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 that some servicer websites require you to log in 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, 1-800-798-8722
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.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of March 18, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 0318/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|