How to lower your private student loan payments

Pay Off Student Loans Fast With 7 Strategies

How to lower your private student loan payments

The best way to pay off student loans is to pay more than the minimum each month. The more you pay toward your loans, the less interest you’ll owe — and the quicker the balance will disappear.

Use a student loan payoff calculator to see how fast you could get rid of your loans and how much money in interest you’d save. Here are seven strategies to help you pay off student loans even faster.

There’s never any penalty for paying student loans early or paying more than the minimum. But there is a caveat with prepayment: Student loan servicers, which collect your bill, may apply the extra amount to the next month’s payment.

That advances your due date, but it won’t help you pay off student loans faster. Instead, instruct your servicer — either online, by phone or by mail — to apply overpayments to your current balance, and to keep next month’s due date as planned.

You can make an additional payment at any point in the month, or you can make a lump-sum student loan payment on the due date. Either can save you a lot of money.

For example, let’s say you owe $10,000 with a 4.5% interest rate. By paying an extra $100 every month, you’d be debt-free more than five years ahead of schedule, if you were on a 10-year repayment plan.

Refinancing replaces multiple student loans with a single private loan, ideally at a lower interest rate. To speed up repayment, choose a new loan term that’s less than what's left on your current loans.

Opting for a shorter term may increase your monthly payment. But it will help you pay the debt faster and save money on interest.

For example, refinancing $50,000 from 8.5% interest to 4.5% could let you pay off your student loan debt nearly two years faster. It would also save you about $13,000 in interest, even with payments that stay about the same.

You’re a good candidate for refinancing if you have a credit score in at least the high 600s, a solid income and a  debt-to-income ratio below 50%. You shouldn't refinance federal student loans if you want or need programs income-driven repayment and Public Service Loan Forgiveness.

» MORE: Can you use a personal loan to pay off student loans?

Would refinancing save you money?

Federal student loan servicers offer a quarter-point interest rate discount if you let them automatically deduct payments from your bank account. Many private lenders offer an auto-pay deduction as well.

The savings from this discount will ly be minimal — dropping a $10,000 loan's interest rate from 4.5% to 4.25% would save you about $144 overall, a 10-year repayment plan. But that’s still extra money to help pay off student loans fast.

Contact your servicer to enroll or find out if an autopay discount is available.

» MORE: How to pay off parent PLUS loans faster

4. Make biweekly payments

This simple strategy is a way to trick yourself into paying extra on debt: Pay half of your payment every two weeks instead of making one full payment monthly.

You’ll end up making an extra payment each year, shaving time off your repayment schedule and dollars off your interest costs. Use a biweekly student loan payment calculator to see how much time and money you can save.

Frequently asked questions

What is the fastest way to pay off student loans?

The fastest way to pay off student loans includes paying interest while in school, using autopay and making payments biweekly. Make extra payments to principal when you can. Consider refinancing. If not, stick to the standard repayment plan rather than income-driven plans or using forbearance.

Are there loans to pay off student loans?

Yes, there are loans you can use to pay off your student loans. The process is known as student loan refinancing; you can pay off one or more of your loans through a private lender, often at a lower interest rate.

When do you pay back a student loan?

Federal and private student loan repayment typically begins six months after you graduate or leave school. You don't have to wait to begin payments, though.

5. Pay off capitalized interest

Unless your loans are subsidized by the federal government, interest will accrue while you’re in school, your grace period and periods of deferment and forbearance. That interest capitalizes when repayment begins, which means your balance grows, and you’ll pay interest on a larger amount.

Consider making monthly interest payments while it’s accruing to avoid capitalization. Or make a lump-sum interest payment before your grace period or postponement ends. That won’t immediately speed up the payoff process, but it will mean a smaller balance to get rid of.

» MORE: How much will deferment or forbearance cost you?

6. Stick to the standard repayment plan

The government automatically puts federal student loans on a 10-year repayment timeline, unless you choose differently. If you can’t make big extra payments, the fastest way to pay off federal loans is to stay on that standard repayment plan.

If you don’t truly need these options and can afford to stick with the standard plan, it will mean a quicker road to being debt-free.

If you get a raise, a student loan refinance bonus or another financial windfall, allocate at least a portion of it to your loans. Consider using this breakdown: 50% of the extra income can go toward debt, 30% to savings and 20% to fun, discretionary spending.

