If student loan payments are eating up a big part of your paycheck each month, you’ve probably found yourself wishing there were a way to lower your student loan payments. The good news: There is! Here’s how to lower student loan payments.
You don’t have to be stuck with sky-high payments if you try these 10 strategies to lower your student loan payments, or repay your loans early.
1. Apply for an income-driven repayment plan
2. Sign up for a Graduated Repayment Plan
3. Consider an Extended Repayment Plan
4. Consolidate your loans
5. Move to another state
6. Sign up for automatic payments
7. Make all your payments on time
8. Get help from your employer
9. Refinance your student loans
10 .Search for repayment assistance
If you have federal student loans, you’re automatically enrolled in the standard repayment plan when you graduate. With this plan, your payments are fixed and divided over 10 years. Under a standard repayment plan, you’ll pay the least amount of interest and repay your loan the fastest, but the monthly payments can be high.
Luckily, there are other student loan payment plans available. There are four income-driven repayment (IDR) plans which based your payments on your income:
Under an IDR plan, the loan servicer extends your repayment term to 20 to 25 years, and caps your monthly payment at a percentage of your discretionary income. Depending on your income, family size and loan balance, your payment could be as low as $0 a month.
As your situation changes, your payments will change, too. If your income decreases or increases, or if your family grows, your payment will be adjusted.
Although your payments can be significantly smaller with an IDR plan, you’ll pay more in interest over the length of the loan. But if you’re struggling to afford your payments, an IDR plan can give you some more breathing room in your budget as you build your career.
Use the federal repayment estimator to find out what your monthly payment would be under each of the different student loan payment plans.
If you make too much money to qualify for a lower payment with an IDR plan but still can’t afford your payment for your federal loans, another option is to sign up for a graduated repayment plan.
Unlike IDR plans, which are based on your income and family size, payments under a graduated repayment plan start low and then gradually increase every two years. After 10 years of payments, your loans are paid off.
Because the payments start out so low, you’ll pay more in interest over the length of your loan than you would with a standard repayment plan. Plus, your payments increase every two years, regardless of your income. Even if you have to take a lower-paying job, you’ll still have to make a larger monthly payment.
If you have more than $30,000 in federal direct loans, you might be eligible for an extended repayment plan. With this option, you’ll repay your loan over up to 25 years, and you can choose between fixed and graduated payments.
Because of the long term of this plan, your monthly payments will generally be lower than they would be under a standard repayment plan or graduated repayment plan. But it’s not dependent on your income, so it might be cheaper to sign up for an IDR plan instead.
Although your payments will be low under an extended repayment plan, you could end up paying more money than you borrowed because of interest charges over time.
If you have multiple federal student loans, all with their own interest rates, repayment terms and minimum monthly payments, consolidating your debt with a direct consolidation loan might be a wise decision.
With a direct consolidation loan, you take out another federal loan for the total amount of all your old ones. You’ll now have just one monthly payment and one due date to manage.
Your interest rate will be the weighted average of your previous loans’ rates, so you won’t necessarily get a lower rate. But you can sign up for an IDR plan after consolidating most of your direct loans and reduce your payment that way — and have one payment to remember rather than juggling several at once.
Moving might sound drastic, but where you live can impact your student loan repayment. Some states offer student loan repayment assistance programs and incentives to new residents, helping you pay off some or all of your loans.
Programs such as those offered by Texas and Minnesota mean more money in your pocket. But before you pack your bags, make sure you consider other factors, such as your earning potential in the new state and the cost of living.
Most lenders offer discounts for signing up for automatic payments. Connect your bank account, and you could qualify for a 0.25% rate discount. Although that might not sound significant, it can reduce how much you pay over time.
For example, say you had $30,000 in student loans at 7.00% interest rate. If you were on a standard repayment plan and qualified for the 0.25% discount, you’d save nearly $500.
Making all your payments on time is important to protect your credit score and avoid late fees. But there’s another reason: You could qualify for an extra discount on your interest rate.
Some lenders, such as SunTrust, offer a 0.25% rate reduction if you make your payments on time for 36 to 48 months. Combined with the automatic payment discount, you could save a significant amount of money.
To attract top talent, more and more employers are offering student loan repayment assistance. With many programs, employers match your payments on your loans, much like a 401(k) match. With their help, you can pay off the debt faster and save money.
Ask your human resources office if your company offers such a program.
If you have private student loans, you’re not eligible for alternative payment plans such as IDR. If that’s the case, or if you have a mix of federal and private loans, another option to consider is refinancing your student loans.
With refinancing, you work with a private lender to take out a new loan for the amount of your current ones. The new loan will have different terms, including repayment term, interest rate and monthly payment. You can opt for a longer repayment term to reduce your monthly bill, and you might qualify for a lower rate that decreases your monthly payment, too.
For example, if you had $30,000 in student loans at 7.00% interest rate, you’d pay $348 a month under a 10-year payment plan. And you’d pay $11,799 in interest charges.
If you refinanced your loans and qualified for a 4.00% interest rate, your new monthly payment under a 15-year term would be $222. Plus, you’d repay just $9,943 in interest. Refinancing would save you nearly $2,000, despite having a longer loan term.
Not everyone can qualify for refinancing. To maximize your chances of getting approved for a loan, ask a friend or relative with good credit and a stable income to act as a cosigner on the loan. Also, keep in mind that refinancing your loans has some drawbacks, especially if you have federal loans.
If you decide that refinancing is for you, compare offers from multiple refinancing lenders to get your best rate.
It might sound too good to be true, but there are hundreds of legitimate student loan repayment assistance programs. Depending on your occupation and location, your state could provide thousands to help you repay your student loans.
To find out if you’re eligible, check out our database of repayment assistance programs.
Choosing student loan payment plans
If you’re wondering how to lower student loan payments, there are a variety of options from which to choose. Unfortunately, there can be a lot of confusion around what options are available for student loan borrowers. By using this guide, you can find what you need to lower your payments and make them more manageable.
Before you choose a plan of action, understand what benefits you might give up and estimate how much extra interest you may pay over time. While lowering payments can feel like a quick win, it can also have long-term consequences. Choose wisely.
Ready to refinance? You can get rate quotes and apply for student loan refinancing online.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.89% – 6.66%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.99% – 5.34%4||Undergrad & Graduate|
|1.98% – 8.55%5||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|Check out the testimonials and our in-depth reviews! |
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of October 1, 2020.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 10/15/2020 student loan refinancing rates range from 1.98% APR to 8.55% Variable APR with AutoPay and 2.99% APR to 8.77% Fixed APR with AutoPay.