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Calculator: Compare 3 Ways to Cut Student Loan Payments

Refinancing, consolidation and income-driven repayment plans can lower your monthly student loan bill.
February 23, 2018
Loans, Student Loans

These strategies lower or streamline your student loan payments. Every student loan strategy has pros and cons, so use the calculator below to compare how much you’ll owe and for how long.

 Compare your payment options

1. Sign up for an income-driven repayment plan

If you have federal loans — borrowed from the government, not a bank — and don’t make too much money, income-driven repayment cuts your monthly loan bill to 10% or 15% of your “discretionary” income. You can pay $0 a month if you don’t have a job. Plus, any balance left after your loan term ends is forgiven. It’s free to enroll in these programs.

The catch: You’ll pay your loans off for longer, you have to reapply annually, and any forgiven amount will be taxed as income.

2. Refinance your student loans

Student loan refinancing is a lot like refinancing a home or auto loan.

A lender will buy out your existing student loans and give you a new one at an interest rate that’s based on your credit and income. A lower interest rate means lower payments. And if you choose a shorter loan term than you had before — five years instead of 10, say — you’ll save even more. Refinancing to a lower rate and a shorter term is the fastest way to pay off your student loans.

The catch: You need to have a steady income and good or excellent credit, or a co-signer who does. Once you refinance federal loans, you give up useful protections, like income-driven repayment and forgiveness programs.

3. Consolidate your federal loans

After graduation you might find you’re repaying a hodgepodge of loans managed by different servicers, the companies that collect payments on behalf of the government. Federal loan consolidation lets you combine those government loans into one, leaving you with just one student loan bill.

The catch: Consolidation won’t lower your interest rate. But it might extend your repayment term, giving you a lower monthly bill.

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