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The national student loan debt is $1.748 trillion, with the average federal student loan debt balance totaling close to $38,000. If you’re one of the nearly 43 million borrowers with student debt, you may be looking for a way to lower your student loan payments. Fortunately, there are strategies for reducing your monthly student loan bills, so you can keep more of your hard-earned cash for yourself.Using one or more of these strategies could lower your monthly bills without causing your loans to go into delinquency or default. Here’s how to lower student loan payments so your education debt is no longer breaking the bank.
1. Signing Up for Graduated Repayment Plan
If you have federal student loans, you’re eligible for a variety of repayment plans that could lower your payments. One such plan is the graduated repayment plan. Like the standard repayment plan, the graduated plan has you pay off student loans over 10 years. However, instead of fixed monthly payments, you’ll start by paying a smaller amount, which then increases every two years. Your payment increase won’t be astronomical, though. In fact, your final payments will never be more than three times your initial payments. If you start by paying $100 per month, for instance, your final payments won’t be more than $300. The graduated repayment plan could be a good choice for borrowers who want to pay off their debt in 10 years and expect their income to increase in the future.
2. Getting an Income-Driven Repayment Plan
Another option for lowering payments on your federal student loan debt is applying for an income-driven repayment plan. There are four income-driven plans:
Income-Based Repayment
Pay As You Earn
Revised Pay As You Earn
Income-Contingent Repayment
All of these plans adjust your monthly payments to a percentage of your discretionary income, either 10%, 15%, or 20%. You recertify your information every year and could see your payment change based on your income and family size. Another perk of these programs is that they could end in loan forgiveness after 20 or 25 years of repayment. If you still owe money after this time, your remaining balance could be canceled.
3. Looking Into Extended Repayment Plans
If you owe $30,000 or more in federal student loans, you could be eligible for the extended repayment plan. The extended plan gives you 25 years to pay back your loans. Because it adds time to your repayment plan, you’ll see your monthly payments go down. It’s worth noting, though, that a longer repayment term means you’ll pay more interest over time. You can use the loan simulator tool on the Federal Student Aid website to compare your monthly payments and long-term interest costs on the various repayment plans. If you opt for the extended repayment plan, you can choose between fixed payments that stay the same every month or graduated payments that start out lower and increase over time.
4. Consolidating Your Student Loans
Federal student loans are also eligible for loan consolidation via a Direct Consolidation loan. Through Direct loan consolidation, you can combine multiple loans into one for a single monthly payment. Your new interest rate will be the weighted average of your previous rates rounded up to the nearest one-eighth of one percent. After you consolidate, you can choose a new repayment term, such as income-driven or extended repayment. Depending on your loan amount, you have options of terms that range from 10 up to 30 years. Consolidating loans might also be a necessary step to make some loans eligible for certain repayment plans. If you owe Parent PLUS loans, for example, you have to consolidate them before you can put them on an income-driven repayment plan.Keep in mind, though, that consolidating your student loans will make you ineligible for forgiveness.
5. Enrolling in Automatic Payments
Putting your loans on autopay is a great way to stay up to date on your payments without much legwork. Plus, most lenders offer a 0.25% reduction on your interest rate when you opt for autopay. Although this rate cut might not sound like much, it can slightly lower your monthly payments and lead to interest savings over time. Going from a 6% rate to a 5.75% rate on a $50,000 student loan, for example, could mean a difference of $751 over 10 years.
6. Moving
If you’re open to changing locations, moving could also help you lower your student loan payments. Some cities and states offer student loan assistance for new residents. The Kansas Rural Opportunity Zones program, for instance, offers student loan reimbursement and tax incentives to new residents of certain counties in Kansas.Plus, some states have a lower cost of living than others or don’t charge state income taxes. With the savings you get by moving, you might be able to afford your student loan payments more easily or even pay your loans back faster.
7. Searching for an Employer Who Can Help
Not only do certain cities and states offer student loan incentive programs, but more employers are providing student loan benefits to employees. Companies like Google and Chegg will pay back a certain amount of student loans each year to their employees. If you’re open to job hunting, consider looking for an employer that offers a student loan matching benefit.
8. Searching for Repayment Assistance Programs
You might have heard of federal student loan forgiveness programs such as Public Service Loan Forgiveness and Teacher Loan Forgiveness. But what you might not know is that many states, colleges, and private organizations offer student loan repayment assistance programs that can help you pay back federal and/or private student loans. Most of these programs require that you work in a certain profession in a high-needs or low-income setting. Some occupations that commonly qualify for student loan assistance include doctor, lawyer, pharmacist, dentist, nurse, and teacher. Check with your state, school, and any other affiliated organizations to see if you could qualify for student loan help.
9. Asking for Temporary Payment Decrease
If you need to lower your student loan payments immediately, contact your loan servicer to see if it could temporarily reduce your bills. Since federal student loans are eligible for a variety of repayment plans, your servicer might direct you to one of those. But you could have luck with your private student loan servicer, which may offer a temporary decrease so you don’t miss a payment. Although there’s no guarantee of success, it’s worth communicating with your loan servicer to see if it’s willing to help.
10. Using Forbearance or Deferment
If you need to pause payments completely, look into your options for forbearance or deferment. Federal student loans are eligible for both these programs if you’ve lost your job, gone back to school, or have another qualifying reason. Some private lenders offer temporary forbearance or deferment, as well. These options could be a lifesaver if you’ve run into financial hardship. But keep in mind that interest continues to accrue on most loan types even when payments are paused, so you could be facing an even larger debt balance when the forbearance or deferment comes to an end.
11. Refinancing Your Student Loans
Refinancing your student loans is another strategy for lowering your student loan payments. When you refinance student loans, you trade them in for a new loan with different rates and terms. Depending on your credit, you could lower your rates by refinancing. Plus, you can select new repayment terms with an adjusted monthly payment. Most lenders let you choose a term as short as five years or as long as 20 years. Be cautious about refinancing federal student loans, though, because doing so means losing access to federal benefits, such as income-driven repayment plans and federal loan forgiveness programs.
Refinance Student Loans With Lantern
Refinancing your student debt has the potential to lower your interest rate and monthly payments. Many refinancing lenders let you check your rates online with no impact on your credit score. By prequalifying online, you can compare multiple offers and see if one is the right fit for you. See how Lantern can help you refinance student loans by connecting you with competitive offers from leading lenders.Take control of your student loan debt today with Lantern.
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About the Author
Rebecca Safier
Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
