Consolidate Your Federal Loans
Federal loan consolidation lets you combine all of your government loans into a single bill. It wont 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 youll pay more interest over time.
This strategic move is only available to federal student loan borrowers. If you have private student loans, consider refinancing.
Use Forbearance Or Deferment
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 youre dealing with medical expenses, youve lost your job or youre 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, youll 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.
Enroll In The Extended Repayment Plan
The federal government offers an alternative to the standard 10-year repayment plan for federal loans. The extended plan allows students to increase their repayment period to up to 25 years. The longer repayment period lowers monthly payments. There is also the option to have fixed or graduated payments on this plan.
To be eligible for the extended repayment plan, you must have at least $30,000 in debt. This is a good option if youre struggling to stick to the 10-year plan, or if youre hoping to lower your payments. Learn more about extended plans on the official government website.
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What Is Capitalization
Capitalization is when unpaid interest is added to your loan principal. This can happen at specific times during the life of your loan, such as when your loan enters repayment for the first time, or after a deferment or forbearance period ends. When you’re in school at least half-time or you’re in your grace period you usually don’t have to make payments on your loan. Before your first payment is due, any unpaid interest that has built up is added to the amount you borrowed . From that point on, interest accrues on the higher balance so you end up paying interest on interest. On federal student loans, capitalization occurs only when it’s required by Department of Education regulations.
Note: If your federal student loans are currently in the COVID-19-related administrative forbearance, when the forbearance ends, interest will not capitalize.However, if your loans were in a deferment or forbearance status before March 13, 2020 , your outstanding interest may capitalize after January 31, 2022 . It depends on your individual situation. Please call us so we can look at your specific circumstances.
Sign Up For An Income
Anyone with a federal student loan is automatically placed on the Standard Repayment Plan . Under this plan, borrowers have 10 years to pay off their loans. Compared to other repayment options, this is a shorter repayment period, which means your monthly payments will be higher.
If youâre struggling to make your monthly payments on your federal student loans, you can apply for an income-driven repayment plan. There are four income-driven repayment plans available to federal student loan borrowers. These plans cap your federal student loan payments at 10% to 20% of your discretionary income while lengthening your repayment term to 20 or 25 years. Both of these help lower your monthly payment.
Also, under an income-driven payment plan, once you make payments for the 20 or 25 years, your remaining loan balance is forgiven. This means you donât have to pay the remaining amount. Under current federal tax laws, the IRS will tax the forgiven amount as ordinary income. The tax laws could change, but this is still worth considering if youâre thinking about signing up for an income-driven payment plan.
Depending on your income, family size, and loan balance, your monthly payment could be as low as $0 under an IDR plan. This still counts as payments made towards loan forgiveness.
4 IDR Plans To Consider
The following four income-driven plans are available:
Remember, income-driven plans apply only to federal student loans, not private student loans.
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Increase Income Cut Expenses
Two things anyone can do to help themselves out of financial stress is to find a second source of income and/or reduce spending in every category in their budget.
There is money to be made taking a second job as a tutor, a coach, a freelance writer or even taking on the traditional side jobs as a waiter, pizza delivery or babysitting. Create a bank account where any money made on the side goes and use that to make payments on student loans.
The added benefit of a second job is that you have less time to spend money on things like dining out, entertainment, clothes, etc. That means you already should be started cutting expenses in the areas where want so often supersedes need.
Try a few more expense-cutting steps like getting a roommate to share rent/utilities/food expenses using public transportation or walking instead of having the expense of a car move home with you parents until you earn enough to afford expenses and student loan debt.
These might feel like drastic steps, but there arent nearly as penalizing as defaulting on a loan.
