Student loan relief is ending, but here are 3 ways to get a lower student loan payment.
Here’s what you need to know.
It’s no secret that January 31, 2022 will be the final day of temporary student loan forbearance due to the Covid-19 pandemic. After two extensions for a total of one year, the Biden administration will not extend student loan relief any further. That means that your federal student loan payments at your regular interest rate will restart beginning February 1, 2022. For some student loan borrowers, restarting student loan payments may become expensive fast. Through January, most student loan borrowers didn’t have to make any federal student loan payments for the previous 22 months and will have received more than $110 billion of student loan cancellation as a result. So, what can you do to save money? Here are 3 ways to get a lower student loan payment once student loan relief ends:
1. Refinance student loans
The best way to save money on your student loans is through student loan refinancing. With student loan refinancing, you can get a lower payment, lower interest rate, or both. You can refinance federal student loans, private loans or both. You can also choose a fixed or variable interest rate as well as a student loan repayment term from 5-20 years. There are no fees to refinance and the application takes 10-15 minutes. You can also check your new rate for free with no impact to your credit score in 2-3 minutes. When you refinance student loans, you get a new private student loan with a lower interest rate that is used to pay off your old student loans. Refinancing can help you save money, pay off student loans faster, and get out of debt more quickly. Should you refinance your student loans? It depends on your personal situation. There’s really no downside to refinancing private loans because you can get a lower interest rate and lower payment. For federal student loans, if you are pursuing public service loan forgiveness or think you’ll need other federal loan features like forbearance or deferment, then you should keep your federal student loans outstanding. That said, some borrowers prefer a lower interest rate for their federal student loans so prefer to refinance federal student loans to save money.
For example, let’s assume you have $100,000 of student loans at an 8% interest rate and 10-year repayment term. Student loan refinancing rates are as low as 1.88% now. Let’s assume you refinance at a 3% interest rate and 10-year repayment term. Through student loan refinancing, you would save $248 each month and $29,720 total.
This student loan refinancing calculator shows you how much money you can save with when you refinance student loans.
2. Update your income for this student loan repayment plan
Your income, family size and state of residence can impact your monthly student loan payment. How? An income-driven repayment plan is an option for student loan borrowers who are struggling to make federal student loan payments or who are pursuing public service loan forgiveness, for example. There are four types of income-driven repayment plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR). It’s possible to pay as low as $0 per month with an income-driven repayment plan. After 20 years (college student loans) or 25 years (graduate school student loans) of student loan payments, you can qualify for student loan forgiveness. There are no fees for income-driven repayment plans and you can enroll with your student loan servicer. Make sure to update your income, family size and state of residence. If your income has dropped, or your family size has increased, for example, you could qualify for a lower student loan payments.
3. Get student loan forbearance or student loan deferment
If you’re struggling to pay off student loans and don’t qualify for student loan refinancing, then a last resort could be student loan forbearance or student loan deferment. For federal student loans, you can get student loan forbearance or student loan deferment through the federal government. For private loans, contact your student loan servicer or lender to discuss options. Student loan forbearance and student loan deferment help you to pause your student loan payments temporarily. However, you’re better off choosing an income-driven repayment plan for federal student loans. Forbearance and deferment affect your student loans differently. With deferment, no interest will accrue on your student loans while your student loan payments are paused. In contrast, with forbearance, interest will accrue on your student loan balance while your student loan payments are paused.
There are many ways to save money on your student loans. Make sure you understand all your options. Student loan relief won’t be extended, so prepare now. Here are some popular options to pay off student loans: