Do you want to know how to reduce your private student loan payments? This is possible, but only if you know how to go about it. But on the other hand, if you don’t know how to do it with no proper information on the object, it can be a very difficult and long process altogether.
How to Reduce Private Student Loan Payments
It is quite true that we all want lower student loan payments but figuring out exactly how to do it can be frustratingly confusing. Should you consolidate or refinance? Get a shorter-term or even a longer-term loan? And what about just even taking a break altogether from payments?
Understanding the best ways to go about it in regards to lowering your monthly student loan payment is incredibly important for college students as well as graduates. With that being said, you should learn about the best ways that you can lower your monthly payments and get to save money on your private and federal student loans.
Ways to Lower Your Monthly Student Loan Payments
Many student loan borrowers continue to struggle to pay their monthly payments, especially right after they graduate. All in all, there are three main ways that you can easily utilize in reducing your monthly payment in a bid to make it more manageable. And they are;
- Reducing your interest rate
- Extending your payment term
- Applying for an income-based repayment plan
That’s it. And for a better understanding of the ways to reduce your private student loan, I will be explaining them further.
Reduce Your Interest Rate
The best way that you can reduce your monthly student loan payments overall is to reduce your interest rate via refinancing. And what does this mean? When you refinance your student loan debt via a private lender, it simply means that you may be able to lower your overall monthly payment.
Additionally, you can also opt to refinance your loans as many times as you want. And to get a lower interest rate on your loan, your credit score in question will very much likely have to be average or even higher. Additionally, you will also have to consolidate your federal loans just before refinancing them with a private lender.
Extend Your Payment Term
If it is that you want a lower monthly payment but however still want to keep the benefits of having a federal loan, then you can choose to extend your repayment term. After your graduation, your repayment term is then set to 10 years automatically. However, you can still get to sign up for an extended repayment plan for up to 25 years and then lower your monthly payment overall.
You will however need to contact your loan servicer to request about extending your term. Additionally, you should remember that in regards to extending your repayment term may lower your payments now, but it will ultimately result in you getting more over the life of your loan in general.
Applying For an Income-Based Repayment Plan
One of the simplest ways of reducing your monthly payment plan is just by signing up for an income-driven repayment type of plan. With that being said, you should know that there are four income-driven repayment plans, but they all have the same purpose at the end of the day and that is to let you continue paying back your student loans without having to inhibit your ability to afford essentials such as rent and food. The four income-driven repayment plans include;
- Pay as you earn repayment plan
- Income-based repayment plan
- Revised pay-as-you-earn plan
- Income-contingent repayment plan
And for those persons that are wondering if everyone on an income-driven repayment plan is submitting their monthly budget to the US Department of Education, they don’t. the income-based repayment plans as you should know are made for most recent graduates that are faced with economic hardship. And in order to qualify for these types of programs, you will need to provide documentation of your present annual income. The government in turn then calculates your discretionary income making use of federal poverty guidelines for families of your size as well as in your geographic location.
And once they have finally calculated your discretionary income, they will then set your monthly payment amount at 10-20% of that very number, but however, depending on the specific plan that you have selected.
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