You can also start a side hustle to pay off student loans fast. Sell items clothing, unused gift cards or photos; rent out your spare room, parking spot or car; or use your skills to freelance or consult on the side.

Consider setting up rules for yourself, putting any $5 or $10 bills you receive toward your loans. Some money-saving apps, Digit and Qapital, will help you set savings goals and rules as well.


How to Lower Student Loan Payments

How to lower your private student loan payments

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

The average monthly student loan payment is a whopping $393. With it being so high, you might struggle to afford everyday essentials. Here are several different ways you can lower your student loan payments to give you some room in your budget.

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1. Sign up for an Extended Repayment Plan

If you have federal student loans and need a lower payment and are willing to make payments over a longer repayment period, an Extended Repayment Plan might be for you. Under this approach, your repayment term could be as long as 25 years, dramatically reducing your monthly payment. To qualify, you need to have at least $30,000 in Direct or FFEL federal loans.

Because of the longer repayment term, you could pay thousands more than you originally borrowed due to interest. However, the tradeoff might be worth it to get a lower payment and make room in your budget now.

2. Enroll in a Graduated Repayment Plan

A Graduated Repayment Plan is perfect for someone who doesn’t qualify for an income-driven repayment plan for their federal loans, but can’t afford their payments under a standard 10-year term.

With a Graduated Repayment Plan, your payments start out very low, regardless of your income. Every two years, your payment increases. After 10 years of making payments, your loans are paid off.

3. Sign up for an Income-Sensitive Repayment Plan

Under an Income-Sensitive Repayment Plan, your federal loan payments are your income. After 15 years, your loans are paid off in full. You’ll pay more in interest than you would under a Standard Repayment Plan, but you’ll get more breathing room in your monthly budget.

Only those with FFEL loans qualify; Direct Loans are not eligible.

4. Apply for an income-driven repayment plan

If you have federal Direct Loans and need to reduce your monthly bill, consider applying for an income-driven repayment (IDR) plan. With IDR plans, your repayment term is extended to 20 to 25 years, and the loan servicer sets your monthly payment at a percentage of your discretionary income. Some people qualify for a payment as low as $0.

There are four different IDR plans:

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

5. Sign up for automatic payments

If you sign up for automatic payments, some lenders will reduce your interest rate by 0.25% to 0.50%. That might sound a tiny difference, but that adjustment in interest rate can add up to significant savings over time.

Check with your lender to see if they offer an autopay discount, so you can take advantage of it.

6. Make all of your payments on time

Make sure you make all of your payments on time. Not only will that help you avoid extra charges and late fees, but you might even qualify for a discount. Some lenders give discounts as high as 0.25% for consistently making your payments by the due date.

7. Consolidate your federal loans

If you have multiple federal loans, one way to streamline your payments and qualify for a lower payment is to consolidate your student loan debt with a Direct Consolidation Loan.

With this approach, you take out a Direct Consolidation Loan for the total amount of your current federal loans. Going forward, you’ll have just one monthly payment and one due date. You can also extend your repayment term, which will help reduce your monthly bill.

But keep in mind, extending your term means you’ll be paying your loans longer and end up paying more in interest over the life of your loan. So carefully weigh the pros and cons before doing so.

8. Ask your employer for repayment help

It might sound too good to be true, but some employers will help you with your student loan payments. According to the Society for Human Resource Management, 4% of employers offer repayment assistance to their employees.

Contact your company’s human resources department to see if this benefit is offered — or if it can be offered in the future.

9. Apply for repayment assistance

Depending on your occupation, you might qualify for repayment assistance. For example, doctors, lawyers, and MBA graduates can qualify for thousands of dollars to pay off their loans. In return, you’re expected to dedicate some of your career to underserved areas, but it can be a great way to significantly reduce your loan balance.

10. Refinance your student loans

If you have private student loans, you don’t qualify for federal programs income-driven repayment plans or Direct Consolidation Loans. However, there’s still a way to reduce your repayments: student loan refinancing.

With refinancing, you take out a new loan for the amount of your current student loans (both federal and private loans). The new loan has different repayment terms, including interest rate and loan length. If you qualify for a lower interest rate or opt for a longer repayment term, you can significantly reduce your monthly payment.

If you decide to move forward with this approach, make sure you compare offers from multiple student loan refinancing lenders, so you can find the best lender for you.

