If you’re struggling under the weight of all that student debt, you’re not alone. America’s student loan debt is more than $1.1 trillion and growing. Almost everyone is dealing with it. But not everyone knows how to deal with it correctly.
There are a few ways you can lower your student loan payments. Talk it over with a student loan or financial counselor. Your alma mater usually provides those services for free to students, and it doesn’t hurt to get a second opinion and explore all your options when it comes to reducing.
Getting out of student debt is one of the best things you can do for yourself financially. So here are a few tips to help get you started and to help ease the burden with cheaper payments:
Check to see if there’s an incomebased repayment plan
Many providers of student loans offer an incomebased repayment plan that allows you to pay in installments that directly correlate to how much you’re currently earning. This is a fairly common practice, because loan providers know that most recent grads aren’t raking in the big bucks straight out of school.
This allows you a little more time, and also lower monthly payments so that you can keep up with your payments without so much pressure. Nowadays it’s not uncommon for recent graduates to be making a few cents more than minimum wage and being forced to move back home with their parents.
If you can lessen the student debt payments, then that’ll be a step closer to financial stability. There might even be a brief grace period where they don’t expect you to start making any payments until a year after graduation. It all depends.
The problem with stretching out the length of time is that you’ll almost always winding up paying a total that’s greater than what you would’ve paid with larger monthly payments over a shorter period of time. But sometimes that’s just not an option.
You might still have to pay taxes on the amounts that get cancelled off of your bill, but the regular payments will still be more manageable in the short term. Federal lenders are the providers that offer this option most often, but you might as well ask and see if it’s a smart option for you. You can always stand to pay a little less, right?
Opt for a graduated repayment plan to make payments more comfortable
Although it won’t necessarily keep you from paying any less of the amount you owe in total, it will help you get going without such a massive pile of student loan debt hanging over your head. Similar to incomebased repayment plans, graduated repayment plans aim to help the recent postgrads that’re just starting out with little to no income.
A graduated repayment plan allows you to repay your debt in increasing increments. They’ll increase bit by bit every couple of years or so, in the hopes that you’ll be making a bit more money by the time the payments increase.
Nothing is going to simply make your student loan debt go “poof.” But if your student loan provider offers a graduated repayment plan as an option, it might be wise to grab at the chance for lower student payments throughout the first few years. With any luck, you’ll be making more money five years after school than you were just two years after school. So as long as your income steadily (if slowly) progresses over time, you’ll have a better chance of getting up on your feet instead of constantly throwing every spare penny you have at those monstrous student loan payments each time.
Try an extended repayment plan
It’s another repayment plan alternative that allows you some time to get a job and start making some more money before you immediately start having to pay off your student loans with any real gusto. An extended repayment plan can work several ways, but the most common sets the student loan payments at a fixed (or occasionally graduated) rate for about 25 years. That’s a long time.
Again, you might run into the problem that you’ll pay more overall when all is said and done if you take longer to pay off your student loan debts. But not everyone has the luxury of being financially able to make those massive loan payments so early on in their careers.
A fixed rate is the way to go if that’s a viable option for you. That way you’ll be better able to assess your finances in the future, and be able to budget for those student loan payments better. And knowing for sure what your student loan payment is going to look like and when it’s going to come makes you less likely to default on your loan payments.
Defaulting is the ultimate nono. Avoid it all costs. Always try to find an alternative option first. That’s what these payment plans are designed to do; take off some of the payment pressure and make it easier for you to continue paying without defaulting.
Consider consolidating your loans
If you not only have student loan debt, but also credit card debt, mortgage debt, or any other kind of financial baggage, you might want to consider consolidating your loans. Research your options carefully, since debt consolidation isn’t for everyone and always has a definite “cons”
But if you’re juggling too many different loan payments and you’re having a hard time affording them all, or you can’t remember to pay them all on time, then it’s probably time to look into debt consolidation. There are debt consolidation counselors that you can consult, but they might try to sell you more on the idea than an unbiased student loans counselor might.
The benefit to consolidating your student loan debt (in addition to your other debts) is that you’ll probably have a lower monthly payment, and you can pay it all in one go rather than running around trying to keep track of all your different debt repayment plans.
