How to Lower Student Loan Payments

Two Methods:Changing Your Federal Student Loan Repayment PlanConsidering Alternative Options

In the United States, higher education is so expensive that most people need to borrow money in order to earn a degree. This debt can accumulate quickly, and many borrowers struggle to make their payments once they leave school. If you can’t afford your monthly student loan payments, don’t despair – there are steps you can take to make them more manageable.

Method 1
Changing Your Federal Student Loan Repayment Plan

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    Understand student loan repayment plans. When it comes time to repay your federal student loan, the government provides a series of plans for how to do so. The default plan is known as the Standard Plan. This plan typically has the highest monthly payments, but allows you to pay your loans off quickly over time.
    • The payments for the Standard Plan are fixed and can be made for up to 10 years.
    • If the payment under the Standard Plan are simply too high for you, or you want lower payments, you will need to consider another one of the repayment plans available.
    • is the main resource for student loan plan information. Visiting this website can help you apply for plans and learn about plans.
    • These programs will likely not be available if you borrowed through a private lender. If your loans are not federal, you will have to follow up with your bank or credit union to see if you have any alternative payment options.
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    Consider switching to the Extended Plan. The Extended Plan is the first plan to consider if the standard payments are too high. The Extended Plan simply takes the amount you owe and stretches it for up to 25 years. This has the effect of immediately lowering your student loan payments. [1]
    • The con is that you will pay much more interest over time, and will have the burden of a loan to deal with for a longer period.
    • This plan is also flexible, in the sense that you can opt for fixed or graduated payments. This means that your payments can be the same over your payment period, or they can gradually grow as your income grows.
    • To apply, contact your loan service provider and inquire about the Extended Plan.
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    Inquire about the Graduated Repayment Plan if you expect your income to rise. If you are currently in a situation where you are unable to pay full payments, but you expect your income to rise steadily over time, the Graduated Repayment Plan allows you to start with a low payment, and have it grow every two years.[2]
    • This program blends the Standard Plan and the Extended Plan. In this plan, you still must pay off your loan within 10 years. This means that you will pay less interest over time than with the extended plan. You also have the option of starting with fairly low payments, and having them grow every two years.
    • If you are in a career where there is solid income growth, this may be an option to consider.
    • This is perfect for an individual who cannot handle the Standard Plan repayments but does not need as much flexibility as the Extended Plan offers.
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    Learn about Income-Driven Plans. If the main three types of plan are still too difficult to repay, the government offers three "Income-Driven Repayment Plans". These plans all tie your monthly payment to your income. If you are currently making very little or have high expenses, these options are wise to consider. Under all three plans, any remaining debt leftover after the payment period is forgiven.[3]
    • All of these plans, with the exception of the "Income-Contingent Plan", require you to demonstrate financial hardship.[4].
    • Income-Based Repayment Plan: This plan makes your payments equal to 15% of your discretionary income. Discretionary income can be complex to calculate (your loan service provider will help you), but it basically means your leftover income after all your essential expenses are paid for. The loans can be repaid for 20 years if you are a new borrower.
    • Pay-As-You-Earn Repayment Plan: This plan is only available for people who received loans after October 1st, 2011. This plan allows you to repay for 25 years, and makes your payment only 10% of your discretionary income.[5]
    • Income-Contingent Payment Plan:This plan allows you to pay either 20% of your discretionary income, or what you would pay on a 12 year Standard Repayment Plan -- whichever is lower. This plan allows you 25 years to repay.
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    Contact your loan service provider to discuss Income-Driven Plans. An in-depth discussion with your loan service provider is necessary to both understand and apply for income driven plans. Your loan service provider can help you understand the sometimes complex eligibility requirements for these plans, and guide you through the application process.
    • Certain types of loans are only eligible for certain plans, and your loan service provider can tell you if your loan is eligible and if you are eligible based on your financial status.
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    Keep your expectations reasonable. Understand that no matter what repayment plan you choose, you may have to cut basic expenses and forego luxuries in order to prioritize your monthly payments.
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    Take the long view. It’s important to understand that if you pay less each month, you will typically wind up paying more over time. It’s understandable to choose the lowest possible monthly payment, but think about your long-term goals, and consider paying more if you can. To illustrate, take the average federal student loan debt, $26,946:[6]
    • On the standard plan, your payment would be $272 a month. When your loans are paid off, you’ll have spent a grand total of $32,585.
    • On the graduated plan, you might pay something like $152 a month in the beginning. This payment would increase to around $455 a month over time. You’ll ultimately spend a grand total of $33,979.
    • On a “pay as you earn” plan, you might pay something like $104 a month in the beginning. This payment would increase to around $272 a month. You’ll ultimately spend a grand total of $39,509.