Learn More: The Best Companies to Refinance or Consolidate Student Loans

11. Get help from the state

Where you live can have a big impact on your student loan balance. Some states offer student loan repayment assistance to attract professionals to the area. For example, North Dakota has a program that gives STEM professionals up to $6,000 in repayment assistance.

Visit your state’s education department website to see if similar programs are offered in your area.

Repaying your student loans

Keeping up with your student loan payments can be stressful and overwhelming. But if you’re wondering how to lower your student loan payments, you should know that there are several options available to you.

Compare Refinancing Rates

For more ideas on how to tackle your student loan debt, check out our guide on how to decide which loans to pay off first.

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The 7 Best Ways To Lower Your Student Loan Interest Rate

How to lower your private student loan payments

For the tens of millions of Americans who borrowed money for college, chipping away at student loan debt probably seems high on the financial priority list. A good place to start is lowering the interest rate you pay on those loans.

If you’re trying to snag a lower interest rate on your student loan, financial experts have a number of tips in their toolkit – from automating your payments to refinancing. Here are seven ways to score a lower interest rate on your student loans and other money-saving tips to help you trim your student loan payments in general.

7 ways to lower your student loan interest rate

The best method for lowering your student loan interest depends on your overall financial picture. Some of the most common ways to lower interest rates are:

1. Consider refinancing

If you have a solid credit foundation, are employed and plan to pay off your loan quickly, you should consider refinancing into a lower rate. Refinancing costs have come down markedly due to the coronavirus pandemic, with fixed rates as low as 2.78 percent and variable rates as low as 1.89 percent.

Don’t be afraid to get strategic and refinance multiple times. “There are no prepayment penalties on federal or private student loans. And most private student loans do not charge any kind of a fee to originate a new loan. So, nothing stops you from refinancing your student loans into a private refinance multiple times,” says Mark Kantrowitz, publisher of

However, if you have federal student loan debt, be sure to weigh the pros and cons of refinancing into a private loan. By doing so, you give up federal borrower protections, the automatic forbearance period through the end of 2020. That trade-off may not be worth it.

Takeaway: With the decrease in interest rates, it’s possible to save quite a bit of money on student loans by refinancing. But weigh your options carefully before proceeding, particularly if you have federal student loans. By refinancing into a private loan, you’ll lose many key protections.

Who this helps the most: Those who have a solid credit score, are employed and are seeking to pay off their loan quickly.

2. Automate your payments

One of the simplest ways to lower your interest rate is by automating your payments. Many lenders offer discounts of 0.25 percent to 0.5 percent if you set up autopay from a checking or savings account.

It might not sound much, but it can all add up in the end, saving you about $25 a year if you have an interest rate of 5 percent on a balance of $10,000.

“This may be the simplest and quickest way to realize a reduction in interest and requires little effort on the borrower’s part,” says Jon Long, an attorney with Long, Burnett, and Johnson who specializes in student loan debt.

Takeaway: This is a straightforward option for borrowers with no downside. The first step is to check with your loan servicer to see if your loan qualifies.

Who this helps the most: Borrowers who are confident that they’ll have enough money in their bank account each month when the payment will be deducted.

3. Negotiate with your lender

If you borrowed at the private level or have already refinanced, you might be able to shop around for a more competitive rate and present it to the lender you’re already working with. Although it’s not a guarantee, the lender might be willing to match that rate to keep your business.

Takeaway: Negotiation with your lender for better interest rates is possible for those who have private student loans.

Who this helps the most: Those who obtained their student loans during times of higher lending rates.

Having a solid credit score is an important foundation to any type of financial goal. That’s especially true when it comes to student loan borrowing, particularly from private lenders. You may still be able to get a student loan with a bad credit score, but your rates will be higher.

“For private loans, the higher your credit score, the lower the interest rate,” says Michael Micheletti of Freedom Financial Network.

“For federal loans, however, boosting your credit score will not matter, because most of these loans do not require a credit check. That includes all federal loans for undergraduates.

And while federal Direct PLUS loans require a credit check, rates are not affected by credit scores.”

To boost your credit score, be mindful of paying all of your credit card bills on time and maintaining a balance of less than 30 percent of your credit line.

Takeaway: A good credit score can help you lock in a lender’s most competitive rate.

Who this helps the most: Those taking out a private student loan or refinancing their student loans with a private lender.

5. Work with a co-signer

If you have no credit built up or if you have a low score, consider working with a parent or relative who has a more established record. Adding a co-signer who has good credit improves your overall credit picture and may help you score a lower rate.

