5 Ways How to Reduce Your Student Loan Payments

Tired of struggling with hefty student loan payments? Whether you’re a pharmacist, a professor, or teacher, you’re not alone. In this blog, we’ll explore five powerful strategies to make your student loan payments more manageable. From income-driven repayment plans to loan consolidation and loan forgiveness options, we’ve got you covered. Say goodbye to student debt stress and hello to financial relief!

5 Effective Strategies to Reduce Student Loan Payments

While there are a number of strategies you can employ to lower your student loan payments, there are a handful that stand out above the rest. These include:

1. Income-driven repayment plans
2. Loan consolidation
3. Public Service Loan Forgiveness (PSLF)
4. Refinancing
5. Temporary forbearance or deferment

Below, we’ll dig into the specifics of each of these strategies.

1. Income-Driven Repayment Plans

Consider enrolling in an income-driven repayment plan offered by the government. These plans make your monthly payments more reasonable by capping them at a portion of your disposable income. Examples of such projects include Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay-as-you-earn (REPAYE).

There are four primary Income-Driven Repayment (IDR) plans available:

1. Revised Pay As You Earn (REPAYE) – Under this plan, your payments are capped at 10% of your discretionary income.
2. Pay As You Earn (PAYE) – With PAYE, your payments are also limited to 10% of your discretionary income.
3. Income-Based Repayment (IBR) – IBR offers two options for payment percentages: either 10% or 15% of your discretionary income.
4. Income-Contingent Repayment (ICR) – Under the ICR plan, you have two payment options: either 20% of your discretionary income or the amount you would pay under a fixed 12-year term, whichever is lower.

2. Loan Consolidation

Your monthly payments will be less if you choose to prolong the repayment period of your federal student loans by consolidating them into a Direct Consolidation Loan. However, remember that this may lead to paying more interest over time.

3. Public Service Loan Forgiveness (PSLF)

If you work in a qualifying public service job, you may be eligible for PSLF.Your federal student loans may be forgiven of their outstanding sum when you have made 120 eligible payments.

4. Refinancing

Private student loan borrowers may consider refinancing their loans to secure a lower interest rate. This can lead to reduced monthly payments and potentially save you interest costs.

5. Temporary Forbearance or Deferment

In times of financial hardship, you can explore options like forbearance or deferment, which temporarily halt your loan payments. However, interest may continue to accrue during these periods.

Federal deferment is an option under specific circumstances, which include:

1. Economic Hardship – You may qualify if you receive government assistance such as welfare payments or food stamps and your primary job income falls below 100% of the poverty line.
2. Cancer Treatment – Deferment is available while you’re undergoing cancer treatment and for six months after treatment concludes.
3. Military Service – Active duty service members engaged in war or national emergencies are eligible for deferment. Deferment ends upon your return to part-time or full-time education.
4. Unemployment – If you are unemployed or actively seeking employment, you can request unemployment deferment. However, this type of deferment lasts for a maximum of three years.
5. Rehabilitation Training – If you’re participating in a rehabilitation program for drug abuse, mental health, or alcohol abuse, you may be eligible for deferment.

Consolidating and Refinancing Your Loans

Two of the strategies above that merit some additional attention consolidation and refinancing. As these are not federally offered or servicer-offered options, their pros and cons may factor more into the decision to utilize these options. Let’s take a look

Pros and Cons of Consolidating Student Loans

Pros:

• Simplified Repayment Process – Loan consolidation streamlines your federal student loan repayment by combining all your loans into one. You’ll only need to make a monthly payment, eliminating the hassle of managing multiple lenders.
• Potential for Lower Monthly Payments – Consolidation can reduce your monthly payments by extending the repayment term. This extension can make your payments more manageable, especially if you’re struggling with your current budget.

Cons

• No Reduction in Total Debt – It’s crucial to recognize that while consolidation makes monthly payments more convenient, it doesn’t reduce the total amount you owe. The outstanding debt remains unchanged, and you’ll ultimately pay more interest over the extended repayment period.

