Some borrowers won’t have trouble making payments when those billing statements start arriving next summer. But for others — recent graduates, parents, borrowers in student loan default, and so on — the payment amount won’t fit their budget, which could force them to make tough choices. Thankfully, the federal government — unlike private lenders — offers its borrowers flexible repayment options to accommodate most situations.
Related: Fresh Start Student Loan Program
Here’s how to lower your student loan payments, depending on your situation.
If you have a financial hardship or recently graduated from college
You can request an affordable payment that’s tied to your income and family size. If you don’t have income or are drawing Social Security benefits, your monthly payment could be zero.
Ask your servicer about enrolling in one of the income-driven repayment plans: IBR, ICR, PAYE, or REPAYE. You can use the Loan Simulator on the Federal Student Aid website, StudentAid.gov, to estimate your payment amount based on your current pay or your adjusted gross income from your most recent tax return.
If you’re pursuing Public Service Loan Forgiveness
Make sure you submit a new PSLF Employment Certification form and update your income and family size before the student loan recertification deadline, March 2023. The Education Department is allowing borrowers to self-report their income through July 31, 2022. That means you don’t have to submit a tax return or pay stub when you report your income. If you submit the IDR application online, select “I’ll report my own income” when you get to Step 2.
Note: Last October, the Education Department announced it would give retroactive credit toward public service forgiveness to borrowers working full-time for the government or an eligible nonprofit who hadn’t yet had their loans forgiven. To receive credit, borrowers had to apply before the PSLF Waiver ended on October 31, 2022.
As of November, over 260 thousand borrowers have received over $24 billion in loan cancellations through the Public Service Loan Forgiveness Program and its waiver.
The U.S. Department of Education is continuing its work to improve PSLF. A few weeks back, it announced proposed changes to the regulations that would allow more payments to qualify for PSLF and allow some deferments and forbearances to count toward PSLF.
Learn More: PSLF Reddit — What Works and Doesn’t Work
If you have Parent PLUS Loans
Look into changing repayment plans. The Extended or Graduated plans stretch your repayment term over 25 or more years and give you a payment amount that either stays the same or goes up every few years. Those plans are good options if you’re still working and have a high income.
But if you need a lower payment because you’re about to retire or are already drawing Social Security benefits, look into the income-contingent repayment plan. The ICR plan caps your monthly payment at 20% of your income. You could have a zero-dollar bill if Social Security benefits are your only source of income when the moratorium ends.
Learn More: How to Pay Off Parent Plus Loans
If you have FFEL or Perkins Loans
You can get the benefits other federal student loan borrowers have received throughout the coronavirus pandemic by consolidating your loans into a Direct Consolidation Loan. Consolidation has two main advantages:
It can give you a lower monthly payment for all your federal student loans.
It can give you credit towards forgiveness with the PSLF Waiver for a limited time.
You can also apply payments and past forbearances from consolidated loans towards loan forgiveness through income-driven repayment by taking advantage of the IDR Waiver.
You can consolidate for free at StudentAid.gov.