8 Ways to Lower Your Monthly Student Loan Payment

The average monthly student loan payment is $536, according to recent data from the Education Data Initiative. For many, especially those living paycheck to paycheck, such student loan payments are too high to reasonably afford on their income.

So we’ve found ways to lower your monthly student loan payment. Typically, reducing your payment means you’ll pay more in interest in the long term. But if you’re struggling to make ends meet and are at risk of defaulting on your student loans, I recommend trying these strategies.

Table of Contents

1. 1. Refinance student loans
2. 2. Consolidate federal loans
3. 3. Switch to an income-driven repayment plan
4. 4. Ask cosigner to chip in
5. 5. Make lump-sum payments on individual loans
6. 6. Seek employer student loan assistance
7. 7. Strategically apply financial windfalls to loan payments
8. 8. Contact your loan servicer

1. Refinance student loans

One of the best ways to lower your monthly student loan payments is to refinance. Refinancing your student loans can lower your monthly payment in one of two ways: a longer loan term or a lower interest rate.

Reducing monthly payments can bring peace of mind by freeing up cash to meet other financial goals.

Longer loan term

Refinancing to a longer loan term means your payments are spread over more years. This makes each monthly payment smaller, but it also means you’ll be saddled with student loan debt longer, and you’ll pay more in interest over the life of the loan.

For instance, assume you have a $20,000 student loan with a 6% interest rate and five years remaining to pay. If you plug those numbers into a student loan calculator, you’ll discover that:

• Your monthly payment is $387.
• You’ll pay $3,199 in interest by the end of the loan.

If you refinance to a lender with the same interest rate, but over 10 years instead of five, here’s how things change:

• Your payment drops to $222 a month.
• The amount of interest you’ll pay more than doubles—to $6,645.

You’ll need to carefully weigh these student loan refinancing pros and cons before deciding.

Lower interest rate

You might also be able to refinance your student loans to get a lower interest rate, particularly if your credit score has improved and you make good money.

Even if the number of years left on the loan doesn’t change, a lower interest rate can reduce your monthly payment by a decent amount.

For instance, let’s assume a $50,000 loan for 10 years. The table below shows how much the interest rate affects monthly payments:

$50,000 loan over 10 years
Interest rate	Monthly payment
5%	$530
7%	$581
9%	$633
11%	$689
13%	$747
15%	$807

Risks of refinancing

While refinancing offers two paths to lowering your monthly loan payments, there are major risks to consider, like a higher interest rate—or a variable rate.

But the biggest risk of refinancing loans is the potential loss of federal benefits. When you refinance a federal loan with a private lender, you’ll lose out on certain federal loan benefits, including income-driven repayment plans, student loan forgiveness, deferment, and forbearance.

Best student loan refinance companies

Choosing the best student loan refinancing option depends on your personal needs, but I especially like Earnest for borrowers struggling to make monthly payments.

Earnest has a cool feature that allows you to skip one payment a year, no questions asked. That can make a huge difference if you find yourself struggling to come up with the cash to make a payment.

Here’s a full list of the top options to consider:

---

Read More:

Can You Refinance Student Loans More Than Once?

2. Consolidate federal loans

An alternative to refinancing your loans is consolidating them, though this only applies to federal loans. There are two key ways that consolidating can lower your federal student loan payments:

1. Longer loan term: Like student loan refinancing, student loan consolidation allows you to extend your repayment term. The standard repayment plan for federal loans is 10 years; by consolidating, you can extend repayment to 30 years, reducing each monthly payment.
2. Income-driven repayment: Not all federal loans are eligible for income-driven repayment (IDR) plans, which allow you to lower your monthly payment to an amount compatible with how much money you make. Ineligible loan types include Parent PLUS Loans, Federal Family Education Loans (FFELs), and Federal Perkins Loans. However, these become eligible for IDR if you consolidate.

The biggest caveat to consolidating your federal loans is that you’ll spend more money on interest in the long run, and you’ll be stuck allocating a portion of your monthly budget to student loans for decades. But if it makes the difference between affording and defaulting on your student loans, it’s worth it.

Read More:

When to Consolidate Private and Federal Student Loans

3. Switch to an income-driven repayment plan

If you have federal loans, you may be eligible to switch to an income-driven repayment plan. These plans are designed so borrowers aren’t expected to make monthly payments outside their means.

Instead, monthly loan payments are calculated based on—you guessed it—your income. The less you make, the lower your monthly payment will be. As with refinancing and consolidating, switching to IDR means you’ll be paying on your student loans for a longer time period, and thus spending more on interest.

