7 Ways to Scale Back Student Loan Payments

Student Loan Debt

Student loan debt today stands at an average of $35,000 per student, an enormous amount to carry as you step into the post-college job market. Learning how to manage the upcoming monthly loan payments can be difficult.

Tucked next to graduation cards arriving in the mail are often envelopes with a loan servicer’s return address. The letters come with loan totals that may seem higher than you originally remembered and the time to start repaying loans quickly approaches. To assist you in this process, here are seven tips for lowering your student loan payments.

Seven Tips for Lowering Student Loan Payments

1. Save During the Grace Period
Following graduation, or whenever you drop below half-time attendance, most loan servicers allow you six to nine months of non-payment. You can use this time to save and put aside the funds that would have gone to loan payments. This money can function as an emergency fund that will prevent you from accruing debt after the grace period ends and you find yourself faced with unexpected expenses.

2. Always Pay on Time
If you make any of your monthly payments after the due date, you may be charged fees which will increase the total of what you are paying on your loans. Keep a calendar and make the commitment to tackle payments before the last minute.

3. Look at Extended Repayment Plans
For federal loans that are difficult to repay, request an extended repayment plan, which lasts up to 25 years, rather than the Standard Plan of 10 years. Since the term is longer, the monthly payments will be reduced, enabling you to afford the payments and keep the loan from going into default.

4. Look at Income-Related Repayment Plans
Another option for those struggling with high monthly payments is a repayment plan that takes income into consideration. Federal loans allow you to choose from a variety of plans that will accommodate your financial needs in order to make repayment possible.

5. Use Income from Annuities
If you or your parents receive monthly payments from an annuity, you can opt to put these payments toward your loans. Insurance companies sell annuities, which are financial products often related to a retirement plan. Annuity owners may also choose to take out a cash advance and pay off part of the principal of your student loan, helping to reduce your interest payments and expedite the repayment process.

6. Set up Automatic Payments
Save money by providing lenders with your banking information and allowing them to obtain automatic payments each month. Federal lenders often offer a 0.25 percent reduction in interest for those who set up automatic payments. Private lenders may offer a reduction as high as 0.50 percent.

7. Focus on Higher Interest Loans
Accelerate your loan repayment process by paying more on loans that have a higher interest rate. As these loans start to shrink, you will reduce the amount of interest you are paying each month.

Remember, every little step you take — like making a payment on time or paying as little as $10 more than you owe — will get you much closer to being debt-free.

personal_loanAlanna Ritchie is a content writer for Debt.org, where she writes about personal finance and little smart ways to spend (and save) money. Alanna has an English degree from Rollins College.

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