About 45 million Americans have student loans totaling more than $1.7 trillion. If you’re struggling with your payments, you’re not alone. Here are some strategic ways to potentially lower your monthly tab.
Know Your Loans. When it comes to carving out a smart route to repayment – and potentially to saving it’s important to know if your loans are federal or private. The easiest way to figure out your loans (and you may have a mix, many people do) is to go to studentaid.gov. This website is a repository for information on all federal loans. If you can’t find all or some of your student loans here, then they’re private.
Federal Student Loans
- Consider Income-Driven Repayment. Income-driven repayment plans base your repayment amount on your income and family size. The latest entry in this category is called the SAVE plan and caps your monthly payments at 5% of income for undergraduate debt (and excludes your spouse’s income if you file your taxes separately). It also caps the maximum number of years of repayment for those with undergraduate debt at 20 years. The limits are higher overall for grad students.
Private Student Loans
- Consider Refinancing. If interest rates have fallen since you took out your student loans or if your credit score has improved, it may be worth refinancing to a lower interest rate. Do not refinance federal loans into the private market without careful consideration because you may lose provisions like deferment, forbearance, and income-driven repayment.
- Extend the Term. You could extend the term of your loan, although you should understand that while doing so will likely lower your monthly payments it may also result in paying more interest overall.
- Automate Payments. You may net yourself a small interest rate reduction by opting to have your monthly payments automatically debited from your checking or savings account.
- Utilize 529 Funds. The SECURE Act allows up to $10,000 in a 529 college savings account to be used for student loan repayment. This $10,000 per limit is per student, not per account.
- Use Employer Benefits. Some employers offer student loan repayment assistance as part of their benefits package. Contact your HR Department to see if that is an option.