4 simple ways to cut the cost of your student loan payments

July 9, 2024
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Your student loan payments may be high, but there are strategies you can use to help cut the costs down.

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Student loan debt can be a significant financial burden for borrowers — especially in today’s unusual economic environment. After all, the average student loan balance was nearly $38,000 in Q1 2024, and that amount of debt can have a big impact on your budget. When you add in the ongoing issues caused by high inflation and increased living costs, it’s easy to see why borrowers may be struggling. 

And, while various government initiatives have been proposed or implemented to help borrowers, the landscape of student loan relief remains complex and uncertain. For example, President Joe Biden’s Saving on a Valuable Education (SAVE) plan could help lower monthly payments for millions of borrowers by calculating payments based on a borrower’s income and family size, with payments as low as $0 for those earning $30,000 or less annually. However, the program is currently facing multiple legal challenges and the fate of the initiative is unclear. 

So for now, many borrowers are taking matters into their own hands to try and lower their monthly student loan payments. But what simple strategies can help cut the costs of your student loans? 

Compare your top student loan lender options online now.

4 simple ways to cut the cost of your student loan payments

Using these strategies could result in lower student loan payments:

Refinance your private student loans

If you have higher-than-average rates on your student loans, you may want to look at what refinancing could offer you. By refinancing your private student loans, you could secure lower interest rates on your loans, resulting in lower monthly payments and total interest charges. You may also have the option to choose a longer repayment term, which would mean paying less each month on your loans. That could be worth considering if you need to significantly reduce your monthly student loan payments. 

However, securing the best student loan refinancing rates typically requires you to have good credit or a cosigner. Otherwise, you may not save much by refinancing. And, if you refinance your loans to a longer term, it’s important to understand that you’ll owe more in total interest over time. You should also be careful about refinancing your federal loans, as doing so will result in losing your federal loan benefits. 

Find out how affordable the right student loans could be for you.

Take advantage of lender discounts

Many private student loan lenders will offer discounts that can help reduce the overall cost of your loan. One of the most common is the autopay discount, which typically results in an interest rate reduction in return for setting up automatic payments. However, many lenders will offer other incentives that can further reduce the cost of your monthly payments. 

For example, some may offer loyalty discounts for existing customers or for opening additional accounts with them. Others may give rate reductions for meeting certain criteria, such as making a specified number of on-time payments or graduating with a certain GPA. And, certain lenders may offer discounts for borrowers in specific professions or those who agree to receive communications electronically. While these discounts may seem small, they can add up to significant savings over the life of your loan. So, it’s worth contacting your lender to ensure you’re taking full advantage of them. 

Enroll in an income-driven repayment plan

If you have federal student loans, enrolling in an income-driven repayment plan can significantly lower your monthly payments by basing them on your income and family size. These repayment plans also offer the potential for loan forgiveness after 20 to 25 years, in certain cases. 

That said, these types of plans are typically only available on federal student loans, so if you’re dealing with private student loans, you may not have this option. And, by taking this route, you could end up paying more interest due to the extended repayment period. 

Explore loan forgiveness programs

If you have federal student loans, there are various loan forgiveness programs available for different professions, such as teachers and public servants. By taking advantage of these programs, you may be able to significantly reduce your student loan debt burden or get rid of your loans completely. 

But while loan forgiveness programs can be a good option for those in certain types of professions, they often require long-term commitments and have strict eligibility requirements. And, the forgiven amount may be taxable in some cases, so make sure you fully understand the potential downsides of these programs before committing.

The bottom line

If you’re finding it difficult to fit your student loan payments into your budget, the strategies outlined above could help reduce the costs. But as with any financial decision you make, carefully evaluate each option to ensure it’s right for you. And, no matter what route you choose, it’s important to be proactive and work toward reducing the financial burden of your student loans as quickly as possible so you can achieve greater financial stability.

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