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Paying down student loans can be challenging. And now that federal student loan payments have started again, paying down your loans may be more challenging than ever. If you're having trouble making student loan payments, you're not alone. You can take steps to make your debt more manageable.
Make your payments on time
It may seem obvious, but it's key to keep up with your student loan payments. Missing payments can:
- Damage your credit. Without good credit, it can be more difficult to rent an apartment, buy a house or car, or even get a credit card with a competitive rate.
- Disqualify you from debt reduction and loan forgiveness programs. These programs can save you significant money that you'd otherwise have to pay back. Read on for more info.
The good news is that student loans have flexibility in payment options to help you stay afloat.
If you're struggling to make your payments, start by contacting your lender before you miss a payment. They'll work with you to discuss your best options and figure out a way to make your payments more affordable.
About 40% of all adults who went to college went into debt to pay for their education, according to a 2022 Federal Reserve report.*
*Source: Report on the Economic Well-Being of U.S. Households in 2022, Federal Reserve, May 2023.
Explore your income-based payment options
Income-based payment plans calculate your monthly payment based on what you can afford. The payment amount is typically between 10% and 20% of your discretionary income—which is based on your annual income, family size, and state-specific guidelines.
Typically, your minimum monthly payment will be lower with an income-based payment plan than with the standard 10-year plan. But, you'll likely be paying the loan over a longer period of time
Income-based payment options for federal student loans include:
- Income-Based Repayment (IBR). Under this plan, you pay 10% or 15% of your monthly discretionary income toward your student loans.
- Pay As You Earn (PAYE). This plan caps your monthly student loan payments at 10% of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.
- Income-Contingent Repayment Plan (ICR). This plan requires 20% of your discretionary income. Unlike the other plans, your loan payments can become more expensive as your income increases.
- Saving on a Valuable Education (SAVE) Plan—formerly the REPAYE Plan. This plan requires you to pay 10% of your discretionary income toward your student loans.
Under all four plans, any remaining loan balance is forgiven if your federal student loans aren't fully repaid at the end of the repayment period.
Unlike federal student loans, private loans aren't eligible for government loan forgiveness or income-driven payment plans. Private lenders, though, often have their own programs to help you with your payments. Contact your provider to find out your options.
Pause your payments in a pinch
We've all gone through a time when money was tight. If you're really strapped for cash, you might be able to pause or reduce payments temporarily through student loan deferment or forbearance. These programs provide a grace period when you won't have to make payments on your loans. You can apply for:
- Deferment, if something happens in your life that prevents you from earning income for a longer period, like losing your job, or going back to school.
- Forbearance, if you need a break—for any reason—that won't last more than 12 months.
Ask for student loan forgiveness
Forgiveness programs are also available for teachers, military service members, and volunteers with programs like AmeriCorps, Peace Corps, and Volunteers in Service to America (VISTA).
Helpful hint
A growing number of companies are offering student loan repayment assistance as an employee benefit. To find out your options, talk to your employer's human resources department.
Consolidate your loans
Paying your student loans can get tricky if you've got a combination of federal and private loans from different providers, with different interest rates. Combining them all into one consolidated loan could be a solution. Make sure you consider the pros and cons carefully, though, because consolidating your loans comes with some risks.
- Pro: You'll have one monthly bill that may be lower than what you were paying prior to consolidating.
- Con: Because consolidation usually increases the amount of time you have to pay your loans and the interest is growing on a higher principal balance, you might wind up paying more money in the long run.
- Con: You could also lose out on some income-driven repayment options.
The bottom line when it comes to managing your student loan debt? Think carefully, and do your research.