Pay off student loans

7 Ways to Lower Your Monthly Student Loan Payment 

how to lower monthly student loan payment

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Are your student loan payments devouring your paycheck the second it hits your bank account? If your payments are way too burdensome right now, don’t despair — there are ways to lower them. Here are seven ways to lower your monthly student loan payments (cue huge sigh of relief).

How to lower your monthly student loan payment

1. Apply for an income-driven repayment plan

If you’ve got federal student loans, you can apply for an income-driven repayment plan, which adjust your payments in accordance with your income. There are four main ones:

  • Income-Based Repayment (IBR)
  • Pay As You Earn (PAYE)
  • Revised Pay As You Earn (REPAYE)
  • Income-Contingent Repayment (ICR)

These plans cap your monthly income at 10%, 15%, or 20% of your discretionary income. Depending on your income, you could qualify to pay as little as $0 per month.

Note that these plans also extend your terms to 20 or 25 years. So you’ll be in debt for a lot longer and pay more interest overall.

But the trade-off could be totally worth it if you need a way to lower your monthly student loan payments. Plus, if you still have a balance at the end of your term, the remaining amount will be forgiven.

You can apply for an income-driven plan on the Federal Student Aid website. Remember that only federal loans are eligible; private student loans don’t qualify.

2. Apply for extended or graduated repayment

Two other options are the extended repayment plan and the graduated repayment plan.

  • Extended plan: lowers your payments and extends your terms to 25 years. You can choose fixed payments or graduated ones which increase over time.
  • Graduated plan: lowers payments now, but they’ll increase every two years. You’ll stick with the regular 10-year repayment term.

In most cases, an income-driven plan is preferable to the extended plan, since it could end in loan forgiveness and is more customized to your situation.

The graduated plan is useful if you need to lower costs now but can afford to pay more in the future (and still want to be debt-free within 10 years).

3. Consolidate your federal loans

Consolidating federal loans involves taking out a Direct Consolidation loan and using it to replace one or more of your previous loans.

Unlike refinancing, you won’t get a lower interest rate. Instead, your rate will be the weighted interest of your previous rates, rounded up to the nearest one-eighth of one percent.

After you consolidate, you can choose a new payment plan, such as IBR or REPAYE. This approach is useful if,

  • You need to get your loans out of default before applying for income-driven repayment (IDR).
  • You hold federal parent loans, which are only eligible for IDR if you consolidate them first (and then only for Income-Contingent Repayment).

Outside of these situations, you should be able to apply directly for IDR, extended repayment, or graduated repayment without consolidating first.

4. Choose new terms through refinancing

So far, all the options only count for federal student loans; they’re not so helpful for lowering monthly payments on private student loans.

But student loan refinancing works for federal or private loans. When you refinance, you take out a new loan and pay off your old ones with it.

If you can qualify, this new refinanced loan will have a lower interest rate, thereby saving you money. Plus, you can choose new repayment terms.

Choosing a long term of 10, 15, or 20 years will likely lower your monthly payments. But again, a longer term means you pay more in interest overall, so make sure you’re okay with the tradeoff before choosing this option.

Note that refinancing federal loans with a private lender turns them private, meaning they stop being eligible for income-driven repayment, Direct consolidation, federal forgiveness programs, and other federal plans.

Make sure you’re comfortable sacrificing these federal protections before refinancing any federal loans.

If you decide that refinancing is right for you, check out our recommended lenders. Most offer $100 to $200 off to Student Loan Gal readers!


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5. Request deferment or forbearance

If you can’t afford to pay anything toward your student loans right now, you could try pausing your payments altogether through deferment or forbearance.

Federal student loans typically qualify if you’ve lost your job, returned to school, or have another eligible reason. You can apply on the Federal Student Aid website.

Some private lenders also offer temporary deferment or forbearance, so speak with your lender about your options.

Deferment and forbearance should usually only be used as a last resort (or if you’re confident your income will increase in the future, as with medical school students), since interest will continue to accrue this whole time.

The only exception is subsidized Direct loans, which don’t accrue interest during deferment. But all other loans will keep collecting interest, meaning you’ll face an even bigger balance when repayment resumes.

So make sure you’ve explored all your other options before pausing your student loan payments through deferment or forbearance.

6. Speak with your lender about your options

Even if your lender doesn’t advertise flexible repayment plans, it’s always worth calling them to discuss your situation. If you’ve lost your job or otherwise run into financial hardship, your lender might be willing to work with you to find a payment that’s more manageable.

After all, they don’t want you to default on your loan any more than you do. So make sure to reach out and see if they can do anything to help.

7. Sign up for auto-pay (and make on-time payments)

This last point isn’t going to lower your student loan payments a huge amount, but it’s worth mentioning. When you sign up for auto-pay, lenders offer a 0.25% discount on your interest rate.

As a result, you could see your monthly payments decrease slightly, as well as pay less interest over time. Some lenders also offer an additional rate cut if you’ve made on-time payments for a period of time.

While 0.25% might not sound like much, it could make a difference over time, especially if you’ve got a high debt balance.

You’ve got options

Although paying off student loans can feel totally overwhelming, remember that you’ve got options. Sometimes the hardest part is facing your debt and making the uncomfortable phone calls or doing the tedious paperwork.

But if you can be proactive about lowering your monthly student loan payment, you should be able to find an arrangement that works for you.

Want better rates? Here are the best banks to refinance student loans:

Variable rates start at...Fixed rates start at...Repayment termsWelcome bonus Check your rates
refinance student loans4.54%4.49%5 - 20 years$200Visit LendKey
refinance student loans4.99%4.47%5 - 20 years$200Visit Earnest
refinance student loans4.22%3.97%5, 7, 10, 15, and 20 years$120Visit Laurel Road
refinance student loans4.53%4.40%5 - 20 years$100 or $200, depending on the amount you refinanceVisit Credible
refinance student loans5.09%4.74%5, 7, 10, 15, and 20 years$100Visit SoFi
refinance student loans4.53%4.83%5, 7, 10, 15, and 20 years$100Visit ELFI