Strategies to Effectively Lower Your Student Loan Payments

Student debt is a significant concern for many, and understanding the available options is crucial for managing it effectively. There is no one-size-fits-all solution, and your unique situation requires careful consideration. Fortunately, several strategies can help lower your monthly student loan payments, providing financial relief and greater control over your debt.

Key Strategies to Lower Student Loan Payments

To lower your monthly student loan bill, consider these strategies, keeping in mind that the best option for you will hinge on your financial situation and whether you have federal or private student loans.

Income-Driven Repayment Plans

Income-driven repayment (IDR) plans are designed to make your federal student loan payments more affordable by capping them at a percentage of your discretionary income. Payments are capped at a portion of your discretionary income - between 10% and 20% - and may lengthen your loan repayment term to 20 or 25 years. At the end of this period, any remaining debt is forgiven. IDR can lower your payment relative to the standard 10-year plan, which splits your debt into 120 payments, plus interest. This option is only available for federal student loans - very few private lenders offer an income-driven repayment option.

The IDR plans available to borrowers are: Income-Contingent Repayment (ICR). Payments capped at 20% of discretionary income, or what you'd pay under the standard 10-year plan. Depending on the size of your income, your monthly loan payment could be significantly lower - even as low as $0 each month. Ask your student loan servicer which IDR plan will result in the lowest monthly payment if that's your goal.

One major drawback of IDR is that it'll take longer than a standard repayment plan to pay off your loan. This results in you paying more in interest over the life of the loan.

If you have a qualified federal student loan and low to no income now, you could apply for income-based repayment. With this option, your loan payments are determined by your income and family size. All four options base your payments on your income, but the plan that’s right for you depends on eligibility, how much you can afford to pay each month, the duration of the repayment period, and the types of loans you have. Income-driven repayment plans could help you lower your payment or even reduce it to $0 if you have no income. Be aware, though, that if you’re approved, you’ll be extending the term of your loan beyond the standard 10-year repayment period, which will result in you paying more interest over the life of the loan. Income-based repayment plans do, however, offer loan forgiveness after 20-25 years. Also, if you’re approved for income-based repayment, you’re required to recertify your income with the government every year. If you’re considering income-based repayment, you’ll need to work with your student loan servicer (the entity that handles your student loan repayment) for every federal loan you have.

Navigating Income-Driven Repayment Plans

To determine the best IDR plan for your circumstances, consider the following:

Eligibility: Each IDR plan has specific eligibility requirements based on loan type, income, and family size.
Affordability: Evaluate how much you can comfortably afford to pay each month.
Repayment Period: Understand the duration of the repayment period under each plan, as longer terms result in more interest paid over time.
Loan Types: Ensure the plan is compatible with the types of federal student loans you hold.

SAVE Plan: The SAVE plan is the most affordable student loan repayment plan in history. It may provide you with the lowest monthly payments and reduced times to getting loan forgiveness if you borrowed a small loan. Also, under the SAVE plan, if your monthly payment doesn’t cover the accrued interest, that interest will not be charged to you. Instead, it will be forgiven, meaning your loan balance will not grow. Borrowers enrolled in IDR plans must annually recertify their income and household size. As part of the FUTURE Act, you can provide consent to ED to automatically recertify your IDR payment based on information from the Internal Revenue Service (IRS). By consenting, you allow ED to receive your tax return information and your monthly payment will be automatically adjusted without you having to recertify each subsequent year. If your income has changed from your most-recent tax return, you can always submit additional documentation to have your monthly payment reviewed.

