How to Reduce Your Payments on a Student Loan

Written By Mary Beth Eastman
Last updated May 31, 2019

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May 31, 2019

Simple. Thrifty. Living.

The big day has finally arrived, and all your hard work has paid off – but you have student loans that haven’t been paid off. Yet.

Entering repayment on your student loans means, now that you’re no longer a student, you must begin repayment of any student loans you borrowed to put yourself through college. The good news is that, depending on your situation, there are ways to reduce your payments.

Federal student loans are automatically placed into a Standard Repayment Plan after you graduate. The exact date repayment goes into effect is six months after the date you graduated or left school. Standard Repayment Plans can have the debt off your shoulders in short time, but your monthly payments could kill any spending money you thought you had.

Thankfully, there are various student loan repayment plans that are based on your income. On an income-based plan, your loan could be extended for up to 25 years and your monthly payment can be capped at an amount you can easily afford. Income-based plans also have contingency factors, such as if you take a lower paying position. In this case, your payment is reduced to reflect the change. If you lose your job, your loan payments can be temporarily paused until to you regain employment.

What if you graduate and immediately get the job of your dreams? You might make more money than is allowed under an income-based repayment plan. If this is the case, but making your monthly payments is still out of reach, a Graduated Repayment Plan allows you to make payments that slowly increase incrementally with your income biennially. Graduated Repayment Plans look to have your payments complete within 10 years.

If you took out multiple student loans during your time at college, each one will have its own repayment plan. In the above examples, a student only took one loan and is unable to make payments. If you have more than one loan that requires the same or similar payment amounts, look into student loan consolidation. If you consolidate your student loan debt, you’ll have just one monthly payment to make. Depending on your lender, you may still qualify for the above types of repayment under a consolidated loan.

You can consolidate federal loans federally. They simply take the multiple loans you have now, combine them into one, and set the rate for your consolidation as a weighted average of your current loan rates. Be aware, however, that this only applies to federal loans — and it may not save you money in the long term, as consolidating student loans or a smaller payment may extend the loan term and end up costing thousands extra in interest.

Another option is to refinance your student loans. Refinancing takes all of your student loans, whether federal or private, and combines them into one new loan, with new terms and a new rate. Lenders determine that rate not by averaging your current loan rates but by checking your credit history and whether you have steady income. It’s quite possible to drop your interest rate with a refinance, thereby saving you thousands extra in interest payments. Start now by checking out our extremely thorough guide to the best student loan refinancing companies. Find out whether you qualify for a student loan refinance.

Graduating college should feel like the biggest weight has been lifted off your shoulders. Keep your happy glow and check out these and other student loan repayment plans.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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