Student loan payments are one of the most difficult bills to pay, especially for recent graduates. When payments get tough, it’s time to look at your options for lowering student loan payments.

There are three popular ways to lower your student loan payment: income-driven repayment programs, federal consolidation loans, and private student loan refinancing. The best plan for you is going to depend on your personal financial situation.

Reducing Your Student Loan Payment with the Income-Driven Repayment Program

The federal government offers repayment plans where your monthly payment is calculated as a percentage of your income. There are four variations of the income-driven repayment plans: REPAYE (Revised Pay As You Earn Repayment), PAYE (Pay As You Earn Repayment), IBR (Income-Based Repayment), and ICR (Income-Contingent Repayment). Each plan considers your income. The lowest cap on payments is 10 percent of your income through the REPAYE, PAYE, and IBR plans, but some programs can cap it as high as 15 or 20 percent (IBR and ICR, respectively).

How to Reduce Your Payment with Direct Federal Consolidation

If your federal student loan debt is broken up into many different loans, the Department of Education offers a consolidation program to combine all your debts into one account. If your loans have different interest rates, then they are averaged together under one weighted interest rate.

A federal consolidation loan lowers your monthly payment by extending the repayment term. Spread payments out brings down the minimum monthly payment. For example, if you have seven years remaining on a 10-year repayment term and consolidate for a 20-year loan, you would see a significant reduction in your monthly payment. Federal consolidation is a smart choice if you need immediate relief without the required credit to qualify for private student loan refinancing.

Keep in mind that there are limitations to the federal consolidation program. Applicants can only consolidate federal loans, excluding private student loans from the process. Here’s the big one. While federal consolidation can provide initial relief with payments, it will not save any money over the life of your loan. In fact, it’ll normally cost you more. Why? If you choose to extend your repayment plan, you will end up making payments for longer under an interest rate that doesn’t actually save you money.

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Using Private Student Loan Refinancing to Reduce Payments

Private student loan consolidation and refinancing offers similar benefits compared to federal consolidation, but it goes a step further.

For starters, consolidating your loans with a private lender offers the possibility of extending your repayment term, providing relief from high monthly payments like federal consolidation. Contrarily, you also have the option of shortening your repayment term, so you have the option to take the fast track to repayment. This may not make sense if you need to lower payments, but it will when you consider this next point.

This is the largest difference between federal consolidation and private student loan refinancing. The private option offers a chance to lower your interest rate. When you apply for a refinancing loan through a private lender, they evaluate your creditworthiness and financial situation, and a private lender may offer you a lower interest rate as a result. With a lower interest rate, payments will be reduced because interest will accrue at lower rate each month.

Bringing it back to the initial point of fast tracking repayment, you can accomplish this without increasing your monthly payment so long as you can obtain a lower interest rate.

While private student loan consolidation sounds ideal, there are several limitations to this option. Firstly, you must be an eligible applicant which means you must pass the lender’s underwriting criteria. Even if you are eligible to refinance, you may not even be able to qualify for a lower interest rate. All of this depends on your credit history and financial standing, so only student debtors who are in good standing with their loans are typically in a position to refinance effectively. If you are in need of immediate relief and struggling with payments, there is a good chance you do not fit that category.