Student Loan Planner Disclosures
Upon disbursement of a qualifying loan, the borrower must notify Student Loan Planner® that a qualifying loan was refinanced through the site, as the lender does not share the names or contact information of borrowers. Borrowers must complete the Refinance Bonus Request form to claim a bonus offer. Student Loan Planner® will confirm loan eligibility and, upon confirmation of a qualifying refinance, will send via email a $500 e-gift card within 14 business days following the last day of the month in which the qualifying loan was confirmed eligible by Student Loan Planner®. If a borrower does not claim the Student Loan Planner® bonus within six months of the loan disbursement, the borrower forfeits their right to claim said bonus. The bonus amount will depend on the total loan amount disbursed. This offer is not valid for borrowers who have previously received a bonus from Student Loan Planner®.
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What Can I Do If No Way To Lower Student Loan Payments Helps Me
Finally, finally, if you dont qualify for any of the options above to lower student loan payments, you might consider forbearance or deferment, either of which can stop or lower your minimum monthly payments between three to 12 months.
The process to file and qualify for forbearance or deferment for private student loans varies from private lender to private lender. File federal forbearance or deferment when you have overbearing medical expenses, youve lost your job or youre having another financial challenge.
As with all the options above, your student loan interest will continue to accrue when youre in forbearance or deferment. This will make the cost of your education more expensive as youre not making payments and may be added to your principal when your payments resume.
So, if youre looking to lower student loan payments, these are most of the options you have available to you.
For most people who want to lower student loan payments, student loan refinancing or consolidation is the best solution. If you consider these options, consider contacting our friends at Debt.com. They know the ins and outs and step-by-step of these solutions, and they can save you a lot of time and mistakes.
Whichever option you choose, be sure to research the pros and cons in-depth and talk with your accountant about what your taxable consequences with each option will be.
Cutting Loan Payments By Increasing Family Size
Increasing household size can also reduce your student loan payments under income-driven repayment.
Discretionary income is defined as the amount by which AGI exceeds 150% of the poverty line. The poverty line is based on household size. Increasing household size will increase the poverty line, reducing your monthly student loan payments under income-driven repayment.
Each additional family member will reduce your student loan payments by about $50 to $100.
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Other Aspects To Consider With College Loans
Aside from preventing late payments by remaining consistent each month or allowing an automatic deduction from your checking account, here are some other aspects to consider:
- Pay off some of your debt during your grace period after graduation.
- Consolidate your federal loans, so multiple loans turn into one easy-to-manage monthly loan.
- Refinance your debt by placing your existing loan on a new loan with smaller interest rates.
- Put extra money like tax refunds, bonuses, and monetary gifts toward your payments.
Refinance Your Student Loans
You can get a lower payment and lower interest rate when you refinance your student loans.
This student loan refinancing calculator shows you how much money you can save.
Student loan refinancing combines your current federal and private student loans into a new private loan. A lower interest rate will save you money each month. You can also choose a repayment period between 5 and 20 years. If you choose a longer repayment period like 20 years, you can get a lower monthly payment. That said, you may pay higher total interest if you choose a longer repayment horizon.
There are many ways to lower your monthly student loan payment. As temporary student loan relief ends, make sure you know all your options. Here are some smart ways to pay off student loans faster:
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How Can I Prep
Over the next two months, borrowers should make sure that their student loan servicer has their current contact information, said , a higher education expert. If you’ve moved, for example, it may not.
If you were enrolled in automatic payments and your banking information has changed, you’ll also want to notify your servicer of that.
Putting aside some money for when payments begin again may also make the transition less painful, experts say.
I have significant concerns that there will be some big servicing delays.Betsy Mayottepresident of The Institute of Student Loan Advisors
Millions of borrowers will find they have a new lender when the bills resume.
That’s because three companies that serviced federal student loans Navient, the Pennsylvania Higher Education Assistance Agency and Granite State all recently announced that they’d be ending their relationship with the government by 2022.
Impacted borrowers should get multiple notices about the change, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.
Come February, if you mistakenly send a payment to your old servicer, the money should be forwarded to your new one, he said.
Move To Another State
Moving might sound drastic, but where you live could impact your student loan repayment. Some states offer student loan repayment assistance programs and incentives to new residents, helping you pay off some or even all of your loans.
