Automating your finances can be a great way to stay on top of due dates and never worry about missing a payment. But even if you’ve set most of your bills on autopilot, you’ll likely find there’s more to consider when you automate your student loan payments.
Though there are opportunities to save money by enrolling in student loan auto-pay, it can be confusing and do more harm than good if you don’t know what to expect.
This guide will walk you through the process every step of the way.
Before you consider student loan auto-pay
Before you automate your student loan payments, make sure your repayment plan is a practical one for your current financial situation. Otherwise, you could be committing to a monthly payment that you cannot always afford.
Automate student loan payments: pros and cons
Pros of student loan auto-pay
- Never miss a payment. You’ll never forget to make your student loan payments, which can lead to delinquency or default. As with any other automatic debit, your student loan payment will be deducted from your account on the same day every month.
- Interest savings. When you automate student loans payments, most loan servicers provide a .25% interest rate reduction. This may not sound like much, but it could add up to hundreds of dollars over the life of your loan.
- Make extra payments. You can set up an auto-debit amount greater than your monthly minimum. This is a great way of paying off your student loan faster. Granted, you could always send in a little extra if you decide to pay by check every month, but it’s easier to talk yourself out of it that way. When it’s already set up through autopay, you’re committed.
Cons of student loan auto-pay
- Overdraft risk. You’ll need to make sure you have the money in your account to cover the auto-debit every month. Otherwise, you’ll be looking at an overdraft or insufficient funds fee through your bank, not to mention a late payment. There’s more to automating your student loan payments than just setting it and forgetting it.
- Less flexibility. The auto-debit will come out every month, even if you send in an extra payment that exceeds your monthly minimum. For instance, if your monthly minimum payment is $250 and you want to pay an extra $50 that month, don’t mail a check for $300 assuming it will stop the automated $250 from being deducted. That scheduled automatic payment is coming out of your account no matter what.
- Tough to cancel. If you want to cancel your automated student loan payment, you will likely have to do so in writing and well before you want the payment stopped. For instance, FedLoan Servicing – the largest servicer of federal student loans – says it needs up to 10 business days to process a written request for cancellation. Check with your student loan servicer about their policy for cancellation.
How to sign up to automate student loan payments
Your student loan servicer is the company that manages your loan for the lender. It is this servicer you turn to with questions and concerns about your loan, including payment issues. So it is through your student loan servicer that you automate student loan payments.
If you have questions about how your servicer’s automated payment program works, you may call the servicer directly. However, you will find that most have all of the information you need on their websites, including a user-friendly process for setting things up.
You can expect this set-up process to include provision of your bank account information, including your routing number and account number.
Federal student loans
The federal government uses 10 different federal student loan servicers, all of which offer the automatic payment option. Direct links to auto-pay information for each servicer are provided below, as well as phone numbers if you have a question or need help troubleshooting the process.
Note, some servicer websites require you to login before displaying auto-pay information.
- FedLoan Servicing (PHEAA), 1-800-699-2908
- Great Lakes Educational Loan Services, 1-800-236-4300
- Navient, 1-800-722-1300
- Nelnet, 1-888-486-4722
- Cornerstone, 1-800-663-1662
- ESA/EdFinancial, 1-855-337-6884
- Granite State – GSMR, 1-888-556-0022
- MOHELA, 1-888-866-4352
- OSLA Servicing, 1-866-264-9762
- VSAC Federal Loans, 1-888-932-5626
Private student loans
Sallie Mae is the largest private student loan servicer. Like federal student loan servicers, Sallie Mae offers the automatic payment option, as well as the .25% interest rate reduction.
Check with any other private student loan servicer for policies specific to them.
Don’t know who to contact? Here’s how to track down your student loan servicer, for both federal and private student loans.
Keep track of your monthly deductions
While one of the biggest benefits of automatic payments is its dependability, never take it for granted. It’s a good idea to check your account every month to be sure your student loan, as well as any other auto-debits, are being deducted according to schedule.
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