Student loans have become a way of life. While there are certainly reasons for this, having too much long-term debt early in life can lead to serious financial difficulties down the line. When you consider the average student loan debt per borrower is now estimated to be over $40,000, it makes sense how this can lead to money problems.
But the total principal of a loan’s balance is only one of the issues. While this is incredibly important over the long term, consumers also need to be paying attention to what’s happening in their lives right now. Having too high of a monthly student loan burden can make it hard to save or even pay the bills. Here are some options for lowering your student loan payments.
Ways to Lower Your Student Loan Payments
There are few people who would say no to lowering the amount they pay each month on their student loans. It should go without saying, then, that any program that can accomplish this is potentially desirable for student borrowers.
These are a few of the most reliable options for lowering your monthly student loan payments:
- Work with your loan servicer – Those who want to lower the monthly payments on their federal loans can communicate with their loan servicer to see what options are available. You may qualify for certain income-driven repayment plans. Otherwise, your loan servicer can often extend the length of your loan, which will then lower your monthly payment. Even though this sounds great in theory, and is in practice for certain people, there are some further considerations to make as well. We’ll look at these in the next section.
- Student loan consolidation – Consolidating student debt is the process of taking several loans and combining them into one. This can be done through federal or private lending programs. When you consolidate your student loans, you can alter the repayment period on the new loan. This means you can potentially lower your monthly payment.
- Refinancing student loans – A student loan refinance is another way to save on your monthly payments. You want to know “what is refinancing,” right? Refinancing student loans means you take out a new loan to replace one of your current ones. This can only be done through a private lender, but it allows you to get a lower interest rate, which doesn’t happen when you consolidate or work with your loan servicer. While this is a great option in certain situations, like all good things, there are drawbacks.
All of these options for lowering the monthly payment on your student loans have their place and time. Simultaneously, it’s important to know some of the cons of each of these methods.
Are There Drawbacks to These Methods of Lowering Student Loan Payments?
There’s nothing perfect in this world. The previously mentioned options for lowering your monthly student loan payments all have merit. But they have negative elements too.
When you consolidate loans and extend the repayment term, this is going to lower your monthly payment. But you have to remember it’s not lowering your principal balance. This means you can actually end up paying a lot more over time, as you’ll be continually accruing interest on a larger amount for a longer period of time. When you’re paying back less each month, you’re doing less to knock down this principal amount, and thus allowing more interest accumulation.
There’s also an important consideration to make about refinancing student loans. Since refinancing can only be done through a private lender, this means you’ll lose federal student loans benefits. While this might not be such a big deal for everyone, many won’t want to lose income-driven repayment plans and potential forbearance.
Finally, it’s essential to know about some of the most common student loan scams. These can make big promises, but only end up causing you harm. If you want to lower your monthly payments, make sure you’re doing so through a legitimate source.
It’s everyone’s own responsibility to determine what will help them pay off their student loans. Consider if these options for lowering your monthly payment are right for you.