Legislative Changes to Federal Loan Repayment Plans: Recent legislation makes significant changes to federal student loan repayment options. The new law phases out three income-driven plans (SAVE, PAYE, and ICR) and introduces a new income-driven plan, the Repayment Assistance Plan (RAP) and a new tiered Standard plan. It also limits repayment options for Parent PLUS borrowers. In many cases, your repayment plan access will be limited if you take out or consolidate ANY loans on or after July 1, 2026. This date refers to when the loan was disbursed, not the date on which you applied for the loan. For example, if you plan to consolidate and want to ensure that the loan is disbursed before July 1, 2026, you would need to apply by April 1, 2026. If all your loans were disbursed or consolidated before July 1, 2026, you will be eligible for:a new IDR plan called RAP, which will be available this summer;a modified version of the IBR plan (without the partial financial hardship requirement); orthe existing Standard, Graduated, or Extended plans.If you are in ICR, PAYE, or SAVE, you will need to switch into one of the above listed plans by July 1, 2028. (Borrowers in SAVE may be required to switch sooner depending upon the outcome of the SAVE litigation.)Many borrowers will have higher payments under IBR and RAP as compared to SAVE or PAYE. You can use this chart to estimate your RAP payments.If any of your loans will be disbursed or consolidated on or after July 1, 2026:Only two plans will be available: a new Standard plan and RAP.The ICR, PAYE, SAVE, IBR, old Standard, Extended, and Graduated plans will not be available.

Temporary Payment Decrease

If you're struggling to make your monthly student loan payment, you can ask your private student loan lender about temporarily reducing your payments to avoid default. Your private lender could modify your loan by reducing your monthly payment or interest rate for a short period of time. Contact your loan servicer to find out what short-term payment modification options they offer, what's needed to apply and how to get started. Federal loan servicers won't lower your payment temporarily. They only offer longer-term options, like what's available through income-driven repayment.

Forbearance or Deferment

If you can’t make your student loan payments and need a longer-term solution, you can contact your servicer to request a student loan deferment or forbearance. Though each option will pause your payments for a period of time (usually in three, six or 12-month increments), the two differ in how interest accrues. Certain loans, including subsidized and Perkins loans, will not accrue interest during deferment. However, all student loans will accrue interest during forbearance. How long your payments are paused can vary. For example, federal borrowers can access up to 36 months of unemployment deferment and up to 36 months of economic hardship deferment throughout the life of the loan. Cancer patients can request deferment during treatment and for up to six months after treatment ends.

General forbearance for federal student loans can be requested for up to 12 months at a time for up to three years. You're eligible for general forbearance if you're dealing with medical expenses, job loss or experiencing other financial challenges.

If you have private loans, your options for deferment or forbearance can be different. Connect with your lender to see what is available and what information is needed to apply. While forbearance and deferment will temporarily stop your payments, remember that you can end up paying more in the long run as interest accrues. In many cases, interest will continue to build during the payment pause and will capitalize, or roll into your principal, when payment restarts.

If you expect your income to be lower for a shorter time period, you can request forbearance or deferment. Both options allow you to temporarily postpone your payments. There is a downside to both forbearance and deferment: Interest accrues during the period when your payments are paused (unless you have a loan in which the government pays the interest). Let’s use an example. Suppose you have an outstanding balance of $35,000 on your federal loan at an interest rate of 6%. If you defer payments for one year, you’ll end up paying an additional $2,100 in accrued interest. That brings us to another downside to federal loan forbearance and deferment after June 30, 2023: the deferred payments will not count toward your eligibility to enroll in loan forgiveness programs. Depending on your circumstances, income-based repayment may be a better option than deferment or forbearance. Also, though forbearance and deferment are available with federal student loans, private student loan lenders may also offer similar programs.

Refinancing Student Loans

If you have a solid income and strong credit score, you may qualify for a lower interest rate - and lower monthly payment - through a student loan refinance. Refinancing also gives you the opportunity to change your term. A longer loan term with a lower interest rate will decrease your monthly payment the most. But you'll also pay more interest than if you went with a shorter loan term.

You can refinance both federal and private student loans, but you can only refinance with a private lender. You can’t transfer private loans to the federal government.

If you refinance federal student loans, you’ll lose the protections that come along with them. Consider this decision carefully, and don't refinance federal loans if you think you may want to use an IDR plan or pursue loan forgiveness in the future.

Many student loan borrowers have several loans, including a combination of federal student aid and private loans. You can refinance your federal student loans to a private loan - and potentially lower your rate - but it may result in the loss of federal loan benefits such as income-based repayment, loan forgiveness, forbearance, and deferment. To qualify for refinancing, you need to have a good credit history or a cosigner with a strong credit score.

