The 3 Best Ways to Lower Your Monthly Student Loan Payments

Carol Katarsky Updated: December 13, 2022

We all want lower student loan payments but figuring out exactly how to make that happen can be frustratingly confusing. Should you consolidate or refinance? Get a shorter term or a longer-term loan? And what about just taking a break from payments altogether?

Understanding the best ways to lower your monthly student loan payment is incredibly important for college students and graduates. Learn about the best ways you can lower your monthly payments and save money on your private and federal student loans.

3 ways you can lower your monthly student loan payments

Many student loan borrowers struggle to pay their monthly payment, especially right after graduation. All in all, there are three main ways you can reduce your monthly payment to make it more manageable. These include:

  1. Reduce your interest rate 
  2. Extend your payment term 
  3. Apply for an income-based repayment plan

1. Reduce your interest rate

The top way you can reduce your monthly student loan payments overall is to reduce your interest rate through refinancing. When you refinance your student loan debt through a private lender, you may be able to lower your overall monthly payment.

Additionally, you can choose to refinance your loans as many times as you want. To get a lower interest rate on your loan, your credit score will most likely have to be average or higher. Additionally, you'll have to consolidate your federal loans before refinancing them with a private lender. 

2. Extend your payment term

If you want a lower monthly payment but still want to keep the benefits of having a federal loan, you can opt to extend your repayment term. After graduation, your repayment term is automatically set to 10 years. However, you can sign up for an extended repayment plan for up to 25 years and lower your monthly payment overall. 

You'll need to contact your loan servicer to ask about extending your term. Additionally, you should remember that extending your repayment term may lower your payments now, but it'll ultimately result in you paying more over the life of your loan. 

3. Apply for an income-based repayment plan

One of the most straightforward ways to reduce your monthly payment is by signing up for an income-driven repayment (IDR) plan.

There are four income-driven repayment plans, but they all have the same purpose: to allow you to continue paying back your student loans without inhibiting your ability to afford essentials like food and rent. The four IDR plans available include:

  • Pay As You Earn Repayment (PAYE) plan
  • Income-Based Repayment (IBR) plan
  • Revised Pay As You Earn (REPAYE) plan
  • Income-Contingent Repayment (ICR) plan

Of course, everyone on an income-driven repayment plan isn't submitting their monthly budget to the U.S. Department of Education. The income-based repayment plans are made for recent graduates facing economic hardship. To qualify for these programs, you'll need to provide documentation of your current annual income. The government calculates your discretionary income using federal poverty guidelines for families of your size and in your geographic location. 

Once they've calculated your discretionary income, they'll set your monthly payment amount at 10-20% of that number, depending on the specific plan you've chosen.

Other student loan repayment options

If income-based repayment, extending your repayment term, and/or refinancing for a lower interest rate don't lower your monthly payments enough, there are other options you can explore. While these aren't guaranteed, depending on the type of loan you have they're worth exploring. The alternative student loan repayment options for you include:

  • Deferment
  • Forbearance
  • ​Forgiveness
  • Auto-pay Discounts

Student loan deferment

If you're struggling to make payments on your student loans, you can contact your student loan servicer and ask about student loan deferment.

Deferment traditionally lasts between six months to three years. All federal student loan servicers allow borrowers to apply for deferment. Some private lenders do as well. 

During the deferment period, you won't be required to make monthly payments on your student loans. Additionally, your federally subsidized student loans won't accrue interest throughout the deferment period. However, both private loans and unsubsidized loans will still accrue interest. 

Student loan forbearance

Student loan forbearance is also offered by both federal and private student loan servicers. It is very similar to deferment in that it pauses your monthly payments for an extended period of time. However, your loans will accrue interest and you may be required to pay the interest on your loans throughout the forbearance period. 

You can also choose to make small payments towards your total loan balance to offset the cost of accrued interest. 

Student loan forgiveness

The best option for student loan repayment is to see if you're eligible for any federal student loan forgiveness programs. However, the federal government only makes these available if you have federal student loans.

There are a few federal student loan forgiveness programs available to you, like the Public Service Loan Forgiveness Program. Many of these programs have strict eligibility requirements for your income, job, length of loan repayment term and more. 

For more information on the federal student loan forgiveness programs available to you, you can visit

Sign up for auto pay with your lender

Most loan servicers will knock a one-quarter percentage point off your interest rate just for enrolling in automatic payments.

That 0.25% discount may sound small, but it can yield significant savings over the life of your loan. The larger your balance and the longer your loan term, the more you'll save.

Frequently Asked Questions

Should I consolidate my federal student loans?

Student loan consolidation often will not lower your monthly payment rate, but it can help make your federal loans more manageable. For a federal direct consolidation loan, they take the weighted average interest rate of all of your federal loans and apply that to your consolidated loan. 

Oftentimes, this means that you won't save a lot in interest, but it you can make a single payment instead of several.

Should I consolidate my private student loans?

Ultimately, consolidating your private student loans can help save you money over time. Private student loans have interest rates set by lenders, not the federal government. That means you can potentially get a lower payment rate on your principal balance.

To consolidate your private loans, you'll need to refinance them with a new lender. Student loan refinancing can help give you one monthly payment on your private loans and help save you money in the long term. However, private lenders will need to do a hard credit check to decide if your credit report is reliable. 

Will an income-based repayment plan extend my repayment period?

Oftentimes, an income-based repayment plan will involve you extending your repayment term for your student loans. This can help keep your costs low but could wind up increasing your overall loan balance with accrued interest.