Pros and Cons of Refinancing Student Loans

Pros:

• Lower Monthly Payments – Refinancing offers the potential for significantly reduced monthly payments, making your student loan burden more manageable.
• Access to Better Loan Terms – You can secure a lower interest rate and potentially better loan terms through refinancing, which can lead to long-term savings.

Cons:

• Loss of Federal Loan Benefits – One of the major drawbacks is the loss of valuable federal loan benefits and protections. This includes the forfeiture of income-driven repayment plans and loan forgiveness programs.
• Private Lender Dependency – Refinancing typically involves switching to a private lender, which may have less flexible repayment options compared to federal loans.
• Creditworthiness Requirement – To qualify for refinancing with favorable terms, you often need a strong credit history. Those with poor credit may not benefit as much or even qualify for refinancing.
• Fixed vs. Variable Rates – Depending on the lender, you may need to choose between fixed and variable interest rates, each with its own set of risks and benefits. Variable rates can change over time, potentially increasing your overall repayment costs if interest rates rise.

Best Refinancing Options for Lowering Student Loan Payments

The journey of navigating student loans can often be a strenuous one. But with the goal of achieving a lower monthly payment through refinancing, the road can become significantly smoother. Diverse lenders offer specialized refinancing packages catering to various credit backgrounds. If your aim is to ease the monthly squeeze of your student loan payments, here are some top lenders tailored to different credit profiles.

AmOne (Best for Okay to Good Credit)

Students with okay to good credit scores seeking to alleviate their monthly student loan burden will find AmOne to be a worthy ally. They act as a bridge between borrowers and a range of lenders, offering diverse refinancing options. With AmOne’s extensive lender network, those with decent credit histories can effectively explore and lock in options that could notably reduce their monthly outgoings.

Check rate on website

on website

AmOne Personal Loan

4.5

Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.

Min. credit score

600

Fixed APR

3.99%-35.99%

Variable APR

N/A

View details

Overview

• Minimum credit score: 600.
• Fixed APR: 3.99%-35.99%.
• Loan amounts: $1,000 to $50,000.
• Repayment: 1 to 7 years.

Qualifications

• Must be at least 18 years old.
• Must be a U.S. citizen or permanent resident.
• While there’s no specific income requirement, a consistent source of income is essential for the applicant.

Pros

• Suitable for individuals with lower credit scores.
• No cost for the matching service.
• Attractive loan rates.

Cons

• Acts as an intermediary, not a direct lender.
• Risk of multiple contacts from prospective lenders.
• Lack of clarity on lender details.

Spring Loans (Best for Bad Credit and No Credit)

Spring Loans shines brightly for those who might be starting their credit journey or have faced past credit challenges. They firmly believe in the principle that everyone deserves a fair chance at better financial management. By considering a comprehensive spectrum of financial indicators, Spring Loans crafts refinancing options that can substantially ease the monthly repayment pressures for many students.

Check rate on website

on website

Spring Loans Personal Loan

4.2

Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.

Min. credit score

None

Fixed APR

27.00%

Variable APR

N/A

View details

Overview

• Minimum credit score: None.
• Fixed APR: 27.00%
• Loan amounts: $3,000.
• Repayment: 48 months.

Qualifications

• Demonstrate a recurrent income.
• Minimum age prerequisite: 18 years.
• Validate U.S. citizenship status with an SSN.
• Provide a legitimate U.S. driver’s license or a state identity card.
• Establish a functional bank account for incoming deposits.
• Adhere to any specific demands by the loan provider.

Pros

• Open to applicants with any credit background.
• Four-year loan period aids in structured financial management.
• The $3,000 offer addresses several short-term financial challenges.
• Wide-reaching eligibility criteria invite a broad spectrum of applicants.
• The focus on dependable income over job title benefits varied income sources.

Cons

• The set 27% APR is higher than many alternatives.
• Restriction to a $3,000 loan might not cover all financial outlays.
• Possessing specific IDs is mandatory, sidelining some applicants.
• A prerequisite for an ongoing bank account may limit certain users.