Federal Loan Consolidation

Federal student loan consolidation lets you combine all of your government loans into a single bill. It won’t lower your interest rate but does allow you to extend your repayment term. Depending on your total debt, terms can range from 10 to 30 years. With a longer term, your monthly payment will be lower, but you may pay more interest over time.

This strategic move is only available to federal student loan borrowers. If you have private student loans, consider refinancing.

If you have multiple student loans with the government and want to maintain your federal loan benefits, you could consolidate them into one federal loan - a Direct Consolidation Loan.

Parent PLUS Loans Repayment options

Parent PLUS debt is NOT eligible for RAPParent PLUS Loans and Consolidation Loans that included any Parent PLUS Loans are ineligible for RAP. This includes “double consolidated” Parent PLUS Loans (i.e., Consolidation Loans that included Consolidation Loans that included any Parent PLUS Loans).Repayment options for Parent PLUS Loans will be limitedParent PLUS Loans disbursed before July 1, 2026 will only have access to the old Standard, Extended, and Graduated plans.Parent PLUS Loans disbursed on or after July 1, 2026 will only have access to the new Standard plan.Parent PLUS Loans that are (1) consolidated into a Direct Consolidation Loan before July 1, 2026, and (2) repaid in the ICR plan (for at least one payment) between July 4, 2025 and July 1, 2028 will have access to the IBR plan. Brief window for unconsolidated Parent PLUS Loans to get IDR accessTo access IDR plans, Parent PLUS Loans must be consolidated. Historically, consolidated Parent PLUS Loans can only access one income-driven plan, the ICR plan, which will be phased out by July 1, 2028. If you have unconsolidated Parent PLUS Loans, you can access the IBR plan instead, but only if you:consolidate your Parent PLUS Loans into a Direct Consolidation Loan by June 30, 2026 (apply by April 1, 2026 to ensure the consolidation is disbursed by June 30th); andenroll in ICR and make at least one ICR payment at some point between July 4, 2025 and June 30, 2028. Hazards of borrowing any federal loans on or after July 1, 2026 for parent borrowersIf you take out a new loan or consolidate any federal loans on or after July 1, 2026, your Parent PLUS Loans, Consolidation Loans that included any Parent PLUS Loans, and “double consolidated” Parent PLUS loans will be restricted to the new Standard plan. In most cases, this will block you from pursuing PSLF for these loan types as you will not have access to a PSLF-qualifying repayment plan.If you plan to consolidate and want to ensure that the loan is disbursed before July 1, 2026, you would need to apply by April 1, 2026.

Maximizing Opportunities for Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you’ve made 120 monthly payments under a qualifying repayment plan (typically an income-driven plan), while working at least 30 hours per week for the government or many types of nonprofit employers.

To receive this credit, file a PSLF Form to certify all the qualifying employment you have held since the Oct. 1, 2007 start date of the program. Using the PSLF Help Tool including the e-signature option, may result in the fastest processing. Once your employment is certified, you will be able to see and track your progress toward forgiveness in your StudentAid.gov account.

New PSLF Buyback Opportunity: Many forbearance and deferment periods do not count toward PSLF. However, you may be able to use a new process, called the PSLF Buyback, to get credit for certain types of forbearances and deferments in which you held qualifying employment. You can buy back these months only if:you already have 120 months of qualifying employment; andbuying back months in forbearance or deferment would result in forgiveness.Additionally, only certain forbearance and deferment types are eligible for buybacks. Notably, you cannot buy back in-school deferment periods. You can, however, buy back time spent in many forbearance and deferment types, including the SAVE Forbearance.

Keep in mind that if you consolidate only non-Direct Loans, you will have to make 120 qualifying monthly payments while working at least 30 hours per week after consolidating to qualify for PSLF. Consolidating will also restart the clock on IDR forgiveness.

Parent PLUS Loans aren’t eligible for any IDR plans. However, after they are consolidated into a Direct Consolidation Loan, Parent PLUS Loans presently become eligible for the Income-Contingent Repayment (ICR) plan.

