If You Have One Private Loan
The best way to get lower payments on a private student loan is to refinance.
Your private loans don’t offer loan forgiveness or income-driven repayment, so you don’t need to worry about losing any federal loan benefits. That means, you’re not locked into a particular program or servicer, so you might as well shop around for the best deal.
What Factors Determine Student Loan Payment Amounts
Monthly student loan repayment amounts can be different for every borrower, even for two borrowers who took out the same amount of loans at the same time. A number of factors influence your payments, some of which you cant control and others that wont be apparent until you receive your first repayment notice.
Your average monthly student loan payment will depend on these five factors:
Option : Extend Your Loan Term
If you’re not interested in an income-driven repayment program but still want to maintain federal benefits, you can simply lengthen the term of your loan to an extended plan, which sets your repayment term at 25 years.
You’ll need to contact your loan servicer to ask about extending your term.
Remember that extending your repayment term may lower your payments now but will ultimately result in your paying more over the life of the loan.
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The Extended Repayment Plan
The extended repayment plan extends out your standard student loan payment from 10 years to 25 years.
The extended repayment plan is available to all Federal student loan borrowers – no income limits apply to this. So, it’s always an option for borrowers.
In our example, if you were to switch to the extended repayment plan, you would lower your student loan payment to $196 per month.
You can switch to this plan simply by calling your lender.
Go To College Just To Meet And Marry A Rich Spouse
Thats what women supposedly did in the old days. Marrying into wealth would probably eliminate your debts, but we do not advise it as a financial plan today.
Youll be much better off using the first seven strategies. Then you can escape student debt prison and really get on with your life.
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Can You Pay Off Student Loans In One Lump Sum
Yes, you can pay off student loans in one lump sum. This includes both federal student loans and private student loans. With both federal student loans and private student loans, there is no prepayment penalty. Therefore, you can pay off your student loans any time. For example, with student loan refinancing, there is no prepayment fee so you can also pay off student loans faster.
This lump-sum extra payment calculator shows you how much money you can save when you make a lump-sum student loan payment.
Make Any Necessary Adjustments To The Repayment Plan You’re Enrolled In
“There are different types of repayment plans, and there are options for each of those when it comes to getting you into a payment program you can actually afford,” Lambert-Terry says.
The first plan is a standard repayment plan, where your payments are broken up into fixed, even monthly amounts until the loan is paid off in about 10 years.
The second plan is a graduated repayment plan. With this option, your monthly payments start off low and gradually increase approximately every two years to help you pay off your loan within about 10 years.
The third plan is an extended repayment plan, which gives you the option to make fixed or graduated payments over the course of 25 years instead of 10 .
The studentaid.gov website outlines five additional repayment plans, which you can refer to when speaking to your loan servicer about which option may be best for you.
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Take Advantage Of The Final Days Of Your 0% Interest Rate
Federal student loan payments were set to resume in February, following a nearly two-year-long freeze. But borrowers got some welcome news before the holidays: the payment pause and interest waiver will last three months longer. This means that any amount you pay before May will go further in decreasing your debt than it would later in the year, when it will get eaten up by interest.
A 0% interest opportunity rarely comes along, says Dan Rooker, a financial planner and certified student loan professional.
How much you can knock off your total debt depends, of course, on how much you owe and what your interest rate will be after the pandemic-era relief ends in May.
But, for the sake of an example, lets say you owe $40,000 with a 6% interest rate, and youre on track to pay that off in 5 years. If you make a one-time $4,000 payment and then return to making the same monthly payments of $773 after the forbearance period ends, youll pay off your debt 6 months faster. Perhaps more motivating? Youll save $1,300 in interest.
Youll be swimming against the current again starting in May, Rooker notes.
Refinance Through A Private Lender To Get A Lower Interest Rate
Get to know nelnet as your new servicer by registering for an online account, watching our website tour video below, and visiting our info page for transfer borrowers. You may have additional options for your student loans under certain circumstances. In the lawsuit, olsen and smith claim that the nelnet class action was unfair.
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How Do I Get An Extended Repayment Plan
If you have more than $30,000 in federal direct loan, want to lower your minimum monthly payment, signing up for an extended payment plan may be a good option for you. There are two caveats, though.