First Premier Lending (Best for Bad Credit)

First Premier Lending is the beacon for individuals whose credit histories have seen better days. They understand that a credit score isn’t the sole indicator of one’s financial responsibility. By adopting a more rounded perspective, they present refinancing options that could result in more favorable terms and, importantly, reduced monthly payments.

Check rate on website

on website

First Premier Lending Personal Loan

4.2

Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.

Min. credit score

None

Fixed APR

27.00%

Variable APR

N/A

View details

Overview

• Minimum credit score: None.
• Fixed APR: 27.00%.
• Loan amounts: $3,000.
• Repayment: 48 months.

Qualifications

• Maintain a consistent source of income.
• Must be at least 18 years of age.
• Possess valid U.S. citizenship and a legitimate social security number.
• Hold a current U.S. driver’s license or state-issued ID.
• Keep an active bank account for direct deposit.
• Satisfy any lender-specific criteria, such as credit rating, borrowing history, or place of residence.

Pros

• No minimum credit score requirement allows accessibility for those with varied credit histories.
• 48-month term provides clarity and allows for long-term financial planning.
• Specific loan amount of $3,000 can meet many short-term financial needs.
• Broad set of qualifications make the loan accessible to a wide range of people.
• Emphasis on consistent income, not necessarily employment type, allows flexibility for borrowers.

Cons

• A fixed APR of 27% is relatively high.
• Loan amount is capped at $3,000, which might not cater to larger financial requirements.
• Requirement of a U.S. driver’s license or state-issued ID could exclude some individuals.
• Mandatory active bank account could be limiting for those who are unbanked.

Upgrade (Best for Good to Great Credit)

For those boasting commendable credit scores, Upgrade emerges as a prime refinancing choice. They excel in providing competitive rates, streamlined processes, and a plethora of flexible options for refinancing. If minimizing monthly student loan repayments without compromising on quality and transparency is the aim, Upgrade is a potent contender.

Check rate on website

on website

Upgrade Personal Loan

5.0

Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.

Min. credit score

560

Fixed APR

8.49% - 35.99%

Variable APR

N/A

View details

Overview

• Minimum credit score: 560
• Fixed APR: 8.49% – 35.99%
• Loan amounts: $1,000 to $50,000
• Repayment: 3 to 5 years (7 years on some larger loans)

Qualifications

• Possess an active bank account.
• Able to provide a legitimate email address.
• Minimum age requirement: 18 years (19 for Alabama residents).
• Credit score of 600 or higher.
• Annual income of $25,000 or more.

Pros

• Willing to accommodate borrowers with a credit score as low as 560.
• Offers flexibility with a range of loan amounts from $1,000 to $50,000. This can be suitable for both small and large financial needs.
• Provides options for repayment, allowing borrowers to choose a timeline that best suits their financial situation.
• Once approved, borrowers can access funds in just one day, which is useful for urgent financial needs.

Cons

• Origination fees can go as high as 9.99%, which might add a significant cost to the loan.
• Apart from the origination fee, there are fees for late payments and failed payments, which can add up if one is not careful.
• While there is an option to extend repayment for larger loans up to 7 years, it’s not standard for all loan amounts.

BestEgg (Best for Good Credit)

BestEgg, a stalwart in the personal loan space, offers tailor-made refinancing solutions for students with good credit. Their process is characterized by simplicity, clarity, and some of the most competitive rates in the market. For students keen on consolidating their student loan landscape, leading to potentially lower monthly repayments, BestEgg is a solid choice to consider.

Check rate on website

on website

BestEgg Personal Loan

4.5

Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.

Min. credit score

600

Fixed APR

8.99-35.99%

Variable APR

N/A

View details

Overview

• Minimum credit score: 600.
• Fixed APR: 8.99-35.99%.
• Loan amounts: $2,000-$50,000.
• Repayment: 3 to 5 years.

