If you are currently having a financial difficulty and would like to lower your student loan payments, take time to do the following.
1. Assess your student loans
a. Classify your loans into:
- Government or federal loan
- Private loan issued by a lender or private bank
b. Determine the kind of loan
- Subsidized – interest payments are not required while in school.
- Unsubsidized – interest accrues while schooling, even with repayments
c. Gather data:
- Amount of your total debt
- Number of lenders
- Grace period for repayment of each loan
- Interest rate for each loan
2. Consult a professional
a. Seek help from a Financial Aid School Counselor or a Financial Adviser
b. Contact your private lenders and ask help on how to make changes in your repayment schedules or interest rates.
3. Explore consolidating loans
Consolidate your federal loans and some private student loans. By consolidating, you group various loans into one that can be locked into one fixed rate. You only transact with one lender. But, this means that you maintain the same interest rate whether or not interest rates go up or down.
4. Study repayment options
a. Based on your regular income, consider a repayment plan that can pay the lowest interest. Consider the life of your loan, and the principal to interest ratio for each payment
b. Target to pay off first your loans earning the highest interest.
c. Prepay some of your loans if you have extra funds.
5. Pay loans on time
a. Schedule to pay your loans on or before the due dates.
b. Ask your lenders for rewards for consistently having paid on time.
c. Register your bank account for auto-pay facilities, to automatically deduct monthly payments.
6. Consider options for financial difficulties
There are options to lower loan payments when in crisis. Talk to your lenders to work out how to repay your loans and avoid default.
a. Transfer federal loans sourced from a private lender and convert them to direct federal loans to avoid variable lender rates.
b. Apply for deferment or forbearance:
- Unemployment Deferment can be applied if you are in school and are not working. Several private lenders and federal loans allow you to defer paying for three years, if you have consistently been in school for at least a half period.
- Deferment because of Economic Hardship or Extended Physical Disability. If your income is not enough to sustain your daily needs you might qualify for an economic hardship deferment. Your lender decides on how long your loan will be deferred and you would have time to improve your financial situation.
- Forbearance should be a final option only when you encounter extreme difficulty to meet loan payments. Lenders usually accept lower payments, than to put your student loan in default. Forbearance allows you to postpone, reduce or even extend the repayment period, lasts from 3 to 6 months, and may be renewed with accrued interest.
Before considering deferment or forbearance, exhaust all means to pay as scheduled. If you defer or extend loan payments, the life of your loan is also extended and you eventually pay a higher total amount later.
7. Keep yourself updated
Be updated on what is new in the loan industry. Note down changing interest rates and information that can help reduce your student loans.
A loan defaults when payment is late for more than 270 days. No matter what option you use to lower payments, avoid putting your student loan in default.