If you take out or consolidate any federal loans on or after July 1, 2026, then ALL your (1) Parent PLUS Loans, (2) Consolidation Loans that included any Parent PLUS Loans, and (3) Consolidation Loans that included Consolidation Loans that included any Parent PLUS Loans (i.e., "double consolidated" loans) will be restricted to the new Standard plan. All of your loans of these types will not have access to any income-driven plans. In most cases, this will also prevent these loans from receiving Public Service Loan Forgiveness (PSLF) as you may not have access to a PSLF-qualifying repayment plan (only the 10-year Standard plan and IDR plans qualify for PSLF).

Additional strategies to consider

Consider filing taxes separately: If you are married and file joint tax returns, you may want to consider filing separate tax returns. If you file taxes separately, only your income will be used to calculate your IDR payment.If you and your spouse both have federal loans, your overall payment may be more affordable if you both pay in IDR.
Extending your loan’s repayment term: Extending your loan’s repayment term will lower your payments (sometimes dramatically) but will result in higher total loan costs.If you have more than $30,000 in federal student loans, you may be eligible for an extended repayment plan, which may allow you to make payments over up to 25 years. You can request an extended plan by contacting your servicer.
Beware of graduated plans: Payments under graduated plans start out low but increase every two years. Graduated plans have higher total loan costs and may become unaffordable in the long run. They also typically don’t count toward PSLF or IDR forgiveness.
As a last resort, use deferment or forbearance to temporarily pause payments: If you’re facing a short term financial hardship, you can request to temporarily pause your payments through deferment or forbearance. Keep in mind that interest accrues on unsubsidized loans during deferment and on both subsidized and unsubsidized loans during forbearance.

Managing Delinquent or Defaulted Loans

If your federal loans are past due or in default, it's crucial to take immediate action.

The Dept. of Education offered an “on-ramp” period in which it did not report missed payments to credit reporting agencies. This “on-ramp” ended Sept. 30, 2024, and if you missed your next payment, your loan became delinquent.

If your loan is delinquent for 90 days or more, the missed payments will be reported to the credit bureaus. After 270 days of delinquency, the loan enters default.

If you have not made payments since the start of the pandemic payment pause in March 2020, there’s a good chance that your loans are delinquent and will soon default. If they are not yet in default, it’s important to contact your servicer immediately. Keep in mind that a new company may be servicing your loans, as many loans changed servicers during the pandemic. Your StudentAid.gov account will identify your servicer’s name and contact information. You can either pay the past due amount or request a forbearance to cover the delinquency.

If you continue to miss payments, your loan will eventually enter default. For most federal loans, this occurs after 270 days, or approximately 9 months, although loans are not reported to be in default until they reach the 360th day of delinquency and are sent to collections. Banks and other private lenders typically charge-off private education loans when they become 120 days past due, but charge-off rules vary by lender.

A default note will go on your credit report, which can have a negative impact on your credit score.

Once your loan is in default, the lender can file a lawsuit against you to collect on the debt. This is because student loans are unsecured debt, which means there is no collateral to repossess, such as a car or house.

Defaulting on a federal student loan can have additional consequences. You could lose your eligibility for all federal student aid and face garnishment of your federal tax returns, wages, and Social Security payments.

However, typically there are other options for getting out of default. If you are struggling to afford your student loan payments, reach out to your servicer immediately to ask about your options. Contact your private loan lender to determine what option is best for you.

Borrowers who expect to be incarcerated for at least 10 years should inform their loan servicer.

