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Automate Student Loan Payments: Direct Debit vs Recurring Bill Pay

By: Staff

Last Updated: October 17, 2017

Most of us forget to pay a bill now and then, but that’s not a risk worth taking with student loans that are already so stressful and expensive. Fortunately, you can eliminate this risk by automating your student loan payments. You have two choices. Here they are, including the pros and cons of each.

Using Direct Debit to Make Student Loan Payments

When you set up direct debit, you are authorizing your student loan servicer to automatically withdraw your payment from your bank account every month.


1) Most student loan providers offer a .25 percent interest rate reduction when you make payments via direct debit every month.

2) You’ll never forget to make a payment. You can pretty much set it and forget it.

3) You can choose a recurring payment amount that is more than your minimum. Even as little as an extra $5 or $10 a month can add up over the life of the loan.


1) It’s hard to cancel. You will likely find it requires a written request several business days prior to the scheduled transaction. Check with your student loan servicer for the policy specific to them.

2) If you want to pay a different amount every month — sending in extra when you can — you’ll find that you can’t adjust the direct debit with your servicer. Your regular debit will come out as scheduled and whatever extra you want to pay will have to be sent separately.

3) While you won’t forget to make the payment, you could forget to make sure the money is in there to cover it.

automate loan payments

Using Recurring Bill Pay

When you set up recurring bill pay, you do so through your bank, authorizing them to make your payment to your student loan servicer every month.


1) You’ll never forget to make a payment. As with direct debit, you can set it and forget it.

2) Recurring bill pay gives you more control over your payments.

The last thing you want to do is cancel a student loan payment, but if you find yourself in a tight spot, it’s nice to know you have the option to make a change last minute. For instance, Wells Fargo gives you up until 7 pm on the Send On date to cancel or change it. Check with your bank for the cancellation policy specific to them.

On the flip side, you may realize last minute that you have a little extra to put toward your loan one month, in which case you can go in and increase the payment accordingly.


1)  You won’t qualify for the .25 percent interest rate reduction available if you set up direct debit auto pay through your student loan servicer. So you could be missing out on hundreds of dollars in savings over the life of your loan.

2)  As with the direct debit option, while you won’t forget to make the payment, you could forget to make sure the money is in there to cover it.

How to Set It Up

To set up direct debit, go to your student loan servicer’s website and look for the direct debit option. If you don’t see it, give them a call. If, however, you decide to go with the bill pay option through your bank, you should be able to set that up through your online account.

Bottom Line

It’s hard to see the benefits of bill pay outweighing the money-saving .25 percent interest rate reduction of auto pay. Again, it could cut your student loan debt down by hundreds of dollars over the life of the loan.