Some people think it is impossible to reduce private student loan repayment, but in this article, we will be showing you how it is possible to reduce private student loan repayment and the process you need to go through to achieve that. You need proper information so that the process can be very smooth, short and easy for you.
How To Reduce Private Student Loan Payments
Most people want to reduce private student loan payments but how to go about it is always frustrating and confusing. Some people even think of either consolidating or refinancing their student loan, getting a shorter-term loan or even going for a long-term loan. Others also consider taking a break or halting the payments on their loan.
There is a need to have an understanding of the best ways to handle the issue of lowering your monthly student loan payments, especially for college students and undergraduates. It is important to learn and know the best ways to reduce monthly payments so that you will save money on your private and federal student loans.
Methods You Can Use To Lower Your Monthly Student Loan Payments
Some students that took up student loans still struggle to pay their monthly payments especially after they have graduated. There are three main methods you can easily utilize to reduce your monthly payment so that you will be able to manage it. The methods are as follows:
- You can reduce your interest rate.
- You can extend your payment terms.
- You can apply for an income-based repayment plan.
For you to have more understanding of the methods you can use to reduce your monthly student loan payment, we will be explaining each of the methods in detail in the sections below.
You Can Reduce Your Interest Rate
One of the best methods you can use to reduce private student loan payments or lower your total monthly student loan payments is by reducing your interest rate through refinancing. You may ask what this means or how to achieve it. Refinancing your student loan through a private lender means that you will be able to reduce or lower your total monthly payment.
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In addition, you can also take the option to refinance your loans as many times as you want. To get a reduced interest rate on your loan, it means your credit score must be average or even high. You may also want to consolidate your federal loans before refinancing them with a private lender.
You Can Extend Your Payment Term
If you want o reduce your monthly payment but still want to retain the benefits that accrue from having a federal student loan, you can choose this method which is extending your repayment term. After graduating from college, you will have a repayment term that is automatically set for ten (10) years. Notwithstanding, you can still sign up for an extension and extend the repayment plan up to 25 years and reduce your overall monthly payment.
You will need to contact your loan servicer or providers to place your request showing you want to extend your repayment term. You can use this method to reduce your payments now but it will definitely result in you getting more years over the life of your loan in general.
You Can Apply For An Income-Based Repayment Plan
This is one of the simplest methods you can use to reduce private student loan payments monthly plan. You need to sign up for an income-driven repayment type of plan. before you go in to start using this method, you need to know that there are four (4) types of income-driven repayment plans that exist. The first types have the same purpose which will allow you to continue paying back your student loans without having to hinder your ability to afford essentials of life such as food and rent. The following are the four income-driven repayment plans that exist.
- Pay as you earn repayment plan
- Income-based repayment plan
- Revised pay-as-you-earn plan
- Income-contingent repayment plan
Many people wonder if all the people using the income-driven repayment plan submit their monthly budget to the United States Department of Education, but the answer is that they don’t submit it. The income-based repayment plans are provided for the most recent graduates that have some economic hardship or situations they are faced with. For anyone to be qualified to use this method to reduce private student loan payments, you will need to provide documentation of your present annual income. The government on their side will calculate your discretionary income using the federal poverty guidelines for families of your size as well as in your geographical location.
Once the federal government has calculated your discretionary income, they will be the ones to set your monthly payment amount to be between 10-20% of the very number. But this will still depend on the specific plan that you selected to use.