Here is a guest host from Ms. LLC, all about how to lower student loan payments. Many solo moms are heading back to school to increase their earning power in order to take better care of their family. That means keeping school and student loan payments as low as possible is a real concern for solo moms. Read through her tips, then visit her site for more great tips on other topics.
3 Ways to Lower Your Student Loan Payments
By Ms. LLC from Lovely Life Cents
Student loan debt is a pesky problem that seems to be an issue for just about anyone you can think of. Right now, there is over a trillion dollars owed in outstanding student loans, and that’s split between only about 40 million students. Yikes!
The numbers sound bad enough at face value, but if you do the math, you’ll see that each student is going to get stuck with tens of thousands of dollars in debt. Knowing this, it’s easy to think that borrowers could be struggling with their student loans. In fact, they are.
It’s a commonly known fact that student loan borrowers struggle to get started on the important things in life. This usually means putting off saving for retirement, struggling to get started with a mortgage, being unable to pick up car payments, and even waiting to get married!
However, despite all these problems, there are ways to lower monthly payments for students who are struggling with student debt. Here are a few options that could lead to a reduction in your monthly payments.
Federal Student Loan Consolidation
In some cases, consolidating your student loans with the federal government offers reduced monthly payments via the Federal Consolidation Loan Program. If you choose to do this, you can consolidate all of your federal loans together, resulting in one monthly payment. Furthermore, you have the option to restructure your repayment term. With this, you have the option to extend your repayment, increasing the number of monthly payments made on your loans. If you have more monthly payments, then your loan balance is split up more, meaning you can reduce your monthly payments.
Keep in mind that you can only consolidate federal loans through the consolidation loan program; private student loans are not eligible. Also, when you choose to combine all your loans, you may lose certain benefits from a different program, so make sure you do your research. Finally, it should be said that a federal consolidation loan does not save money in the long run. While you can get initial relief by restructuring your repayment term, you cannot save money over the life of you loan. Why? The new repayment term allows interest to accrue for longer, and more interest means more money spent.
Income-Driven Repayment Programs
There are multiple payment plans available through the income-driven repayment program, and typically, they should allow you to reduce your monthly payment. These programs cap your payments at anywhere from 10, 15, to 20 percent of your discretionary income. If you are struggling to make payments, then capping payments according to your income could offer some serious relief, allowing you to save money each month.
Keep in mind, if you are not struggling at all with your payments and have a high income, then an income-driven repayment plan will probably not reduce your payments. Contrarily, such a plan could possibly increase your payments since you have a high income.
Student Loan Refinancing
Similar to a federal consolidation loan, student loan refinancing with a private lender allows you to combine your student loans together as well as extend your repayment term; however, it offers something else entirely. Successfully refinancing your student loans leads to a lower interest rate since you receive a new loan term from a private lender. A lower interest rate means less interest accrues each month, and you’ll have to pay less each month as a result.
There are a couple of things to keep in mind. For starters, successfully refinancing through a private lender is much harder to pull off than consolidating through the federal government. For starters, you need to qualify under a private lender’s underwriting criteria which bars many sub-prime applicants from the option. Another thing to keep in mind is you will lose any potential federal benefits through refinancing. So if you think you might qualify for student loan forgiveness, then you might want to re-think refinancing with a private lender!
Want to learn more about student loan payments? Check out these other posts –
Student Loan Debt and It’s Impact On You
Lower Your College Cost of Living
Scholarships For Single Moms