provider’s website and locate the payment options or account settings section.
- Within one of those sections should be an option to enroll in automatic payments or a similar feature.
- Follow the instructions provided by your loan servicer to set up automated debits. You’ll likely need to provide your checking account number and routing information.
- Note that you will typically have to choose a recurring withdrawal date and confirm the amount to be debited each month, which you can set to be more than your minimum required payment if you choose.
It may also be helpful to speak with your student loan provider and your financial institution to clarify their respective processes for setting up automatic payments.
When it comes to learning how to pay off student loans, your checking account may be one of your most useful tools. Using your checking account to automate your repayments alongside a sound repayment plan may be one of the more efficient paths to paying off your student loans. Linking your student account to your loan provider may help streamline the process. Want to possibly pay off your student loans faster? Try considering repayment strategies like a biweekly repayment structure or additional payments over your standard installment, which may help chip away at your principal faster.
Read on to learn more about Online Bill Pay.