If you can qualify, student loan repayment programs could mean more money in your pocket. But before you pack your bags, make sure you consider other factors, such as your earning potential in the new state and the cost of living.
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Legal Ways To Lower Your Student Loan Payment
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If you don’t do anything with your student loans, you’re automatically signed up to a generic repayment plan that typically has even payments for 10 years. However, that can be tough, especially right after graduation.
Sign Up For Automatic Payments
A 2016 by FINRA Investor Education Foundation found that 37% of student loan borrowers had a late payment the year before. One sure way to make payments on time is to have it done automatically.
Not only does that mean youll never forget to pay, it can also save you money. A lot of lenders offer discounts of 0.25% if you sign up for automatic withdrawals from your bank account.
If you owe $20,000 with 6% interest under the Standard Repayment Plan, that would save you $320 over 10 years.
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Increase Or Decrease Your Monthly Payment
If you have a full-time student loan, you can customize your payment online. You can increase your payments. This will lessen the time it takes to pay back your loan and will lower the amount of interest you pay. You can also lower your payments by extending your repayment period up to 174 months. That will make your payment smaller but you will pay more interest.
- Customize your monthly payment terms by logging in to your secure National Student Loans Service Centre account
To reduce your payments below the minimum amount or if you do not wish to change your payment terms online, contact the NSLSC.
If you need more help in repaying your loan, you may be able to get Repayment assistance.
Millions Of Borrowers Have Benefited From Student Loan Relief As They Manage The Ongoing Pandemic
The Biden administration recently extended the pause through May 1, 2022.
The federal student loan payment pause has provided much-needed relief for millions of borrowers over the past two years, but that relief comes with a high price tag.
The Department of Education recently reported that the pause in student loan repayment has cost the government $98.4 billion so far a number that will continue to rise until the moratorium is lifted in May 2022. The current student loan forbearance period costs the federal government about $4.3 billion per month, according to the Congressional Budget Office .
Several Republican lawmakers pressed Education Secretary Miguel Cardona to release documents on how the government calculates projected losses to the student loan portfolio in a This includes portfolio losses caused by borrowers who default on their student loans, which is a concern for lawmakers as student loan payments are set to resume in a few short months.
Keep reading to learn more about the federal student loan repayment moratorium, including how to prepare for the return to repayment. One strategy is student loan refinancing, which can help borrowers reduce their monthly payments. You can compare student loan refinance offers on Credible for free without impacting your credit score.
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Payment Date And Frequency Update
You can change the day of the month your payment is due:
Fill out the form and mail it to:
National Student Loan Service Centre P.O. Box 4030 Mississauga, ON L5A 4M4
You can set up weekly or bi-weekly payments by adding multiple days of the month as payment dates.
Consider setting payments soon after your receive a pay cheque to help pay off your debt in the quickest way that works for you.
Public Service Loan Forgiveness
If you work a full-time job for a U.S. federal, state, local, or tribal governmentor a not-for-profit organizationyou could be on your way to student loan forgiveness. You’ll need to make 120 payments, which don’t have to be consecutive, to qualify.
This option isn’t for the recent graduate because it takes at least 10 years to earn. You’ll need to have a federal direct loan or consolidate your federal loans into a direct loan.
This program has been plagued by problems. The government created the PSLF program in 2007, and when the first borrowers became eligible for forgiveness in 2017, a significant controversy emerged. A year after the first round of borrowers gained eligibility, almost all of their applications had been denied. Many borrowers were being denied the forgiveness they had earned over technicalities. Some discovered their loan servicers had misled them about their eligibility. As of June 2021, only 5,500 borrowers had gotten their loan balances discharged under the program.
Temporary Expanded Public Service Loan Forgiveness might help you if your Public Service Loan Forgiveness application was denied. TEPSLF grants qualifying borrowers the forgiveness they were denied under PSLF, but only until the program runs out of funds.
Many of the previous requirements for PSLF are waived as part of the change, with two key requirements remaining:
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