Key Steps to Take Control of Your Student Loans

Know what you owe: Make a list of your student loans. Include whether they’re private or federal, monthly payment and due date, the current and principal balances, the interest rates, and servicer. If you’re not sure, start by checking your free credit report . For federal loans, it will also help to know what type of loan it is (such as PLUS, subsidized, or unsubsidized) and the name of your repayment plan. You can look up your federal loans at studentaid.gov .
See if your loans fit into your budget and pay schedule: Make a budget and explore strategies for reducing debt to help you see how your student loans fit into your finances. Request a different due date if that would make it easier for you to make your payments on time and in full.
Make sure your federal repayment plan is the best one for you: You can use Education Department’s Loan Simulator to compare plans by monthly payment, total interest, and more.
Set up direct debit (aka autopay) for 0.25% off your interest rate: With direct debt, your payment is taken automatically from your bank account each month. All federal direct loans and many private lenders offer this discount.
Extra payments can get you out of debt faster and save you money on interest: If you can afford them. To get the full benefit, tell your servicer to apply extra payments to your highest interest rate loan(s) first.
Stay in touch with your servicer: Take notes when you talk on the phone with them: jot down the date, the name of the person you’re talking to, what you asked, and how they answered.
Claim your student loan interest on your tax return: Depending on your income and tax filing status, you may be able to claim up to $2,500 of the student loan interest you paid in a given year.
If your payment is too high, seek income-driven repayment rather than a pause on payments: Pauses, known as deferment and forbearance, are not long-term solutions. An income-driven repayment (IDR) plan can reduce your monthly payment to as low as $0. Use ED’s Loan Simulator to choose the right plan for you. Learn about SAVE, the newest IDR plan, and how to enroll.
Set a reminder to renew your paperwork: If you don’t consent to the automatic recertification, you will need to confirm your income annually in order to keep your payment based on your income. Failure to recertify will likely result in a significant increase in your monthly payment amount. It can also result in interest capitalization.
Renew your IDR income recertification early if your income goes down or your household grows: Your monthly payment will be recalculated. These plans allow repayment flexibility based on your income (or lack thereof) you may be eligible for a lower monthly payment, possibly as low as $0, through an income-driven repayment (IDR) plan.
Beware of capitalization: For federal student loans, interest will be capitalized - or added to your principal - under two circumstances: when you exit a period of deferment on an unsubsidized loan or when you are repaying a loan under the income-based repayment (IBR) plan and you no longer need financial assistance as determined by the regulations. In other instances, interest may accrue but not be added to the principal. Keep in mind that a monthly payment will be applied against outstanding interest before it will be applied to your loan principal. In the new SAVE plan, any interest that remains after a monthly payment is applied will be forgiven by ED and your balance will not grow. Call your servicer to understand how the SAVE plan can help you reduce the cost of repaying your federal student loans.
Lower your payment by saving for retirement: Your IDR payment is based on your adjusted gross income (AGI). Contributing to a tax-deferred retirement account, like a 401(k) or 403(b), decreases your AGI and your IDR payment too. This could increase the amount forgiven if you are pursuing loan forgiveness through PSLF or IDR.

Additional Tips for Specific Situations

Servicemembers: Exercise your rights as a servicememberYour service counts towards public service loan forgiveness (PSLF). After you make 120 qualifying monthly payments under the PSLF program, you can apply to have your remaining loan balance forgiven, tax free. Learn more about your next steps from the PSLF Help Tool. The Servicemembers Civil Relief Act (SCRA) entitles you to have your interest rate reduced to 6% on all debts taken out before your service began, including both federal and private student loans. Federal student loans can be reduced to 0% when you are serving in a hostile area. Reductions in federal student loan interest should happen automatically; check your statements to make sure. Contact your private student loan servicer to request a rate cap.There are other benefits for active-duty servicemembers with Direct Loans. Check out our guide to student debt for servicemembers and ED's guide to federal loan benefits for servicemembers.
Avoiding Scams: Avoid scams and wasting moneyDon’t use credit cards or home equity to pay off student loans. Credit cards will cost you way more in interest. If you refinance your loans using home equity and run into trouble paying your mortgage, you could lose your house. Either way, you will lose the flexible repayment options and borrower protections offered by federal student loans.Don’t go back to school just to avoid loan payments. Even during in-school deferment, your unsubsidized loans will accrue interest. Carefully compare the costs and benefits of more education. Never share your loan or bank information, or your studentaid.gov login. Learn the other warning signs of student loan scams.Don’t pay for help with your student loans. Many companies sell support services, including filling out forms. These services, however, will charge you a fee for something you can do for free.Free, qualified help is available. Credit counseling nonprofits, which are different from credit repair companies, can help you make a plan to get out of debt. You can look for one near you by searching “credit counseling nonprofit” with the name of your city or town.

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