That said, if you continue to make your reduced monthly payment for the full repayment period (20 or 25 years) and still haven’t paid off the full amount, the remaining loan balance will be forgiven.

The types of income-driven repayment plans are:

• Income-Based Repayment (IBR) plan
• Pay As You Earn (PAYE) plan
• Revised Pay As You Earn (REPAYE) plan
• Saving on a Valuable Education (SAVE) plan*
• Income-Contingent Repayment (ICR) plan

There’s nuance to these plans, but the table below breaks down the repayment periods and percentage of discretionary (abbreviated “disc.”) income that can be applied to loan payments for each type:

Plan	Repayment term (yrs.)	% of disc. income
IBR	20 (borrowed after July 1, 2014); 25 (borrowed before July 1, 2014)	10% (borrowed after July 1, 2014); 15% (borrowed before July 1, 2014)
PAYE	20	10%
REPAYE	20 or 25	10%
SAVE*	20 (undergrad only); 25 (if any grad or professional loans)	10%
ICR	25	20%

---

*Note:

Recent reporting from NPR confirms that the SAVE plan is “as good as dead,” so you’ll want to consider REPAYE or another plan in its place.

---

If you’re concerned about paying more in interest over the long term by lowering your payments, I recommend starting with a close look at your current cash flow. If there’s strain covering essentials like groceries or bills, lowering the monthly loan payment may be the best option—even if it results in a higher overall cost over time.

If income increases in the future, refinancing into a shorter term and potentially a lower interest rate could be a smart next step. Taking the time to evaluate both your current needs and long-term goals can help you make a more confident, balanced decision.

4. Ask cosigner to chip in

If you have a cosigner on your private student loans, they have a vested interest in ensuring you make payments on time. Late or missed payments impact their credit score, as well as yours.

If you’re truly struggling to make payments—even after cutting all discretionary spending and taking on a side gig or part-time job—I recommend sitting down with your cosigner and asking if they can help, at least for now.

The conversation will likely go better if you ask for help with a portion of the loan payment, rather than the whole thing. You can also pledge to repay every cent they pay over time—and, ideally, they won’t charge you interest (or not as much as your private student loan lender, at least).

5. Make lump-sum payments on individual loans

We often think of our student loan debt as one big, scary number, but that total amount likely represents a wide range of smaller loans, assuming you haven’t consolidated or refinanced.

In that case, it may be beneficial to make a lump-sum payment toward a specific loan to help lower your monthly payment. In future months, you’ll have one less loan to repay, thus reducing your monthly payment amount.

Pay off the loan with the highest interest rate if you can afford it.

Of course, this only works if you can save up the cash to make a big lump-sum payment. Plus, it only applies to borrowers who aren’t on income-driven repayment plans. If you’re on an IDR plan, your payment is a set amount each month, based on how much money you make.

6. Seek employer student loan assistance

The IRS allows employers to help borrowers repay their student loans (both principal and interest), and the first $5,250 of that each year is not considered taxable income for the employee.

Some companies that offer employer student loan repayment benefits distribute the money to the employee to repay the loan; others make the loan payment directly.

If you need help with your student loans, reach out to your company’s HR department to see whether it offers this benefit. And if not, it may be worth interviewing for a job at a company that offers student loan assistance.

A hybrid approach can work well, too—make the lower required payment, but pay extra toward the principal in months when finances allow. 

7. Strategically apply financial windfalls to loan payments

Paying your student loan debt, on top of all your other bills, might be tough if you’re on a tight monthly budget. That’s why it’s important to be smart about what you do with irregular cash influxes, such as:

• A birthday check from a loved one
• Cash for selling your possessions online
• A big tax refund
• An inheritance after a loved one passes away

Rather than spending that unexpected money on yourself, I often advise opening a high-yield savings account to store the money, where it will earn interest. Then set aside a portion of the cash each month, and apply it to your student loans. Even if it’s just $50 a month you can pull from that account, that’s $50 less that you have to worry about coming out of your paycheck to cover your student loans.

And by the time that cash is dwindling, you may get another influx, like on your next birthday or during the next tax season.

8. Contact your loan servicer

When money is tight and your student loan payments are too high, you may be able to access federal loan benefits, such as forbearance or deferment, that let you pause payments. But if you have private loans, your options are limited.

Still, it’s worth calling customer service to explain your financial situation and inquire about any options to lower or pause your payments. The worst they can say is no.