How to lower your monthly student loan payments

Many of us know all too well how daunting student loan payments can become especially when times are tight. However, very few of us know anything about our loans at all let alone the options that may be available to help make our repayment plans more manageable. It’s time that you get educated about your student loans and take charge of your financial future by learning about your repayment options. Don’t default on your loans! The last thing you want is for your higher education to leave you in debt and with bad credit!

1) Know Your Repayment Options

When you graduate you are automatically given the Standard Repayment Plan, which has the highest monthly payment but will give you the cheapest loan overall and the shortest payback term, usually 10 years.

There are several options to lower (not eliminate) your monthly payments. Most federal loans have these options:

Graduated repayment: your monthly payments can start as low as interest only and gradually rise as you become more financially stable.

Income-sensitive: you choose to put between 4%-25% of your income towards your loan, the percentage paid must at least cover the monthly interest due.

Extended repayment: by extending the life of the loan to 25-30 years, you will lower your monthly payments.

2) Cash flow vs. Overall Cost

Keep in mind, all of these options will extend the life of the loan. This means you will pay less now, but you will be making payments for a longer period of time. By helping your cash flow now, in the long run, your loan will cost you more money because you will be making interest payments longer. This is not something to stress over! If you need to reduce your payments now, remember - You ALWAYS have the option of going back to a Standard Repayment plan at any time or paying the loan off all at once with no penalty.

3) The Trick to Private Student Loans

Typically, private student loans do not offer as many repayment options as federal loans. If you need to lower your payments, take the personal approach: Call your lender and explain your situation.

Student loan companies would rather have you call them and tell them “I can’t pay, what should I do about it?" than have you stop paying altogether. So, if you’re having trouble making your monthly payments because they’re too high, pick up the phone, call your lender and find out your options. For example, as of June 1, 2009, Sallie Mae is offering a graduated repayment option to students with private loans.

4) Pay the Principal

Fab & Fru Tip: A good trick for paying your loan faster without breaking the bank is to add a little extra money each month (or whenever you get a windfall) towards paying off the principal (the original amount borrowed). By adding just a few hundred dollars each year towards your principal payments, you lower your interest payments over time and you will shave several years off the repayment term. This works regardless of what repayment plan you chose or if you’re on the Standard Plan.

To read the full article and get more info on Student Loans and Student Loan Repayment visit Fab & Fru.

What horror stories do you have about paying back student loans? And what do you know now that you wish you knew then?