Ways To Lower Your Student Loan Payment

If you have federal student loans, there are several options available that could lower your monthly payments. There are significantly less choices for private loans, but it still can be done if you have a good credit score.

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Forget terrorism, climate change or a Jonas Brothers reunion tour. The biggest worry millions of young Americans have is student loan debt.

Here is how bad the situation stands in 2019:

  • Almost 45 million of us are on the hook for a collective $1.5 trillion, which is three times the amount of debt owed in 2005.
  • Somebody defaults on their student loan every 28 seconds, according to a 2018 study titled “Buried in Debt.”
  • Student loans are such a worry that 20% of borrowers say they have delayed getting married, and 26% have put off having children.
  • A recent survey of almost 8,000 borrowers also found that 33% say their monthly loan payment is higher than their rent or mortgage, and 85% said it’s a major source of stress.

So, how can you control student loan debt instead of letting it control you?

A good first step to lowering stress is to lower your monthly payment. Paying less in the short run usually means paying more in the long run due to interest charges. It’s worth considering, however, especially if you’re just starting out and don’t have much income.

Here are some strategies that could help you get on with your life, while still paying back your student loan.

1. Consolidate Your Loans

You probably got at least one loan for every year you were in college. They might be with a variety of loan providers with differing interest rates.

Keeping up with the monthly bills is a challenge in itself. If you miss one payment, it’ll damage your credit score and make it harder to get out of debt.

You can combine those debts into one with a Direct Consolidation Loan. Having one monthly bill and one due date will simplify things.

A wide array of federal loans can be consolidated. Private loans aren’t eligible for this program. Check out the federal student aid website for list at https://studentaid.ed.gov/sa/repay-loans/consolidation

Your interest rate will be the weighted average of your previous rates (rounded up to the nearest 1/8th of a percent), so you won’t necessarily end up with a lower overall rate. You would get lower payment by lengthening the time (up to 30 years) you’ll have to pay off the loan.

The downside is you’ll make more payments and pay more interest over the life of the loan. Your choice could come down to whether more cash now beats paying more for the loan down the line.

For instance, if you owe $30,000 in loans and have a 10-repayment plan that averages 6% interest, your monthly payment would be $333.

A loan with same amount and interest rate repaid over 20 years would reduce your monthly payment to $215. But your total payment would balloon from $39,960 to $51,600.

More cash now? Or more later?

2. Apply for an income-driven repayment plan

The federal government has four IDR programs in which your payments are based on how much you earn. Your overall debt isn’t lowered, but you get to pay it back at a pace that reflects how much you are making.

With standard repayment plans, your payments are fixed and divided over 10 years. Under an IDR, you can extend the terms to 20 or 25 years.

By spreading it out, your payments could be sharply lowered. But like a consolidation loan, you will pay more over the long run in interest.

The IDR concept is based on the assumption you will have more over the long run as your career advances and you earn more. The formula incorporates your income, family size and the poverty line in your state. Your monthly payment will be 10% of your discretionary income.

An added bonus is that, depending on the plan, your loan balance will be eligible for forgiveness after 20 or 25 years.

3. Apply for a Graduated Repayment Plan

If a borrower makes too much to qualify for an IDR, they still get lower initial payments with a graduated plan. There is a 10-year plan and 25-year plan.

Like IDRs, they are based on the assumption you’ll earn more as the years pass. Unlike IDRs, your payments automatically increase every two years even if your income doesn’t or your family situation changes.

Be aware that the increases mount up. For instance, if you owe $38,000, your monthly payment would be $213 in Year 1 under the 10-year repayment plan. That would jump to $638 a month in Year 9.

4. Apply for an Extended Repayment Plan

This plan is open to borrowers who owe $30,000 or more and stretches the repayment period from 10 to 25 years. It allows you to choose between fixed and graduated payments.

Your payments are immediately slashed but you’ll be making them well into middle age. That can get pricey if interest rates rise. Even if you get a fixed rate, 15 years of additional interest payments can be sobering.

If you owe $40,000 with a 6% rate, your monthly payment would be $444 under the standard 10-year repayment. It would drop to $257 under a 25-year plan, but you would pay $24,027 more in interest over the life of the loans.

5. Refinance with a Private Lender

The federal government may have loaned you the money, but that doesn’t mean you have to pay it back through federal programs. You can borrow for college from private lenders or pay back federal loans with a loan from private lenders like banks, credit unions and online lenders.

The new loan – and it would probably be one that allows you to consolidate your debts – will have a different interest rate and repayment terms.

You’ll have to crunch the numbers to see if they make financial sense for you. Keep in mind that private loans are not eligible for income-based repayment plans or federal loan forgiveness programs.

6. Seek Assistance from Your Employer

With so many employees under the student-debt gun, employers have started offering repayment assistance. For instance, Aetna healthcare matches up to $2,000 a year ($10,000 total) in student-loan payments for full-time employees.

Not only does that help recruit and retain talented employees, easing the financial strain makes them more productive. Check with your company’s human resources office to see if it offers loan assistance.

Unfortunately, the growth of such programs hasn’t matched the overall crisis. A 2018 study by the Society for Human Resource Management found that only 4% of companies offer this benefit.

But, hey, there’s no harm asking.

7. Sign up for Automatic Payments

A 2016 by FINRA Investor Education Foundation found that 37% of student loan borrowers had a late payment the year before. One sure way to make payments on time is to have it done automatically.

Not only does that mean you’ll never forget to pay, it can also save you money. A lot of lenders offer discounts of 0.25% if you sign up for automatic withdrawals from your bank account.

If you owe $20,000 with 6% interest under the Standard Repayment Plan, that would save you $320 over 10 years.

8. Go to College Just to Meet and Marry a Rich Spouse

That’s what women supposedly did in the old days. Marrying into wealth would probably eliminate your debts, but we do not advise it as a financial plan today.

You’ll be much better off using the first seven strategies. Then you can escape student debt prison and really get on with your life.

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet.


  1. Berman, J. (2018, December 19). The perilous gap between lofty goals and student-loan forgiveness – the fine print. Retrieved from: https://www.marketwatch.com/story/two-stories-that-illustrate-the-gap-between-the-lofty-goals-of-student-loan-forgiveness-and-the-fine-print-2018-12-19
  2. NA. (2018, November 1). Buried in Debt. Retrieved from:https://www.meetsummer.org/share/Summer-Student-Debt-Crisis-Buried-in-Debt-Report-Nov-2018.pdf?_t=1541171524
  3. NA. ND. Consolidating your federal education loans can simplify your payments, but it also can result in the loss of some benefits. Retrieved from: https://studentaid.ed.gov/sa/repay-loans/consolidation