Federal student loan borrowers haven’t had to make payments for more than three years, as the government suspended payments and interest in March 2020. However, with that reprieve scheduled to end in 2023, you may be worried about being able to afford your payments.
Fortunately, there are several ways to reduce monthly costs, regardless of your financial situation. Here’s how to lower your student loan payment and make your debt more affordable.
- Review income-driven repayment
- Consider alternate repayment plans
- Request forbearance or deferment
- Consolidate your loans
- Research refinancing
Plus: Other strategies to lower your student loan payment
1. Review income-driven repayment plans
An income-driven repayment (IDR) plan can make student loan payments more affordable if you have a low to moderate income. An IDR plan sets your monthly dues at an amount you can afford based on your income and family size. After you complete the repayment term, any remaining loan balance can be forgiven.
You must have federal student loans to qualify for IDR, though not every borrower will be eligible for every plan. The table below summarizes the four types of IDR offered by the Department of Education.
| Tip: While IDR plans are useful, their rules are complex. If you’re not sure which option is best, use Federal Student Aid’s Loan Simulator tool to compare costs and review your eligibility. |
| Plan | Payment amount | Repayment term |
|---|---|---|
| Pay As You Earn (PAYE) | 10% of discretionary income (but never more than your payment under the standard 10-year repayment plan) | 20 years |
| Revised Pay As You Earn (REPAYE) | 10% of discretionary income | 20 years for undergraduate loans, 25 years for graduate loans |
| Income-Based Repayment (IBR) | 10% of discretionary income if you borrowed loans before July 1, 2014; 15% of income if you borrowed after that date (but never more than your payment under the standard 10-year repayment plan) | 20 years if you borrowed loan before July 1, 2014; 25 years if you borrowed after that date |
| Income-Contingent Repayment (ICR) | The lesser of: 20% of discretionary income, or what you’d pay with a fixed payment over 12 years, adjusted according to income | 25 years |
2. Consider alternate repayment plans
In addition to the IDR plans discussed above, federal loan borrowers may also choose from Graduated or Extended Repayment. Both of these plans provide additional flexibility when it comes to your payments.
With Graduated Repayment, you start with lower monthly payments that gradually increase every two years. You’ll still pay off your loans in 10 years, but this can be helpful if you expect your income to increase in the future.
Extended Repayment lengthens your repayment term from 10 years to 25 years and sets fixed or graduated monthly payments. You must owe at least $30,000 to qualify.
Both of these options generally result in paying more interest over time, so make sure it’s the best option for your financial circumstances before switching.
| Tip: While these plans are only available for federal loan borrowers, private lenders may also offer alternative repayment options for borrowers who are struggling. Contact your lender if you can’t afford your private student loans. |
3. Request forbearance or deferment
If you can’t make your federal or private student loan payments due to financial hardship or other temporary circumstances, you may be able to request forbearance or deferment from your lender.
Both of these options allow you to pause or lower your student loan payments for a limited time. You typically must have a qualifying reason, such as unemployment, active military service, returning to school, high medical expenses, or general financial difficulties.
Unless you have federal Direct Subsidized Loans, interest will continue to accrue during this time, meaning your loan’s balance can quickly balloon. For that reason, it’s best to use this strategy as a short-term solution.
4. Consolidate your loans and extend your term
Consolidating your federal student debt into a single loan allows you to extend your repayment term, spreading out the cost of your loans over a longer period and lowering your monthly payments.
First, it’s important to understand the difference between consolidation and refinancing.
- Consolidation combines multiple federal debts into one new federal student loan, resulting in a single monthly payment — often with a longer repayment term.
- Refinancing, on the other hand, is when you apply for a new private student loan to replace multiple federal and/or private student debts — usually with a lower interest rate or better terms.
Consolidating your student loans can make it easier to manage your monthly budget and avoid default, but it won’t lower your interest rate. Depending on the type of loan and the terms of consolidation, you may end up paying more interest over time in exchange for lower monthly payments now.
5. Consider refinancing your student loans
Refinancing student loans allows you to take out a new private loan to replace one or more federal and/or private student loans. When you refinance, you could extend your repayment term or get a lower interest rate, both of which can make your monthly payments more affordable.
There is an important caveat, however. Refinancing federal loans turns them into privately owned debt, and you’ll permanently lose access to federal benefits like income-driven repayment, forgiveness programs, and more flexible deferment and forbearance. Be sure you won’t need these perks before refinancing federal debt.
Other strategies to lower your student loan payment
In addition to the options discussed above, there are several other steps you can take to help make your student loan payments more manageable.
- Pay down your loan balance before federal payments resume. If you can afford it, pay down your loan balances before federal loan payments resume this year. Doing so can reduce the amount of interest you’ll pay over the life of your loan because your principal balance will be lower when the Department of Education starts charging interest again.
- Explore options from your employer. See if your employer offers student loan repayment assistance options, a benefit that’s becoming increasingly more common. Employers may offer direct repayment, in which they match the employee’s payment or pay a set amount each year directly to the lender. Alternatively, employers might provide a certain amount of benefit dollars to employees to put toward their student loans. Ask your company if they offer student loan assistance and how to take advantage of it.
- Look into student loan forgiveness. There are several forgiveness programs and repayment-assistance opportunities designed to help borrowers reduce their student loan debt. These often center around your career; if you work in an eligible job and meet other qualifications, you could get a portion of your debt erased. Both federal and private loans may be eligible for these programs.