Qualifications

• Targets borrowers with good to excellent credit; fair credit may qualify.
• Minimum credit score of 600.
• At least two years of credit history.
• Minimum annual income: $3,500 from various sources like employment, alimony, and more.
• Debt-to-income ratio: 40%, or 65% when including a mortgage.
• Must be a U.S. citizen.

Pros

• Soft credit check available for pre-qualification.
• Offers a diverse spectrum of loan amounts.
• Provides options for secured loans.
• Direct payments can be made to creditors for debt consolidation.
• Late fees are not charged.

Cons

• Charges an origination fee.
• Doesn’t offer rate discounts.
• Initial payment date isn’t customizable.
• Lacks a dedicated mobile app for loan management.

Geographic and Employment-Based Solutions

In student loan management, your location and employment can serve as powerful tools to alleviate the financial burden. Some states extend a helping hand through loan forgiveness and repayment assistance programs, offering you the prospect of reduced monthly payments or even partial debt forgiveness. Additionally, certain employers now offer student loan repayment assistance as part of their benefits package, effectively lightening the load of interest payments. By exploring these geographic and employment-based solutions, you can uncover avenues to secure a more stable financial future.

Moving to Another State for Lower Payments

Geographic location can significantly influence your student loan payments. Some states have recognized the challenge of student loan debt and have implemented programs to attract graduates to live and work within their borders. These programs often include loan forgiveness or repayment assistance initiatives that can lead to substantial reductions in your monthly payments or even the forgiveness of a portion of your debt over time.

Exploring state-specific programs is crucial for those considering relocation. Each state offers distinct benefits, creating opportunities to reduce student loan payments. By moving to a state with such programs, you can attain substantial financial relief, like discovering a hidden treasure map leading to lower costs and a more sustainable financial path.

Employer Assistance in Student Loan Repayment

As a part of their employee benefits packages, some employers now provide aid with student loan payments. This benefit can have a meaningful impact on your monthly budget and long-term financial well-being by reducing the interest you pay over the life of your loans.

Employer-sponsored student loan repayment assistance is an invaluable benefit, akin to having a fairy godparent with a magic wand that can vanish your intimidating loan payments. If your employer provides this assistance, seizing the opportunity is essential. It offers a remarkable chance to alleviate financial stress and embark on a more secure and stable financial future.

Additional Methods to Reduce Payments

While geographic and employment-based solutions can be powerful tools in managing your student loan debt, there are also additional methods you can consider to reduce your monthly payments further:

Enrolling in Automatic Payments

Many lenders offer a small interest rate discount, typically around 0.25%, to borrowers who choose automatic monthly payments. This seemingly minor reduction can lead to significant savings over the life of your loans.

Searching for Repayment Assistance Programs

Pay attention to the various repayment assistance programs available to borrowers. These programs can provide substantial financial support and, in some cases, lead to complete loan forgiveness. Eligibility for these programs often depends on factors such as your profession or income level.

Extended Repayment Plans

A comprehensive repayment plan could be an option if you prefer lower monthly payments over a longer period. Be mindful of the increased total interest costs associated with longer repayment terms.

By combining these techniques with career and location-based options, you can develop a comprehensive plan that will enable you to efficiently manage and lower your student loan payments. Every strategy has its own benefits, enabling you to customize your payback schedule to your own financial situation and objectives.

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Final Thoughts

Tackling the challenge of high student loan payments requires a multifaceted approach. Understanding the basics of student loan repayment is the first step, empowering borrowers with the knowledge needed to make informed decisions. From there, various strategies, such as income-driven repayment plans, loan consolidation, and even geographic and employment-based solutions, can reduce the financial burden.

By implementing these strategies, borrowers can regain control over their finances, free up income for other essential aspects of life, and work towards a more secure financial future. Remember that each individual’s financial situation is unique, so choosing the strategies that best align with your goals and circumstances is essential.

And for more state-level options, check out our student loan repayment guides for Connecticut, North Carolina, Indiana, Arizona, Louisiana, and Maryland!

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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