How to reduce student loans payments – Know your Options

How to reduce student loans payments - Know your Options

Student loans are a common thing among graduates, who are dealing with monthly payments up to a few hundred dollars. If you are at the start of your career, or if you have lost your job, got a salary cut, or some event placed into the situation to spend your budget not as planned, you might be searching for a way to pause or to reduce student loan payments. 

But first, have you already analyzed your incomes and expenses? This data might help you to revise the things you are spending on and maybe even grow your budget by changing a cable provider or minimize the grocery costs. If you have gone through this process and still are in lack of funds, then there are more options that will help you reduce the loan payments.

Understand your loan type

First things first, and here is the stage that requires more information about your loan type. This will help you to understand which repayment plans are available to you.

Students who qualified for federal student loans have a grace period, which means that the repayment starts after graduation. In the case of private loans, the repayment type depends on the lender. Another way to differentiate loans is whether the loan is subsidized or not, which is very important when it comes up to interest rates. The government will pay for you the rates in case you have beneficiated from a subsidized loan.

The aforementioned facts will give you an intro to the repayment options, but you have to be aware that you have to start paying for the debt even if you haven’t found a job after university, or you are experiencing difficult financial times. Also, some students have a mixed form of loans, in the situation if the federal one does not cover the costs for education. Therefore, we will discuss some tools to use to handle your loan after college.

Options to reduce student loan payments

Now that you understand your loan type, these are the options to consider in order to reduce the costs of your loan:

Extended Repayment Plan

This option implies the extension of the standard 10 years student loan repayment term to 20 or 25 years. This will significantly lower the monthly amount of money you owe. Speaking from a long term perspective, you may end up paying much more for your student loan due to the interest you pay every month. In 20 years the sum which will accumulate might not be very profitable.

Extending the repayment plan might be a good option in the beginning, but this will postpone other financial goals you have. Choosing this way, you should calculate first the full amount with the interest over time and decide if it fits you or not. This option is only available if you have at least $30 000 in your student loan.

The Income-Driven Repayment Plan

IDR, or income-driven-repayment, is a plan available for students with federal loans. It is divided into 4 plans, outside of the standard option. The IBR (income-based repayment) plan is based on your income and family size, which means that the monthly payments will be limited to 10-15% and the state will cover the difference. The PAYE plan is similar to IBR and is a 10 % payment. It is easier to qualify for this option and the main benefit is for those who do not have a stable salary. REPAYE has the same principles as PAYE, but you do not have to prove financial hardship. Be aware that in the case of Revised-Pay-As-You-Yearn, loan forgiveness is after 25 years. The last option is ICR, which is a plan that goes further than your income and takes into consideration the rate at which your salary is taxed and the number of people in your household. For more information about these ways, ask your federal student loan servicer for details and documents required for the application.

Choose a Graduated Repayment Plan

If you do not qualify for an income-driven repayment plan, then you can apply for a graduated one. If the standard plan is not for you, the graduated plan means that your monthly payment, in the beginning, will be very low. The idea is that the sums will increase every 2-3 years. This will help you to get some stability after graduating in then you will be able to pay higher amounts and not feeling pressure on your budget. In 10 years, you will be done with your loan.

Federal Loans Consolidation

This is the case of students who take multiple loans to cover their educational costs. The consolidation of federal loans means combining them into one direct consolidation loan. This makes the process of loan payment easier because instead of making payments to many lenders, you only pay once a month. This also enables you to extend the repayment term from 10 to 30 years. However, make sure to count first, as this option does not help you to get a lower amount of interest you pay.


A good way to lower student loan payments is the interest rate reduction. Refinancing means replacing the existing debt with another one but at a lower interest rate. This option is offered by private lenders only in certain conditions. To qualify for refinancing, lenders will request details about your credit score or information from your credit report. Only those with good credit history will be accepted for this possibility. It is important to understand that the loan balance is the same, only the paid interest will be lower and you will also lose the benefits of federal student loans, like the income-driven repayment.

Deferment and Forbearance

These two ways enable you to pause the payment for the student loan debt. They are perfect for tough situations, but for stable times, it would only extend the life of your loan. In the case of federal student loans, deferment can be requested. You may qualify in case you are going through financial hardships if an emergency occurred, or in case you decided to go back to school. If you have a private lender, apply for forbearance. The student loan payment will be paused but not the interest rate.

Help from the state

Private student loans do not qualify for such ways as deferment, but you can get a helping hand for your debt from the state. Find a website that has financial tools to help you find an assistance program based on your state and field of activity. The main idea of help from the state is to attract professionals so feel free to request help with your student loans.


Managing your budget will offer you more financial security. Therefore, before making decisions, make sure to analyze your student loan balance left, and understand the amount which is to be paid monthly. From this point, you will be able to choose the instrument which fits you the best. It is ok to opt for deferment or direct consolidation loans, even if they extend the life of the loan if the monthly payment is too difficult to handle for you. If you are still in school, this article provides you enough information for selecting the best type of loan and repayment plan for you.

However, sometimes the standard options are better. If you make payments for tour student loans constantly, you will build a better credit score, which will offer you loans with a lower interest rate.

Student loans can be stressful but know you know your options. You only have to choose the one that fits you the best.

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