A Complete Guide to Lowering Your Student Loan Payments

Renee Layberry
May 4, 2021

If you’re feeling overwhelmed by student loan debt, you've got a lot of company. Almost 45 million Americans have student loans and we collectively owe $1.56 trillion!   It’s not surprising that you may be struggling to meet your loan payments, and even less surprising that you're wondering how to lower your monthly student loan payments. While the average student loan debt is $32,731, the average salary right out of college in 2019 was $45,000.   Still, you can’t escape student loan debt if you have it. If you default, you’ll simply create significant financial problems that will last for years. Not only will you kill your credit score, but you may also end up in court and have your wages garnished.   There is hope, though. You can lower your monthly student loan payments; you just have to know how. With that in mind, here is your complete guide to reducing your loan payment amount, regardless of the type of loan you have.   overhead view of person making student loan payments on their laptop with a calculator Photo by @Chantelle via Twenty20

Strategies for lowering monthly payments on federal student loans

If you have federally-funded Direct Loans (or other select types of federal loans), you have several options for lower monthly payments. Note that some of the suggestions for reducing monthly loan payments can be done together. Mix and match to find the right solution for your situation.  

Request a graduated repayment plan 

If you're just getting started at your first real job out of college, you might be facing unexpected expenses. Those costs might include a deposit and two months' rent for a new apartment, payments for your new car or furnishings, and even the cost of a professional wardrobe. Before you get financially settled, it can be hard to find the money to make your monthly student loan payments at first.   Graduated repayment plans allow you to pay lower monthly payments for two years. Then they gradually increase. Every two years, your monthly payments will be adjusted. The idea is that the further you get in your career, the more money you’ll free up for your loan payments.   You can use a loan simulator to see what monthly payments will look like throughout a 20-year graduated plan. Then you can plan your budget accordingly.  

Apply for an extended payment plan 

Your monthly loan payments might be prohibitively high because the life of your loan is too short. If you are currently set to repay your loan over 15 years, for instance, your payments are going to be far higher than if you have a 20- or 25-year loan.   You can request an extended loan life from your loan service provider. Log into your Federal Student Aid account to find out who you should contact.   Keep in mind that extending a loan will increase the amount of interest you’ll pay in the long run.   If, however, you cannot currently afford your loan payments, paying more interest in the future in exchange for lower student loan payments right now might be worth it. You can always pay more each month if you find yourself in a better financial position later in your career.   Photo by Ray Reyes

Consolidate your loans 

If you have several federal loans, you might benefit from consolidating them. Consolidation means that all of your loans will be rolled into one. You’ll have just one payment, which makes it easier to keep track of and to pay it on time each month. It’s just one less thing to worry about when you already have plenty of other things to keep track of.   What's better is that you may find that your total monthly loan payment is lower once you consolidate because you may be eligible for a lower interest rate.   Keep in mind that you must be up-to-date on your loan payments or in an approved grace period to qualify for consolidation. If your payments are delinquent or you have already defaulted, you will not qualify for consolidation. That’s all the more reason to seek help before you get to the point that you can no longer make your monthly payments.  

Sign up for an income-driven repayment plan

One of the best ways to decrease monthly student loan payments is to sign up for an income-driven repayment (IDR) planThere are four IDR plans designed to suit you based on your current income, your expected future income, your marital status, and your family size.   Regardless of the IDR program you choose, the benefit is that your payments will be set based on your particular financial circumstances, and your loan life will be extended to 20 or 25 years. If at the end of your loan life you have not paid off the loan (and assuming you’ve made regular payments and the loan is in good standing), the remaining amount will be forgiven.   You can sign up for an IDR plan online. Like other relief programs, you must be up-to-date on your current loan payments to qualify.   Photo by Christin Hume

Change jobs 

Certain jobs allow you to qualify for loan forgiveness. For instance, if you're a teacher, you may be eligible for the Teacher Loan Forgiveness Program. To qualify, you must teach for five consecutive years at a public elementary or secondary school that serves a low-income population.   If you are currently teaching at a private school or a well-funded public school, you might consider looking for a job at a Title I school. Not only will you help children and families in need, but you’ll also be working toward loan forgiveness (and saving a lot of money).   Other public service jobs may be eligible for loan forgiveness after 10 years. That would include many government jobs and some nonprofit work. If you are qualified and have the right skills, spending 10 years doing good for the world can also help fatten your wallet.  

Request a deferral or forbearance 

If your financial troubles are temporary, you may qualify for a deferral or forbearance. If you qualify, you will be given a grace period during which you do not have to make payments on the principal of your loan. Note that you may still have to make interest payments.   If you are going back to school, doing military service, or have a medical issue, you may qualify for a grace period. Check with your loan servicer to find out more information.  

Strategies for lowering monthly payments on private loans 

You may have loans from a private company or bank instead of (or in addition to) federal loans. You can still negotiate lower monthly payments on private loans. Your options are simply different than your federal loan options, but here are some ways you can reduce your student loan payments for your private student loans.   Photo by National Cancer Institute

Refinance your private student loans

Private loans can be refinanced. Check with your bank or student loan company to find out if you qualify for refinancing. If you do, you can get a lower interest rate, which can greatly decrease how much you pay monthly and over the life of your loan.   You do need good credit to refinance. If your credit is shot, or you haven’t been regularly making your loan payments, you probably won’t qualify. If you have a co-signer, however, you may have more options.  

Sign up for autopay through your student loan lender

One of the easiest ways to reduce your student loan debt itself is to sign up for autopay. Most banks and student loan companies will give you a discount if you set up a monthly autopay.   Not only will you never miss a payment (and avoid late fees), you’ll also get a small discount – usually around 0.25% applied to interest. That might seem trivial, but it adds up quickly, especially if you have a big loan. You’ll be paying more toward the principal each month, which means you’ll shave off months – or even years – of payments.  

Borrow student loans at a lower interest rate 

If your parents or grandparents are financially able and willing to help, you might ask them to pay your loans off in their entirety. You can pay them back without interest, which will save you a lot of money over the life of your loan.   Borrowing money from family can be risky, but if you commit to paying the loan every month without fail, your family can help you save those interest fees that would otherwise just go to the bank.   If you (or your parents or grandparents) own your own home and have good credit, consider refinancing your mortgage. Interest rates are quite low right now, and you may be able to take the money you save and put it toward higher payments on your student loan principal. You’ll pay less interest over the long term.   Student loan payments can almost always be negotiated. Don’t be afraid to ask about your options. As long as you reach out early, there are lots of opportunities available to you.