8 Ways To Lower Your Student Loan Payments

The amount you pay in student loans isn’t set in stone. There are ways you can reduce the size of your monthly payments, and even wipe away some of your student debt in some circumstances. Here are eight different strategies to help you lower your student loan payments so you can have more flexibility and control over your finances. 

1. Change your repayment plan

The Standard Repayment plan for federal student loans is a 10-year plan with equal monthly payments for the life of the loan. But if your monthly payment is more than you can afford, the Department of Education offers a number of repayment options designed to lower your monthly payment. 

If you’re struggling to make payments on your federal student loan under the standard plan, consider switching to one of these plans:

• Graduated repayment: This plan starts with lower monthly payments that gradually increase every two years. This can be a good option for borrowers who expect to increase their income over time.
• Extended repayment: Borrowers who owe more than $30,000 can extend their repayment over a maximum of 25 years. Your monthly payment may be fixed or graduated.
• Income-driven repayment: An income-driven repayment (IDR) plan extends your repayment term to 20 or 25 years and sets your monthly payment at a percentage of your discretionary income. Some borrowers qualify for monthly payments as low as $0. There are four IDR plans:
  • Saving on a Valuable Education (SAVE)
  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment (ICR)
  • Pay As You Earn (PAYE)

2. Consolidate your federal loans

Borrowers juggling multiple federal student loans may want to consolidate their debt. Consolidating allows you to combine your existing federal loans with a Direct Consolidation Loan, meaning you now only have one loan, one monthly payment, and one loan servicer to worry about.

Federal student loan consolidation doesn’t change the interest rate you pay on your various loans. Instead, the interest rate on your newly consolidated loan is a weighted average of the interest rates on the debts you consolidated, rounded up to the nearest one-eighth of one percent.

Consolidation does give you the opportunity to extend your repayment term up to 30 years, which can reduce your monthly payment amount. Just remember that taking longer to repay your loans means you will likely pay more in interest over the life of the loan.

Check Out: 12 Strategies To Pay Off Your Student Loans Faster

3. Refinance your loans

Like consolidation, refinancing lets you combine multiple loans into a single debt. But while federal consolidation is only for federal student loans, refinancing can include both federal and private debts. 

To refinance student loans, you borrow a new loan from a private lender, which is then used to pay off your existing loan accounts. Your new loan will have different repayment terms, including a new interest rate and loan term length. If you qualify for a lower interest rate or opt for a longer repayment term, you can significantly reduce your monthly payment. This can be a good option for borrowers with excellent credit who qualify for the most favorable rates and terms.

Borrowers interested in refinancing should compare offers from multiple student loan refinancing lenders. This will ensure you find the best loan, rate, and term for your needs. Note that refinancing federal student loans will turn them into private debt, and borrowers will permanently lose any federal perks and protections.

4. Research deferment and forbearance

Federal student loan borrowers may be able to suspend their payments for a period of time through either deferment or forbearance. 

Deferment

Deferment is a temporary payment pause on your student loans. During this time, interest may or may not continue to accrue, depending on your loan type. The following circumstances may qualify for federal student loan deferment:

• Cancer treatment: This payment pause will last while you are undergoing cancer treatment and continues until 6 months after your treatment ends.
• Rehabilitation: Borrowers who are enrolled in an approved rehabilitation program designed to treat mental health issues or substance abuse may qualify for this deferment while in treatment.
• Economic hardship: If you're receiving a means-tested benefit like Temporary Assistance for Needy Families, work full-time but earn below 150% of the federal poverty level, or are serving in the Peace Corps, you may be eligible for up to three years of economic hardship deferment.
• Unemployment: If you are unable to find full-time employment or you receive unemployment benefits, you may qualify for this deferment for up to three years.
• Graduate fellowship and in-school deferment: Borrowers enrolled in an approved graduate fellowship program or enrolled at least half-time at an eligible college may be eligible for this kind of deferment.
• Military service: Active-duty service members who are serving in response to war, a military operation, or a national emergency may be eligible for this deferment, which can last until 13 months after the end of the qualifying active-duty service. You may also be eligible if you completed active-duty service and a grace period. 
• Parent PLUS deferment: Parents who took out a Direct PLUS Loan for their child can qualify for a deferment while their child is enrolled at least half-time at an eligible school. 

Forbearance

Forbearance gives you the option to pause payments or make smaller payments, but interest continues to accrue on your student loan balance during this time. This means applying for forbearance could significantly increase the amount you owe, depending on your interest rate and the amount of time your loan remains in forbearance.

Federal student loan borrowers may request a general forbearance from their loan servicer. Acceptable reasons include financial hardship, medical bills, a change in employment, or any other reason the loan servicer accepts. Loan forbearance is available for no more than 12 months at a time, with an aggregate limit of three years.

5. Consider loan forgiveness or discharge programs

Though the terms “forgiveness” and “discharge” both mean that a borrower is no longer responsible for paying their remaining student loan balance, these options are offered in very different circumstances. 

Loan forgiveness

Student loan forgiveness is generally when a borrower is relieved from paying the remaining balance of a loan after working at a qualifying job and making a certain number of payments. The most common federal student loan forgiveness programs include:

• Public Service Loan Forgiveness (PSLF): Borrowers who work for a government or not-for-profit organization may be eligible to have their remaining balance forgiven under the PSLF program.
• Teacher Loan Forgiveness: Borrowers who teach full-time for five consecutive academic years at a low-income elementary or secondary school, or an educational service agency, may be eligible for up to $17,500 of federal student loan forgiveness.
• Income-driven forgiveness: Borrowers who are enrolled in an IDR plan and make the required number of payments may have their remaining balance forgiven at the end of their loan term.

Loan discharge

There are several reasons why your loan may be discharged, meaning you’re no longer responsible for repaying some or all of your loan. Reasons include total and permanent disability, fraud, or school closure. 

6. Look for state-based assistance programs

Many states offer loan repayment assistance programs to help attract young workers in high-need professions. Health care, teaching, and law are among the most common fields that receive state-based loan assistance or grants. For example, Wisconsin offers up to $50,000 in education loan assistance to health care professionals who work full-time in a federally designated Health Professional Shortage Area.

Visit your state’s education department website to see if similar programs are offered in your area.

7. Find other sources of funding

There are a number of programs that may be able to help you pay down or pay off your student loans, including:

• Employer assistance: The CARES Act included a provision that allows employers to give up to $5,250 to employees annually in tax-free student loan assistance, and the Consolidated Appropriations Act of 2021 extended that provision until Dec. 31, 2025. Ask your employer if they’d be willing to start offering this perk.
• Relocation programs: These programs offer incentives to individuals to move to a certain area. Under Tulsa Remote, individuals who move to Tulsa while working a remote job outside of Oklahoma may be eligible for $10,000 in cash. The Kansas Rural Opportunity Zones program provides new full-time residents of any of 95 designated counties the potential for up to $15,000 in student loan repayment assistance.

8. Contact your loan servicer

If you can’t afford your monthly student loan payment, contact your loan servicer as soon as possible. Let them know you’re having trouble making payments, and explain why. Ensure your loan servicer understands whether your financial hardship is chronic or temporary, since it may affect what solutions they offer. 

Contacting your loan servicer can be one of the best ways to find out what payment-reduction options are available to you.