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The Simple Dollar

Student loans: How automatic repay can help

Signing up for automatic payments on student loans can reduce the chances of messing up something important for young people who are relatively inexperienced with managing their finances. What's more, it can actually reduce the amount you have to pay back on student loans over the long haul. 

By Guest blogger / May 15, 2012

Graduation candidates add some personality to their caps during the Centenary College Commencement Ceremony Saturday, May 12, 2012 in Hackettstown, N.J. Signing up for automatic loan payments can help keep finances on the right track and reduce student loan costs in the long run, Hamm argues.

Matt Smith/The Express-Times/AP/File


One of the best decisions I made during my years of poor finances after college was to sign up for the automatic loan repayment program that my lender made available.

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The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.

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To understand why it was such a good choice, you have to roll back the clock to the situation I found myself in right after college.

For starters, I was really inexperienced with managing my own money. I was freshly out of college and earning the first significant paycheck of my life. Money management was completely new to me. The idea of meeting monthly bills was largely new to me.

I was aware of most of the concepts of personal finance, but actually putting them into practice is completely different than understanding them conceptually.

The end result of this was a somewhat cavalier attitude towards bill payment. I managed to pay my bills on time, but I didn’t worry much at all about juggling them and pushing right up to – and right past – due dates. The idea of a credit score was a vague concept that didn’t really matter to me. Interest rates were pretty secondary in importance to me.

Signing up for automatic payments on my largest debt at the time took some of the weight off of my immaturity. It was all taken care of. The money came out of my primary checking account, reducing my only worry to making sure I kept up a reasonable minimum balance.

Automatic student loan payments help cover for some immaturity at the very time when many young people are completely inexperienced with money management. It minimizes the chance that they’ll mess up this important thing before they can really grasp the consequences of messing it up.

There’s another big reason for doing it, too. It can often save you money.

If I signed up for automatic student loan payments, my lender knocked 0.25% off of my interest rate. That saved me several hundred dollars over the course of my student loans.

In addition to that, if I made my first twelve monthly payments, I got another 0.25% off of my interest rate. That also saved me several hundred dollars over the course of my student loans.

Many lenders offer such programs. Some lenders promote their offer heavily, while others may require you to ask about it. In either case, if you’re facing student loans, it’s a good way to start saving yourself some money very quickly. Check with your lender to see if such programs are available to you.

For me, it was good all around. The automatic payment plan kept me responsible. The interest rate reductions saved me money. If an automated plan can do the same for you, it’s well worth signing up for.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on

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