Most student loan borrowers realize that student loan interest accrues daily. Most student loan borrowers also realize that the sooner you pay off your student debt, the less you will spend on interest over the life of the loan.
As a result, it is recommended that most borrowers aggressively pay off their debt.
Taking this concept to its logical extreme is the idea of daily payments. Does making a daily payment to your student loan company help combat growing interest? Though tedious, is it the most efficient way to pay off debt?
The Pros of Daily Student Loan Payments
The biggest advantage that I can see to daily student loan payments would be the daily reminder about your student loan debt.
People who have their debt fresh on their minds are far less likely to make unnecessary or extravagant purchases.
Additionally, making daily payments would reduce the amount spent on interest over the life of the loan compared to just making the same monthly payments on the due date.
Going this route would be extremely tedious.
Most student loan companies will only set up automatic payments on a monthly basis. Unless your bank can set up auto bill pay on a daily basis, it means you will have to go through the steps every single day to make sure you do not miss one of these payments.
The Fundamental Problem with Daily Payments
The biggest disadvantage to this route, and the reason I recommend against it, is that it doesn’t accomplish its real goal.
The appeal to making daily payments is that you are battling the daily accumulation of interest on your student loans. All this work is in an effort to pay as little as possible on interest.
However, unless you are paid on a daily basis, the daily payments are not the most efficient route. If you are paid bi-weekly, make your student loan payments bi-weekly.
For most people, making daily payments would require saving money in your checking account for a week or two at a time so that you have what you need to make your daily payment. Money sitting in your checking account is a missed opportunity. It earns very little if any interest, but your student loan is working against you.
From a math perspective, the earlier and the larger the payments, the better. If you have $200 from your most recent paycheck, that $200 will do the most damage paid to your lender immediately, rather than spread out over a two-week period.
Making daily student loan payments sounds super aggressive in theory, but for most people, it is not the most efficient way to attack their debt.