If you learn how to lower your student loan payments, it can help in several ways, especially if you’re struggling to pay your student loans. Fortunately, you don’t have to make high payments every month.
This guide will show you several effective ways to decrease your loan payments. Some steps might even help you pay off your student loan faster. Let’s begin.
4 Ways To Lower Loan Payments
Apply For an Income-Driven Repayment Plan
If you have federal student loans, you automatically get enrolled in the standard repayment plan when you complete college. With this repayment plan, your monthly payments are fixed and divided across ten years. But, unfortunately, that makes your payment every month high.
Fortunately, you can opt for other repayment plans. You can find four IDR plans. These plans base your monthly payments on your income. They are:
- IBR plan
- ICR plan
With the IDR plan, the loan lender extends your repayment term to 20 to 25 years. They do this by capping your payment every month at a percentage of your discretionary income. So, depending on your loan balance, income, and family size, your payment could get below zero dollars per month.
When your situation changes, your payments will also change. If your income increases or decreases, your payment will be adjusted accordingly.
Even though your monthly payment could be small, you could pay more in interest with time. However, if you’re struggling to make your payments, the IDR plan can give you some space to get things back together.
Consider Graduated Repayment Plan
Consider the graduated repayment plan if you don’t qualify for the IDR plan because you make enough money but can’t still afford your federal loan payments. With the graduated repayment plan, you start making low payments and then increase it every two years.
You get your loan paid off after two years. However, you’ll pay more interest over the loan life because you began low. Additionally, your payments will increase every two years, regardless of your income.
So even if you take a low-paying job, you’ll still have to make substantial monthly payments. If you feel overwhelmed, you can always opt for student loan forgiveness to pay off your loans.
Consider An Extended Repayment Plan
If you have over $30,000 in direct federal loans, you may qualify for an extended repayment plan. When you select this option, you’ll have to pay back your student loans over up to 25 years. And you can choose between graduated and fixed payments.
Generally, your monthly payments will be lower compared to the graduated repayment plan or standard repayment plan. But it doesn’t depend on your income, so it might be cost-effective to apply for an IDR plan instead.
Your payments will be lower with the extended repayment plan. However, you may end up paying more money than you initially borrowed due to interest charges over the loan life.
Consolidate Your Student Loans
If you have several federal student loans, each having repayment terms, interest rates, and minimum monthly payments, it may be good to consolidate them.
With the loan consolidation, you’ll have one monthly payment as you go for another federal student loan for the overall amount of the old ones. You’ll also have only a single due date to manage.
The interest rate you get will be the weighted average of your previous student loan rates. And that means you may get a lower rate. Sometimes too, you may not. But you can apply for an IDR plan after you consolidate most of your direct student loans.
That can help you lower your student loan payments. And you’ll also have one payment to remember instead of handling multiple loans at once.
You can also consider student loan forgiveness, such as Public Student Loan Forgiveness. These loan forgiveness programs can help you pay off your debt.
If you’re looking for ways to decrease your student loan payments, you can choose from several options. Unfortunately, it’s possible for you to get confused about which option to take. But through this guide, you can learn ways to decrease your student loan payments.
Some options in this guide can help you manage student loans well. But before you make your final decision, take a look at the benefits you have to give up. Also, estimate the amount of interest you’ll pay over time.
Even though lowering payments can help you, it could also come with long-term consequences. If you don’t know what to do, get an expert to help you.