If you only have student loan debts, then debt consolidation isn’t going to benefit you. But if you came out of school with a few different debts weighing you down, it might be a good way to get lowered loan payments and a simplified way of paying it all back.
Looking at the total number of dollars that you’ll owe will make your blood freeze in its veins. But it is easier to manage than those multiple debt accounts. The best part of debt consolidation is that most people come out of it with a lowered interest rate.
Not always, but if you have credit card debt in addition to your student loans debt, you’ll probably see a lower interest rate overall, and that could potentially be in addition to lower regular payments. This is especially great if you’ve been paying off loans with varying interest You’ll probably wind up with a longer overall repayment period. It’ll take you years. That’s just the give and take of lower payments on loans; it’s a bit tougher in the long run but it’s the better option for people who need immediate help in the everyday scheme of things.
Avoid Capitalization At All Costs
This is just a solid allaround tip for anyone who’s ever borrowed money, or is thinking about borrowing money in the future. Capitalization tends to happen after a deferment or forbearance period is over, which is why those two routes aren’t always recommended. Although they give you great options for lowering your student loan payments, they tend to have a worse aftershock of capitalization on your student loan interest.
Capitalization is also why you should learn to love the federalized student loans. It’s always the option you should aim for if at all possible. The trick to avoiding the high payment costs of capitalization is to try to start making loan payments as soon as possible. That’s an unpleasant reality; you might have to start making payments on the accrued interest before your regular student loans payments are even due.
You can do that in the grace period (if you’re offered one) between the time you graduate school and the time you have to start making payments on your student loan debt. If you can afford it, try to pay off that interest before it appears on those first few payment statements. That’ll lower the overall cost of each payment early on, and save you a lot of stress trying to figure out how to make those massive payments. It’s smarter to start earlier, pay more frequently, but still pay in smaller amounts.
That’s also a good trick to getting you out of student loan debt faster and with less stress. The faster you can get out from under your student loan debts, the sooner you can stop paying all that interest on each payment and get on with your life financially.
Switch to Auto Pay to save some money and never forget to pay
The auto pay option is a scary thing for the many postgrads who only have a couple hundred dollars in their checking accounts at any given time. But it could actually save you a bit of money and make your student loan payments a little lower.
It’ll also force you to make payments regularly, and you’ll never be late or accidentally miss a payment, which your credit score will thank you for. You can customize your auto pay options to suit your own needs and comfort level. One option with auto pay is to have it withdrawal a fixed amount or a fixed percentage on the same regular date and use those funds to chip away at your student loan debts. Lenders often like you to use the auto pay option because it means that they’re getting paid in regular amounts and at regular intervals. No more of your wishywashy payments and erratic payment schedule.
So as an incentive, some lenders will offer you a .25% reduction on your interest rates. Most lenders offer some kind of reward for switching to auto pay, because automated payments are a better guarantee for them and they want you to keep it up.
While the benefits may vary, there is a wide range of lenders that will work with your auto pay and they’ll usually offer you some kind of rewards system for using it successfully. It might not make your individual payments lower in the immediate future. But it will almost always reduce the total amount that you have to pay throughout the life of the loan thanks to the reduced rates and faster payment process. Good things happen when it’s impossible for you to forget to make your student loan payments!
You can pay more on your monthly payments if you want to save money on your
It seems a little counterintuitive, but if you pay as much of your student loan debt as possible and as frequently as you can afford, you’ll wind up spending less money on your student loans in total. That’s because you’re ducking out from under those high-interest rates faster, and so you’ll be paying a smaller total than you would if you were to drag out the loan repayment process. That’s why this isn’t an option for every borrower.
Some people just don’t have the kind of income to allow them to make large payments on their student loan debt from the start. But waiting longer will actually cost you more total money.
You can even start making payments on your student loan debts while you’re still in school. If you get a headstart before graduation, you’ll take less time to pay it all off, and thus save money that you would have otherwise wasted on climbing interest rates and countless smaller payments. The total dollar amount owed decreases the faster you manage to pay off your student So make those payments count, and you’ll save money on your total student loan payments when you tally it all up once you finally free yourself from debt.