One of the most common questions I receive here on The College Investor is simple: “How do I lower my student loan payments?”
Yes, it may sound simple, but lowering your payments isn’t always easy. Plus, believe it or not, there are a bunch of different options and some of them may not be right for you.
I want to share with you five quick tips that you can take right now to try and lower your student loan payments. Make sure that you figure out the best option for you.
1. Student Loan Consolidation
If you have multiple loans through different lenders (which is quite likely), you can likely consolidate your loans into one easy payment.
Keep in mind that while loan consolidation can reduce your monthly payment, it often lengthens the terms of your repayment date, meaning you will make payments longer and your total bill will be more than if you would have just stuck with the original payment. However, if those payments are just too much right now, this might still be a good option for you to consider.
If you’re considering this option, make sure that you read my guide: Everything You Need to Know About Student Loan Consolidation. There are a lot of student loan scams out there, and you need to make sure you’re doing it correctly.
2. Income-Based Payments
If you are working a job that provides you with a low income, you can get set up with income-based payments instead of the regular payments that you are originally set up with.
If you qualify for this payment option, you need to reapply each year in order to prove your low income status and receive the reduced-payment benefit. If you prove your low income for 30 years, then the balance of your student loans will be forgiven.
My definitive guide to student loan debt has a lot of information on this topic.
3. Unemployment Deferment
If you are unable to find a job after taking out those student loans, then you do have an option to defer the loan payments to a later date (typically for three months at a time).
I have actually exercised this option and what the lender does not tell you is that the interest payments will still accumulate with each month that your loan is deferred. In other words, while you may not be expected to pay anything from month to month, your interest payments are still piling up and will be added to your overall balance (that is, unless you have a subsidized Stafford Loan).
4. Economic Hardship Deferment
Perhaps you have found a job, but you are just having trouble making ends meet with your other expenses. This could be due to other debt loads or perhaps you are underemployed due to the economy. Whatever the case may be, if you prove that you are having an economic hardship, then you will be able to defer your payments to a later date.
Again, keep in mind though that the interest payments will still accumulate for each month that you chose not to make a payment. This will increase your overall loan amount and may actually increase your payment amount if the interest accumulates to a large enough figure.
5. Speak to Your Lender
If you feel that you absolutely cannot make the monthly student loan payments, there are other options that can be granted by the lender.
One of the options could be a reduction in the interest percent (although this is incredibly unlikely). Alternatively, they could extend your loan terms, which would then reduce your monthly payment. With student loans, however, there are not many special exceptions that are typically made to aid you in making your monthly payments.
If you don’t know whom to speak to, check out our list of Federal student loan servicing companies.
Don’t Forget to Check Your Credit
If you’ve struggled to make your student loan payments, your credit score could be negatively impacted. This could have serious repercussions on your future. The only way to really be sure is to check it. That’s why I recommend you use a free service like Credit Karma to check your credit score and know where you stand.
That way, if you want to buy a house or a car in the future, and you need to get a loan, you’ll know if your student loan debt will be hurting or helping you.
You May Just Have to Earn More Money
If I were caught in this situation, I would simply focus on earning more money. Many of you might balk at this comment, but there is always the potential to earn extra money, you just have to train yourself to think a little differently.
For instance, instead of going out looking for another side job that will pay you $8 an hour, why not start to think of ways that you can earn money for yourself, from yourself?
There are numerous ways that you could start earning money for yourself. Are you able to clean houses? Well, there is something you could do for money. Simply put an ad up on Craigslist or on your church bulletin board and wait for a few calls to come in.
If you are a quality worker, then you will most likely benefit from one of your customer’s referrals and will earn yourself even more business. The same thing could be done with lawn mowing, painting, or window washing.
The benefit to making extra money for yourself is the per-hour rate. Instead of earning $8 per hour, you will likely start earning 20 to $40 per hour. With this kind of cash coming in, you should easily be able to handle those student loans.
Have you tried any of these options to lower your student loan payments?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.