If you are searching for ways to lower your student loan payments, you will be glad to know that there are lots of options for you to choose from. Student loans make it difficult for college graduates to purchase a home and do other things.
Fortunately, there are several ways you can reduce the burden of student loans. Although there can be a little confusion on which option to choose, this blog post will guide you on how to reduce your student loan payments, thus making them more manageable.
How To Lower Your Student Loan Payments
Below are seven strategies that can help you lower your student loan payments:
Calculate your Total Debt
The first thing is to know how much you owe. Most students graduate with lots of loans. By knowing the amount of debt that you have, you can build a plan to pay for the loan, consolidate it, or even apply for forgiveness.
Apply for an Income-Driven Repayment Plan
If you have a federal student loan, then you are enrolled automatically in the standard repayment plan when you graduate from college. Your payments are fixed and divided over 10 years; however, the monthly payments can be very high. Fortunately, there are other payment plans for student loans. There are four income-driven repayment plans available, and they include:
- Pay as you earn.
- Income-based repayment.
- Revised pay as you earn.
- Income-contingent repayment.
Under the income-driven repayment plan, the loan servicer will extend your repayment term to 20 to 25 years while rounding off your monthly payment at a percentage of your discretionary income. Based on your family size, income, and loan balance, your monthly payment can be as low as zero dollars.
Your payment changes as your situation changes. If your income increases or decreases, your payment will be adjusted. While your payments can be smaller with an IRD plan, you can pay more in interest throughout your loan. If you are struggling to make the payments, the IDR plan can give you some time.
Consolidate your Loans
If you have several federal student loans, each with its interest rate, minimum monthly payments, and repayment terms, then consolidating your debt with a consolidation loan is an excellent idea. Through a direct consolidation loan, you will be able to take out another federal loan for the amount of your old loans.
Now, you will only have a single monthly payment and just one due date to manage. Your interest rate will be charged on the average of your old loan rates, so you might not get a lower rate. However, you can sign and register for an IDR plan.
Refinance Your Student Loans
Private student loans aren’t eligible for alternative payment plans such as IDR. If you have private student loans, then you can consider refinancing your student loans. You will work with a private lender to apply for a new loan for the amount of your current loan. The new loan has a different term, repayment period, and a new monthly payment.
You can choose a longer repayment term to lessen your student loan payments, and you could also qualify for a lower rate that lowers your monthly payment. It isn’t easy to be eligible for refinancing, so to increase your chances of getting approved for the loan, you can ask a relative or friend with a good credit score to be a co-signer on the loan.
Enroll in Automatic Payments
Several lenders provide discounts for signing up for automatic payments. You can connect your bank account and learn how you can be eligible for a 0.25% rate discount. While it might not sound important, it can lower how much you can pay over time.
Request for a Temporary Payment Decrease
If you are unable to make your monthly student loan payment, then you can ask your private lender to temporarily reduce your payment. Your lender can modify your loan by lowering your monthly payment for a limited period. You can contact your loan servicer to know what short-term payment options they have, what you need to apply for, and how to apply.
Use the Debt Avalanche Strategy
This is one of the best ways to pay off your loans, which have the highest interest rate. A common method is to budget a specific amount above the monthly required payments and then use the remaining to pay off the loan with the highest interest rate. As soon as the loan is paid off, you can apply the total monthly amount on the loan to the loan with the second highest interest rate and then the loan with the third highest interest rate.
The above-mentioned are various ways you can pay off your student loan debt. You can choose the plan that suits you.