How to Lower Student Loan Payments

Refinancing, consolidation and income-driven repayment plans can lower your monthly student loan bill.
Anna Helhoski
Cecilia Clark
By Cecilia Clark and  Anna Helhoski 
Edited by Des Toups

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There are several ways to lower your student loan payment. The reason you want a lower payment and the type of loans you have will help determine which is best.

If you have stable finances and want smaller student loan payments to give you extra money each month, these strategies could be best for you:

  • Student loan refinance: Get a lower interest rate and new term with a private lender.

  • Federal student loan consolidation: Combine multiple federal student loans and get a new term that could lower payments.

If you need to lower your monthly student loan payment so that you can make ends meet, consider these strategies:

  • Income-driven repayment: Decrease your federal student loan payment based on your income.

  • Temporary payment decrease: Get a temporarily reduced private student loan payment.

  • Forbearance or deferment: Stop payments for a set period of time, on either federal or private student loans.

Compare your payment options

Refinance some or all of your loans

If you have solid finances, you may qualify for a lower interest rate — and lower monthly payment — through student loan refinance. Refinancing also gives you the opportunity to change your term.

You could opt for a shorter or longer term depending on your overall goals. Getting a longer term with a lower interest rate would allow you to decrease your monthly payments the most. But it would also leave you paying more overall than if you went with a shorter term.

You can refinance federal and private student loans. Refinancing always transfers your loans to a private lender: you can’t transfer private loans to the federal government.

If you refinance federal student loans, you’ll lose the protections that come along with them, like the current federal student loan payment and interest freeze.

Consolidate your federal loans

Federal loan consolidation lets you combine all of your government loans into a single bill. It won’t result in a lower interest rate, but it could extend your repayment term. Depending on your total debt, terms can range from 10 to 30 years. With a longer term, your monthly payments will be lower. However, a longer term also means you’ll pay more interest over time.

This strategic move is only available to federal student loan borrowers. If you have private student loans, consider refinancing.

Choose an income-driven repayment plan

Income-driven repayment plans will cap federal loan payments at a portion of your discretionary income — between 10% and 20% — and lengthen your loan repayment term to 20 or 25 years. At the end of this period, your remaining loan balance is forgiven.

This applies only to federal student loans since very few private lenders offer an income-driven repayment option.

Depending on the size of your income, your monthly loan payment could be lower than it is now. Ask your servicer which income-driven plan will result in the lowest payment amount.

You have to recertify your income every year, otherwise you’ll end up back on a standard plan and your monthly payment will likely increase.

The drawbacks of income-driven repayment are you may not pay off your loans faster over time and could end up paying more interest. You also could end up with a higher monthly payment as your income grows.

Ask for a temporary payment decrease

Temporarily reducing your payments can help you stay on track and avoid default, but you’ll have to ask for it.

Federal loan servicers don’t lower your payment temporarily — they only offer long-term options like income-driven repayment. But your private lender could modify your loan by reducing your monthly payment or interest rate for a short period of time.

Contact your private lender to find out what short-term payment modification options they offer and the process to get started. You might have to prove financial hardship, for example.

Use forbearance or deferment

If you can’t make any payment right now, consider contacting your lender or servicer to request a deferment or forbearance. Each will pause your payments for a period of time (usually in three, six or 12-month increments).

For example federal borrowers can access up to 36 months of unemployment deferment and up to 36 months of economic hardship deferment throughout the life of the loan. Cancer patients can request deferment during treatment and for up to six months after treatment ends.

Federal student loan forbearance, meanwhile, has no limit through the life of your loan and you can request up to 12 months at a time. You can request a forbearance if you’re dealing with medical expenses, you’ve lost your job or you’re experiencing other financial challenges.

Options for forbearance vary among private student loan companies. If you have private student loans, ask your lender which options are available to you.

While forbearance and deferment will temporarily stop your payments, you’ll always end up paying more in the long run. Interest continues to build during the pause and capitalizes, or rolls into your principal, when payment restarts.

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