Lowering Student Loan Payment
Many students can get through college because of student loans and financial aid. Some lucky ones can win scholarships and grants that could cover all or part of their college tuition. We say lucky because, unlike student loans, scholarships and grants are non-repayable, so students that are fortunate to get them, especially the full ones, graduate free of debt.
While student loans are precious, they accumulate over time to become hefty sums that could be frightening when it is time for them to be repaid. Students that can finance college with loans often struggle to repay them because they have to meet other financial responsibilities while servicing the loans.
On top of that, the salaries of many entry-level professional jobs are not comforting, which is the main reason fresh graduates struggle to repay loans. Click here to learn more about entry-level jobs that pay well.
This struggle makes the first few years of a graduate’s life difficult, and it is common to see a few of them fall into depression. For those about to begin servicing their student loan debts or those who have already begun but are having a hard time doing so, you will find this article helpful as we will look at ways you can lower your loan repayment.
Consolidate Federal Loans
If you have multiple loans from the government, you should consider consolidating them. The federal loan consolidation allows you to combine all of them into one bill. While this will not reduce the interest rate, it could help in extending your repayment term.
With consolidation, one can increase the repayment term from 10 years to 30 years. Although this extension results in lower monthly payments, borrowers will pay more interest over time instead of a shorter term. It is worth noting that this option is only available to students who received repayable financial aid from the government.
Refinancing is open to both federal and private student loans. With a refinancing, you can take out a new loan with a better interest rate or term. This new loan is used to pay off the former, leaving the borrower with a debt with more favorable terms.
Usually, one approaches the servicer to see what they qualify for. Whether you qualify for lower interest or a longer-term, either way, you will be able to reduce your monthly payment significantly. To get the best out of refinancing, make sure you shop around and compare the offers from several refinancing lenders to get the best deal.
You can learn more about refinancing student loans here: https://www.forbes.com/sites/zackfriedman/2020/06/13/15-secrets-refinance-student-loans/?sh=1475d19b50c6.
Ask for an Income-driven Repayment (IDR) Plan
Federal loan repayments can be made with an income-driven repayment plan. This plan cap borrowers’ monthly payments at a percentage of their discretionary income and not based on the amount owed. Usually, this repayment is capped between 10% and 20% of the borrower’s discretionary income, and the term is increased to about 20 or 25 years.
If the borrower cannot complete the payment at the end of the term, whatever is left is forgiven; however, most borrowers can complete payment before this time. If you are a graduate who has already begun repayment, depending on how much you make, you could pay less than what you currently pay if you follow an income-driven repayment plan.
However, this amount will increase as your income increases, except you still fall under 150% of the poverty line. If you follow this plan, you will recertify your income to remain in the plan at the end of the year. This option is one of the most convenient when it comes to lowering your student loan repayment comfortably.
If your income has decreased or there is an increase in your family size, you can ask to have your current repayment plan recalculated. Since this plan works with your income, your monthly repayment should be lowered if there has been a dip in your discretionary income.
Borrowers need to know that they can have their plan reviewed and recalculated before the annual recertification period. This also applies if you wish to change your IDR, as some may offer better benefits that suit your current situation.
Lowering student loan payment: Conclusion
With options like these available, servicing student loan debts does not have to be so dreadful. Many graduates suffer because they are unaware that steps like these can be taken to lower their repayment.