“From the lender’s perspective, if one of the two people is low risk because he or she has good credit and the means to repay, the overall loan is lower risk,” says Long.

Just keep in mind that your co-signer will be equally responsible for the loan, meaning their credit score could suffer if you fail to make timely payments.

Takeaway: Having a co-signer can be helpful if your credit is less than ideal and you want to obtain the best interest rate possible. However, both you and the co-signer need to be fully aware of the responsibility involved.

Who this helps the most: Those whose credit score is not strong enough to obtain the most competitive interest rates on their own or who have minimal credit history.

6. Choose your loans carefully

For federal borrowers, there are generally three types of loans: Direct Subsidized and Direct Unsubsidized, which are sometimes referred to as Stafford Loans and Direct Stafford Loans, and Direct PLUS Loans (which also includes parent PLUS loans).

Direct Subsidized and Unsubsidized Loans have lower interest rates than Direct PLUS Loans, but most colleges and universities cap how much you’re able to take out.

Private student loans may also have caps, and your interest rate is determined by your credit score.

Deciding which loans to take out to fund your education is one of the hardest parts about starting school. Review the terms and interest rates associated with each loan option available to you and be sure to max out the loan with the lowest interest rate first, which will help minimize the amount of debt you accumulate to pay for your education.

“A smart borrower will maximize the amount of the loan with the lower interest rate before moving to one with an increased interest rate,” says Long. While a difference of 1 or 2 percent may not seem a lot on paper, remember that you will typically make 120 loan payments — which means that borrowing as much as you can with the lowest interest rate could save you thousands of dollars.

Takeaway: Take the time to methodically review the interest rates associated with your loan options and plan strategically how you’ll borrow money, relying as much as possible on the funds from the loans with the lowest interest rates.

Who this helps the most: Those who are just beginning their college education and still have the opportunity to compare various loans offers.

7. Borrow equity from your home

This is perhaps one of the trickiest options for lowering your student loan interest rate. If you own a home and have student loan debt, it is possible to “refinance” that debt with a lower interest rate by taking out a home equity line of credit (HELOC) and using the cash to pay off the educational debt.

HELOCs and mortgage rates have come down significantly in 2020 from what were already record lows a year earlier. Still, it’s important to look carefully at your finances and determine whether this is the right step for you, as there are many drawbacks.

“If you do not pay, the lender can take the collateral and sell it to pay the loan,” says Long. “Carefully consider the risk to your home that you’re undertaking. If you don’t pay a private student loan, it is very unly and a lot more difficult for the lender to threaten your home. If you don’t pay a home equity line or second mortgage, your home may be lost.”

Takeaway: It is possible to obtain a lower interest rate by paying off your student loan debt using a home equity line of credit, but it’s important to weigh the benefits and drawbacks first.

Who this helps the most: Those who have significant equity in their home and a reliable source of income to make the HELOC payments.

What to do if you can’t get a lower rate

Sometimes these money moves aren’t a viable option for student loan borrowers. But don’t fret – there are still ways you can trim your student loan costs in general, even with the same interest rate.

Deduct interest payments from your taxes

You might be able to deduct a portion of your interest payments from your topline earnings, which would therefore reduce your income and ultimately how much you have to pay in.

For individuals whose adjusted gross income (AGI) is less than $70,000 (or married filers whose income is less than $140,000), you can deduct $2,500 worth of interest payments, according to the IRS. Phaseouts occur for single filers who make between $70,000 and $85,000 and joint filers earning between $140,000 and $170,000.

Check for cash back specials or rebates

Though it’s not knocking down your interest rate, cash back specials and refinancing rebates offered through many servicers and lenders in the private space could help you spend less money in the long run – if you use the cash right.

Credible, for instance, will offer you a $200 gift card if you’re able to find a lower rate than what it offers you.

Adjust your payment plan

Experimenting with different payment plans is a sure way to maximize your money and pay less in interest over time, even if the rate at which you’re borrowing stays the same. That can include steps such as selecting a shorter repayment plan or making multiple payments a month. Be sure to also prioritize paying off the loans with the highest interest rate.

By reducing the loan in regular increments, over time you’ll lower how much interest you pay in each installment.

“Many people find a way to bring in extra income, anything from online tutoring or yard work to a traditional part-time job to put toward student loan debt,” says Micheletti. “If you can pay more, make sure to contact your lender or servicer and request that your extra payments go toward the outstanding balance, versus your next payment.”

