How to Lower Student Loan Payments

Key takeaways

• The federal loan program offers several repayment plans to help borrowers.
• Check with your loan servicer to see if you qualify for deferment or forbearance.
• Some servicers will lower your monthly payment if you enroll in autopay.

Over the past several decades, it seems as though the cost of a college education has skyrocketed. As a result, many people have taken out student loans to earn their degrees. If you are one of those people and you’re struggling to make your student loan payments, you might have options for lowering your monthly payment. In this article, you’ll learn 8 ways to lower student loan payments and get ahead of your monthly student loan debt.

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Can you negotiate student loan rates?

While the federal government has provided student loan relief over the past several years, payments are still required for many student loan holders. Below, we’ll discuss how you might be able to obtain a lower monthly payment from your loan servicer.

Refinance your student loans

Take a careful look at the terms of your student loan. Is your interest rate higher than you’d like it to be? Do you have private student loans? Student loan refinancing is one way you could get a lower payment and a lower interest rate.

When you refinance a student loan, a lender pays off the balance and issues you a new loan with new terms. This could help you save money over the life of the loan, depending on the interest rate and loan term. You might also arrange to get a lower monthly loan payment if you choose a longer repayment period.

Just remember that if you have multiple federal student loans and choose to refinance with a private lender, you won’t have access to government-run student loan forgiveness programs and protections, like loan forgiveness or income-driven repayment plans.

Consolidate your loans

Borrowers with multiple federal student loans could combine them with a direct consolidation loan. This means you’ll have one loan with one interest rate and one monthly payment. You could also have the option to extend the repayment terms, which could help lower your monthly loan payment. Note, while you may save money in your monthly payment, you might pay more over the life of the loan.

Enter a repayment plan

Federal student loan servicers have several loan repayment plans for which you might be eligible. Most are structured to help lower your student loan payment each month. Here are some options you may want to consider:

• Graduated repayment plans increase your monthly payments automatically every two years. After 10 years of graduated payments, your loans could be repaid.
• Extended repayment plans are available to borrowers with more than $30,000 of Direct or FFEL loans. If you qualify, you could extend your repayment period from 10 years to 25 years, lowering your monthly payment. Because you will pay interest for up to 15 more years, your loans will have more accrued interest, resulting in a higher total interest paid overall.
• An income-driven repayment plan will set a monthly student loan payment amount based on your income and family size and on your state of residence. Income-driven payment plans allow borrowers to pay a set portion of their income each month. After 20-25 years of qualifying payments, you may be able to get student loan forgiveness on the remaining balance.
• Pay As You Earn (PAYE) and Revised Pay As You Earn (RePAYE) plans are also income-driven payment plans. They are available only to qualifying federal student loan borrowers. These plans will change as your income changes; your monthly payments will always be about 10% of your income. These plans also consider your income and your spouse’s income, regardless of whether you file separate or joint tax returns.

If you have private student loans, contact your lender (or servicer) and see what repayment plans they offer. Loan servicers and lenders are always re-evaluating what relief they offer customers, so checking in with your servicer regularly to see what programs you are eligible for is always a good plan.

Seek deferment or forbearance

Times can be tough. Emergencies occur. If you find that making your monthly payment becomes truly difficult, you can request deferment or forbearance of your loans. These are temporary options. The terms and eligibility will vary, depending on your loan servicer. They’ll be much different if you have federal student loans rather than private loans.

Deferment is typically the better option if it’s available to you. You can apply to put a qualifying loan in deferment for 12 months or up to 36 months. During this time, interest will not accrue and you will not have to make payments. With forbearance, you can also temporarily pause payments. Your service provider can also reduce your monthly payment amount during the forbearance period. However, it’s likely that interest will continue to accrue during the forbearance. And you might have to make interest payments, even if your regular monthly payment is suspended.

Enroll in automatic payments

Some servicers will lower your student loan payment each month if you enroll in autopay. Some borrowers opt for payments to draft from their bank account automatically. Even the smallest benefit could save you money over the loan’s lifetime, so see if your lender or servicer offers an advantage for autopay enrollment.

Get help from your employer

Some businesses offer education and student loan repayment assistance. If yours does, ask how it can help you pay off your student loans.

Loan Repayment Assistance Programs

These programs could provide funds that help you to lower your student loan payments. These are especially helpful for borrowers with private loans who are not eligible for income-based repayment programs. These are generally used to aid borrowers with more modest incomes after graduation or workers in public service fields. These programs may require employment in a particular field, so make sure you pay attention to all of the details your servicer provides regarding any program you’re considering.

Claim the student loan interest deduction

Think about your federal income tax returns. Did you know you can deduct up to $2,500 in interest on your federal student loan and private student loans? If you’re not already doing this, make sure you start when you next file your taxes. The deduction works as an above-the-line exclusion, meaning that it can be claimed even if you don’t itemize deductions.

This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.