The first caveat is that your term or the duration of your loan may increase up to 25 years, so making payments will last considerably longer than they would with your current loan. The second caveat is because your term may be extended, youll pay more in interest than you otherwise would.
With an extended repayment plan, you can choose between a fixed and a variable interest rate, but neither your interest rate nor your minimum monthly payment is contingent on your income.
This will, however, make the cost of your education even more expensive. This is why if youre looking to lower student loans payments you may want to consider an IDR. An IDR may be cheaper for you.
Enroll In The Extended Student Loan Repayment Plan
If you have federal student loans, one option to consider is the Extended Student Loan Repayment Plan. Youll need at least $30,000 of Direct or FFELP Loans to qualify. Under this plan, you could extend your student loan repayment from the 10-year standard student loan repayment period to 25 years. By extending your student loan repayment period, your monthly student loan payments will be lower. That said, extending your student loan period also results in higher total interest payments over the life of your student loan. .
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Refinance Through A Private Lender
Another way to lower your monthly student loan payments is to refinance through a private lender. Refinancing can score you a lower interest rate and lower your monthly payment.
You can refinance both federal and private loans with a private lender. However, bear in mind that if you refinance federal loans, you’ll lose access to perks such as income-driven repayment and Public Service Loan Forgiveness.
Here’s how it can work for you: Let’s say you currently pay $500 a month on a $50,000 loan. If you have a good credit score and refinance at a 5.69% fixed interest rate, you can lower your monthly payment to $349 a month.
Check our Student Loan Refinancing Calculator to find out how much you could save.
Whichever path you end up taking, the first step is reaching out to NelNet. If your account is past due or you can’t make make an upcoming payment, don’t be afraid to call them. As your service provider, they’re here to help. Learn more about the role of a service provider on the blog.
Summary And Next Steps
Whew. That was a lot of information.
Let’s recap.
You’re ready to pay less on your monthly student loan bills . We’ve got a few steps to help you do that.
Whenever you’re about to put some work into making positive change for yourself, it helps to have the motivation of a really great result at the end. Use one of these calculators to find out how much you could save by refinancing, consolidating, or choosing an income-based repayment program.
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Update Your Address If Needed
Many people moved at some point during the pandemic and will need to make sure their loan servicer has their most up-to-date mailing information., so you get your monthly bills and other communications.
If you need to update your address, you can go to the studentaid.gov website, click on your profile and update your personal information with your new address and phone number, says Lambert-Terry. Alternatively, you can go directly to your loan servicer’s website and update your information there.
Search For Repayment Assistance
It might sound too good to be true, but there are hundreds of legitimate student loan repayment assistance programs. Depending on your occupation and location, your state could provide thousands to help you repay your student loans.
To find out if youre eligible, check out our database of repayment assistance programs.
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Sign Up For Graduated Repayment
Photo by MorboKat
Is your income temporarily low, but likely to increase dramatically in the future?
The U.S. Department of Education offers a graduated repayment plan for borrowers that allows them to reduce their monthly payment for the near term and then have the payments increase over time to eventually catch up with a traditional repayment plan.
If youre in a situation where you have strong confidence that your salary will increase significantly in the future, then this may be a way to give yourself more breathing room immediately without committing to paying for your loans any longer than you have to. But, keep in mind that this plan does not take your income into account, so even if you dont end up earning any more in the future, your payments will still continue to rise.
How Student Loan Payments Make Life Hard Today
You dread going to the mailbox and you dread even more opening the envelope. And every month you get the same feeling.
Ugh! How will I ever pay off these student loans?!
Every month you get a reminder of how much your student loan debt is and its as if the Post Office and your lenders are in cahoots to ruin your day.
As if that wasnt bad enough, your damn student loan payments make it hard to pay your other bills . . . like electric, WiFi and, maybe even sometimes, food.
You think, If only I could get a little breathing room each month, I wouldnt be stressing. But can I even lower my student loan payments?
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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.
Maybe You’re Getting Closer To 30 And You Still Have No Idea What’s Going On And Your Monthly Student Loan Payment Still Seems Too Difficult To Pay
This author can relate, and that’s why we’re going to figure this thing out.