Final considerations

Lowering your student loan interest rate is just one way to maximize your payments; it’s not the be-all and end-all. Being savvy with your money is what ultimately saves you money in the long run.

And even though student loan debt feels a heavy burden, don’t let it derail your other financial goals, such as saving for retirement and building up an emergency fund.

Next steps

If, despite all your efforts, you can’t seem to obtain a lower interest rate than you have, it’s a good idea to try and figure out why.

“Maybe you already have a great rate. Maybe it’s because you have a dinged credit report or poor earnings,” says Long. “Once you understand the why, you can choose a course of action to either mitigate the cause — perhaps by rehabilitating your credit or seeking a co-signer — or accept you have the best you will get.”

Learn more:


The Ultimate Guide to Lower Student Loan Payments

How to lower your private student loan payments

If you have one federal loan, you can lower your monthly payments by using one or more of these three options:

  1. Enroll in an income-driven repayment plan.
  2. Extend your loan term.
  3. Refinance to a lower interest rate.

Option 1: Enroll in an income-driven repayment plan

One of the most straightforward ways to reduce your monthly payment is by signing up for an income-driven repayment plan.

There are four income-driven repayment plans, but they all have the same purpose: to allow you to continue paying back your student loans without inhibiting your ability to afford basic things food and rent.

That means your lender needs to understand how much you spend on the non-negotiable things in your life so that they know how much you have left over (your “discretionary income”).

The idea is that, while you absolutely have to pay the heat bill and the rent check, you could skip the new purse or the fancy vacation.

Of course, everyone on an income-driven repayment plan isn't submitting their monthly budget to the Department of Education. Instead, you provide documentation of your current annual income, and the government calculates your discretionary income using federal poverty guidelines for families of your size in your geographic location. 

Once they've calculated your discretionary income, they'll set your monthly payment at 10-20% of that number, depending on the specific plan you've chosen. 

What is your eligibility for an income-driven repayment plan?

If you have federal student loans, you can enroll in an income-driven repayment plan. 

If you checked out NSLDS or your credit report, then you already know whether you have federal loans. 

How to enroll in an income-driven repayment plan 

Great news: you can enroll in an income-driven repayment plan in less than 15 minutes. 

You'll need to gather some information, your social security number, your federal student aid ID, proof of income, and similar information about your spouse (if you're married).

There are two ways to apply:

An important thing to note with income-driven repayment plans is that while they may reduce the amount you pay in the short-term, they can significantly increase the amount you pay in the long-term.

Most income-driven payment plans come with a term of 20-25 years, so you'll be paying interest over a longer period of time.

Plus, lower payments mean that less of your payment will be going toward your principal every month, so it will take longer to whittle down your balance. 

However, if you're still paying after 20-25 years, any remaining balance will be forgiven (although you'll have to pay taxes on any unpaid debt).

The one exception: Public Service Loan Forgiveness(PSLF). This program is available only to borrowers with federal student loans working in eligible public service positions. PSLF comes with a 10-year term and tax-free loan forgiveness after 120 qualifying payments. 

Want to see if you qualify for PSLF? Check out What is Public Service Loan Forgiveness?

Option 2: Extend your loan term

If you're not interested in an income-driven repayment program but still want to maintain federal benefits, you can simply lengthen the term of your loan to an extended plan, which sets your repayment term at 25 years.

You'll need to contact your loan servicer to ask about extending your term. 

Remember that extending your repayment term may lower your payments now but will ultimately result in your paying more over the life of the loan. 

Option 3: Refinance your loan

If you don't intend to use federal loan benefits the PSLF, or if income-driven repayment isn't going to lower your payment all that much, refinancing may be a smart idea. 

Refinancing to a lower interest rate is a supe- effective way to lower your monthly payments. And … if you refi and also opt for a longer loan term, you may be able to lower your payments by as much as $250 a month. 

While refinancing is a big money saver for a lot of borrowers, you'll want to think very carefully about any actions that would reduce your monthly payments but remove your eligibility for federal student loan benefits. 

For example, refinancing your student loans is a great way to reduce your interest rate, but it's not an option if you're counting on a federal loan forgiveness program or if you want to maintain the ability to ask for a period of deferment or forbearance in the future. (We'll talk more about this in a minute.)


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