3 Ways You Can Reduce Your Student Loan Payments
After finishing your education and earning your degree, there’s one big hurdle that remains: repaying your student loans. With thousands of dollars in student loan debt to repay, your monthly payments are likely way more than you can afford.
Fortunately, there are ways to reduce your monthly payment amount. If you’re looking to lower the amount you owe each month on your student loans, check out these three ways to do exactly that.
1. Consolidate or Refinance Your Loans
Like most former students, you’re likely carrying student loans from different lenders. You may even have loans from different types of lenders, like federal and private loans. And each one of your loans comes with a different monthly payment amount, as well as a different repayment plan.
To manage all of these loans more easily and get a lower monthly payment amount, you should consider consolidation and refinancing. Loan consolidation is like refinancing your loans – you’ll take all of your loans and roll them into one loan, with different terms and a different repayment plan.
Refinancing and consolidating your loans will give you one single monthly payment, one due date, one interest rate, and one easy way to manage all of your student loan debt. You can also get a lower monthly minimum payment.
And you may be able to combine your consolidated loans with another option, like income-driven repayment or an extended repayment plan. This can help lower your monthly payment in multiple ways for maximized benefits.
2. Enroll in an Extended Repayment Plan
As soon as your student loans enter repayment, your monthly payment is calculated. And that calculation is based on a standard repayment plan. Under a standard repayment plan, you’re expected to pay off your loans within 10 years.
However, if you stretch out the lifetime of your loan and your repayment period, your monthly payments will decrease. Though lenders don’t make it seem like borrowers have a choice, you don’t have to stick to the standard repayment plan. You can actually choose to enroll in an extended repayment plan.
An extended repayment plan allows you to lengthen the repayment period up to 25 years. Although you’ll pay more interest with a longer repayment schedule, the amount you pay monthly will drop. And that can make repaying your loans far more manageable.
If you have more than $30,000 in federal student loans, you can see if you’re eligible
3. Apply for an Income-Driven Repayment Plan
If you have student loans from the federal government, you can reduce your monthly payments by changing your repayment plan. The government offers a number of different repayment options for student loan borrowers, and each can help you repay your loans more easily.
To reduce your monthly payment, you’ll want to consider a repayment plan that offers an amount you can actually afford. And the best way to achieve this is to apply for a repayment plan that’s based on your income.
Federal student loan borrowers can apply for one of the available income-driven repayment options. If you qualify, your monthly payment will be adjusted to your income. And after a set period of years, your remaining balance will be forgiven.
Borrowers can apply for the following income-driven options:
- Pay-As-You-Earn (PAYE): Your monthly payment will be capped at no more than 10 percent of your discretionary income. Payments will never be more than they would be on the standard repayment plan.
- Revised Pay-As-You-Earn (REPAYE): Your monthly payment will be capped at no more than 10 percent of your discretionary income, but there’s no limit to how high payments can go. The more you earn, the more you’ll pay.
- Income-Based Repayment: Your income is used to set your monthly payment rate. Payments will be limited to 10 to 15 percent of your discretionary income.
- Income-Contingent Repayment: Your income is used to set your monthly payment rate. Payments will be capped at no more than 20 percent of your discretionary income, or what your payments would be on a 12-year repayment plan.
You can easily apply for these programs through the Department of Education to see if you qualify for reduced monthly payments.
Take Steps to Lower Your Student Loan Payments Today
If you’re paying way more than you can afford each month on your student loans, it’s time to consider another option. You don’t have to suffer financially. You can make your monthly payments more manageable. Consider options like these to get your student debt under control.