The Department of Education offers Income Driven Repayment Plans that may be the answer if you’re struggling to make the monthly payments on your federal student loans. Private loans are a completely different thing and this article will not fully address them, but it will give you some quick information about IBR plans and answers to some great questions about them.
You can also use IDR plans if you’ve gone to graduate school, and you should pay special attention, if you’re married and have kids, or received loans during a certain time period. Go to the Federal Student Aid website to find out the details if you fall into these categories.
ATTN.com/U.S. Department of Education
Still have questions? Many other people do, too.
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Whats The Average Student Loan Payment
The average monthly student loan payment is around $460, based on Education Data Initiative analysis of information from federal education and other sources. Monthly payments range from $354 to $541 for a bachelors degree, and from $350 to $1,039 for a masters degree.
Your monthly payment may fall in that range, or be more or less depending on your individual circumstances.
It takes most borrowers 20 years to repay their student loans, during which time theyll rack up $26,000 in interest, according to Education Datas analysis.
Look Into Forgiveness And Reimbursement Programs
Public Service Loan Forgiveness is designed to offer student debt relief for students who pursue careers in public service. You make a set number of payments while working in a public service job and the remainder is forgiven.
If you don’t qualify for loan forgiveness, you may be able to get help with your student loans through your employer. Talk to your HR department about whether student loan reimbursement is available as an employee benefit and what you need to do to qualify.
In some circumstances, a debt relief company can assist you in negotiating lower payments or even partial debt reduction.
The American Rescue Plan passed by Congress and signed by President Biden in March 2021 includes a provision that student loan forgiveness issued between December 30, 2020, and January 1, 2026, will not be taxable to the recipient.
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Log Into The National Student Loan Data System
If you have federal loans, go here. You’ll need a Federal Student Aid ID to sign-in. If you don’t have one or don’t remember yours, you can get one on the NSLDS website at nslds.ed.gov.
Caveat: The NSLDS pertains only to federal loans. If you have private loans, you’ll need to find your loan balance elsewhere .
Make Payments While You’re In School
Another way to hold down your costs is to make student loan payments while you’re still in school. If you can afford it, making payments can reduce what you owe in the long run. It not only reduces your principal, but it also reduces the amount of interest that accrues on your unsubsidized loans and eventually capitalizes. How your payments are applied depends on a number of factors, but in most cases, payments are applied first to any accrued interest and fees, then to your principal balance. Learn how your payments are applied to your loans while you’re still in school.
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Refinance Your Private Loans
Finally, if you have private student loans, you don’t have a lot of options. The best option is to simply refinance your student loans.
There are a lot of factors in whether this could actually lower your payment, but that’s why we recommend using a free tool like Credible that allows you to quickly and easily see what student loans you’d qualify for, and if it would even help you lower your payment.
For example, if you currently have a $38,000 student loan, and it’s at 6.8%, you could be paying $437 per month.
If you’re able to refinance your student loan with Credible to 4.25%, you could lower your student loan payment to $389 per month.
Plus, College Investor readers get a special bonus of up to a $1,000 giftcard when they close their loan! You won’t find a better deal! Check out Credible here.
If you don’t believe us, check out this list of all the places to refinance student loans.
Consider A Graduated Payment Plan
If you’re looking for a longer-term option that extends past the forbearance period, consider the Graduated Repayment Plan.
The federal government automatically places borrowers in the Standard Repayment Plan, which consists of 10 years of fixed monthly payments. Switching to a graduated plan keeps the time period the same, but starts you out with smaller payments in the early years, ramping up over time as you start to make more money.
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Option : Refinance Your Loan
If you don’t intend to use federal loan benefits like the PSLF, or if income-driven repayment isn’t going to lower your payment all that much, refinancing may be a smart idea.
Refinancing to a lower interest rate is a supe- effective way to lower your monthly payments. And … if you refi and also opt for a longer loan term, you may be able to lower your payments by as much as $250 a month.
While refinancing is a big money saver for a lot of borrowers, you’ll want to think very carefully about any actions that would reduce your monthly payments but remove your eligibility for federal student loan benefits.
For example, refinancing your student loans is a great way to reduce your interest rate, but it’s not an option if you’re counting on a federal loan forgiveness program or if you want to maintain the ability to ask for a period of deferment or forbearance in the future.
