1. Try a different payment plan

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The federal government offers alternative student loan payment plans.

If you have federal student loans, you’re likely following the standard repayment plan with 10 years of fixed payments.

This isn’t a bad option. In fact, the standard plan helps you pay off your loan quickly with less interest than alternative payment plans.

The downside is it gives you a higher monthly payment.

If you’re struggling to afford your payments, the government offers three alternative payment plans that could help. You can use this federal government loan simulator to see if you're eligible for any of these:

Income-driven repayment (IDR) plan

An income-driven payment plan is for borrowers with lower incomes. Your monthly loan payment is based on your how much money you make, so if you’re earning less, you can pay less.

Depending on when you took out your loan, you’re looking at payments amounting to 10% to 15% of your discretionary income. Each year, your monthly payment amount will be adjusted based on your family size and previous year’s income.

Since you are paying less per month, the term of your loan will be stretched out. This will make your loan more expensive in the long run, because of the drawn-out interest costs. But if you desperately need some breathing room in your budget, it’s an acceptable tradeoff.

Plus, if you still owe money after 20 or 25 years (depending on your loan date), your remaining balance will be forgiven.

Extended repayment plan

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If you have over $30,000 in federal loans, formally called "direct" loans, you may be eligible for an extended repayment plan.

This lets you stretch out your payments for up to 25 years using either fixed or graduated payments.

Because you're spreading your loan over a longer period of time, your monthly payment will be lower.

That said — as with any of these alternative plans — the longer it takes to pay off your loan, the more you will pay in interest.

Graduated payment plan

The graduated payment plan is for borrowers who don’t qualify for an income-driven or extended plan, yet can’t afford the standard repayment plan.

Unlike the other alternatives already mentioned, the graduated payment plan does not extend the length of your loan. You will still pay it off in 10 years, but your payments will start low and increase every two years, regardless of your income.

This option is especially useful if you’re earning less in your early working years and expect your income to increase over time.

But you will pay more interest over the life of the loan, because your low initial payments won’t pay off your principal balance as quickly as the payments under the standard plan. Interest will be calculated over a larger balance for a longer period of time.

All three alternative payment plans — income-driven, extended and graduated — will make your loan more expensive, but if you’re up to your neck in bills, they offer great ways to free up cash flow.

Even if you qualify for an alternative payment plan, your best bet is to pay as much as you can comfortably afford, after paying down credit cards and any other higher-interest debts.

2. Leverage lender discounts

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Lender discounts can cut your interest rate — and your monthly payment.

If your loan isn't through the federal government, another way to shave down your monthly payment is to take advantage of any discounts that your private lender offers. The discounts cut the interest rate on your loan, and that results in a lower bill each month.

The thing is, when you’re fresh out of college starting your career, it’s easy to forget that these money savers are available. You may qualify for a discount and not even know it.

The best way to make sure you’re not missing out on anything is to dial up your lender and ask. Here are a few savings opportunities to look out for.

Pay on time

Some lenders will offer discounts if you make your payments on time. You’re basically rewarded for something you should be doing anyway.

To qualify for the discount, you’ll need to earn it. This means maintaining a good payment record for three to four years. It’s not a discount you’ll be able to use right out of the gate, but it’s a goal to work towards.

Not all lenders offer this discount, but it doesn’t hurt to ask.


Federal loan servicers and private lenders will give you a quarter-point (0.25) interest rate cut if your sign up to autopay your monthly bills. This is sometimes referred to as an ACH (automated clearing house) discount.

A quarter-percent may not sound like much, but over the life of your loan it can equate to hundreds — or even thousands — of dollars in savings. Plus, setting up autopay means you’ll never miss a payment and can build your credit score on autopilot.

And if you never miss a payment, you could automatically qualify for the pay-on-time discount, too — a double whammy.

Loyalty discounts

If you or a family member already has an account or previous loan with a bank or other lender offering student loans, you may qualify for an interest rate discount.

For example, Citizens Bank offers a quarter-point rate cut if you or your co-signer has an existing account there when you take out a student loan. The reduction means a loan with a 4% rate would cost you 3.75%.

Several other lenders offer similar loyalty discounts, so when shopping for a student loan, you may want to consider opening another account with a financial institution you're targeting, like maybe a student checking account.

3. Consolidate multiple student loans into one

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Consolidating multiple student loans into one can cut your monthly payment.

If you graduated with an assortment of federal and/or private student loans, you may want to consider consolidating them.

By doing so, you won’t have to deal with multiple accounts, interest rates, minimum monthly payments and so on. Instead, you lump the loans together into one account.

This not only makes budgeting easier, but it also could lower your monthly payment.

When you consolidate, your new interest rate will be a weighted average of the rates on all your individual loans — so you won’t necessarily save on your rate. But you may find that one consolidated minimum payment each month ends up costing less than multiple smaller, minimum payments.

Keep in mind that if you reduce your monthly payment without reducing your interest rate, you will pay more over the long haul.

If you choose not to consolidate loans, you can still save money over time by paying extra toward the student loan with the highest interest rate, to make the most expensive debt go away fastest.

4. Refinance your student loans

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When you refinance, you swap your loan for a new one with a lower interest rate.

Apart from lender discounts, all of the strategies we’ve covered so far have a trade-off: They help lower your monthly payment, but they increase the total cost of your loan.

But refinancing can cut down your monthly payment and reduce your overall loan. You take out a new, lower-interest loan that will pay off your existing one.

Since the current prime rate is near a historic low, now would be a perfect time to refinance if you meet the following criteria:

  • You have excellent credit. Your score should be at least in the high 600s. The higher your credit score, the better the interest rates you’ll get. Today, it's super easy to check your credit score for free.
  • You have a comfortable cash flow. There's no sense in refinancing if you won't be able to afford your payments. If your budget is tight, consider starting a side gig to boost your monthly income.

One of the quickest ways to check what kind of refinance rate you qualify for is by using the comparison tool from the student loan provider Credible.

Alternative payment plans, lender discounts, consolidation and refinancing are all great ways to lower your student loan payments.

Whatever you do, do not default on your student loans. You have options. If you’re struggling with your bills, give your lender a call. You'll find the company will be more than happy to help you find a solution.

About the Author

Mitchell Glass

Mitchell Glass

Freelance Contributor

Mitchell is a freelance contributor to MoneyWise.com.

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