Method 2
Considering Alternative Options

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    Check with your employer. Many companies offer assistance to employees with student loan debt. See what kinds of programs your employer offers.
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    Look into consolidation. If you are worried that you won’t be able to make payments on your federal or private student loans – or if you are already delinquent or in default – you may want to apply for a consolidation loan. These loans take all of your existing student loans and merge them into a single loan. You can often negotiate a lower monthly payment on this new loan.
    • If your loans are federal, stick with a federal consolidation loan, which you can apply for through the Department of Education. These are almost always a better deal than private consolidation loans.
    • You can apply for a federal consolidation loan through There are also plenty of resources to help you understand these types of loans better.
    • Consolidation can be a useful option if you have multiple separate student loans. It can combine them into one easy payment. It is possible that the combined loan will have a lower interest rate then what you would be paying on each loan separately, and this would lower your payment.[7]
    • Inquire with your loan service provider about whether this option can have an interest-lowering effect for your particular situation.
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    Defer your payments if you qualify. If you truly cannot afford to make payments, you may qualify for a financial hardship deferment from the Department of Education for a maximum of three years. You will have to prove that you are unemployed, underemployed, or otherwise experiencing tremendous financial difficulties, but if you do so, you will be able to stop making payments temporarily – though interest will continue to accrue on any of your unsubsidized loans. You may also qualify for deferment if:[8]
    • you go back to school.
    • you serve in the Peace Corps.
    • you serve in the military.
    • you are admitted to a full-time rehabilitation program for people with disabilities.
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    Check if you qualify for forbearance. Forbearance is like deferment – you’ll get to stop making your payments temporarily. However, with forbearance, interest will continue to accrue on all of your loans, whether subsidized or unsubsidized. You may qualify for forbearance if:[9]
    • you enroll in a full-time medical or dental internship.
    • you are currently teaching in a school that qualifies for the teacher loan forgiveness program.
    • you serve in AmeriCorps or another volunteer organization full time.
    • your lowest possible student loan payment is more than 20% of your monthly income.
    • Forbearance is typically consider for people who do not qualify for deferment, but still cannot make their payments. If you suffer from an illness, or a period of financial hardship, you may qualify for forbearance.
    • You can apply by contacting your loan service provider. They will likely require financial, medical, or other types of documentation.
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    Know whether you qualify for loan forgiveness. The Department of Education may forgive some part of your student loan debt if you teach or provide public service in specific circumstances. You may qualify if you:
    • teach for five consecutive years in a school that qualifies for Title I funding under the Elementary and Secondary Education Act of 1965.
    • work and/or volunteer for ten years in tax-exempt organizations.
    • serve in the U.S. military.


  • Borrow as little as possible when you apply for school loans, and learn to economize in every way possible to save yourself money.
  • Be sure that your future salary will be sufficient to repay your school loans.
  • Try to reduce your principal. Loans repayments first clear your late fees, then interest and then principal. If you make additional payments when possible, it helps reduce the principal and this reduces the overall interest payable on the principal amount.


  • Do not ignore repayment of your student loans. Doing so can result in long term effects on your credit rating and lifetime financial damages.
  • Beware of fees and minimum loan balance requirements when you consolidate loans.

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Categories: Budgeting and Financial Aid for College