The average monthly student loan payment for borrowers between the ages of 20 and 30 is $351.
Although making that payment each month is struggle enough, your student loan payment can actually increase as time goes on. Find out which factors impact your monthly payment and what you can do to reduce or lock in your payment so you don’t pay more down the road.
Why did my student loan payment go up?
Here are the four most common reasons behind an increase in your monthly student loan bill.
1. You signed up for the Graduated Repayment Plan
If your income was low after graduation, and you couldn’t afford your federal student loan payments on a Standard Repayment Plan, you might have signed up for a Graduated Repayment Plan. With this option, your payments start off low and gradually increase over time.
Presumably, as you progress in your career, you’ll earn more money and be able to afford the higher payments later. However, your payments increase every two years with a Graduated Repayment Plan, whether you’re earning more money or not.
2. Your salary increased
For those struggling to keep up with their federal loan payments on a small salary, an income-driven repayment (IDR) plan can be a huge help. With an IDR plan, your monthly payments are capped at 10 to 20 percent of your discretionary income and your repayment term is extended. This reduces your payments to make them more manageable.
However, you must recertify your IDR plan each year. If you increased your income by getting a raise or taking on a second job, for example, the government would adjust the terms of your IDR plan. They recalculate your payment based on your new income, which can make your monthly student loan payment higher.
3. You have a variable interest rate
Federal student loans all have fixed interest rates, meaning the rate stays the same for the life of the loan. However, private student loans are different. When you take out private student debt, you can choose between a fixed interest rate or a variable interest rate.
Variable interest loans often have lower interest rates than fixed loans at first, but they can fluctuate over time depending on market trends. If your variable interest rate increases, your loan will accrue more interest, and you will have to make a larger payment each month.
4. You deferred your loans
Many people defer their loans, pausing their monthly payments while they go back to school, search for work, or deal with economic hardship. While temporarily deferring student loan payments can prevent you from becoming delinquent on your loans, it can also cause your loan balance to increase.
Depending on the type of loans you have, such as unsubsidized federal loans or private loans, interest will continue to accrue on your loan during deferment. That growing interest can cause your overall balance to increase. Once you start making payments again, you could end up with a bigger bill.
How to lock in your monthly payment
If monthly payment fluctuations make it difficult to manage your student loans, there are two ways to get a fixed interest rate and a set monthly payment.
1. Switch to a Standard Repayment Plan
If you’re on an IDR plan or Graduated Repayment Plan, consider switching back to a Standard Repayment Plan. The Standard Repayment Plan is the default, where your payments are spread out evenly over 120 months. While your payments might be higher initially, they’ll stay constant for the length of your repayment.
2. Refinance to a fixed-rate loan
If you have private student loans with a variable interest rate, you can refinance them into a new loan. By refinancing, you take out a new loan for the amount of your old one, paying your old debt off and working with a new lender.
When you refinance, you can choose a fixed interest rate loan and decide to extend or shorten repayment term. Depending on the terms you choose, refinancing your student loans can help you save money, too.
Managing your student loan payments
When you’re on a tight budget, there’s no room for fluctuating student loan payments. If you’ve ever wondered why your student loan payments went up, remember the different factors that can affect your bill. By switching your repayment plan or refinancing your debt, you can get financial stability.
For more information about managing your loans, here’s how to decide if refinancing is for you.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 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 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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 Month/Day/Year, 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 08/21/18. 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@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|