Student loan payments can be a source of financial stress for many borrowers who are struggling to repay their loans. Every dollar of loan payments is a dollar less that is available for other priorities. So, borrowers sometimes seek to lower their monthly student loan payments.
There are several different ways of reducing student loan payments:
Note that cutting your interest rate in half will not cut your monthly payments in half. This is a common myth. Even if your interest rate were zero, you’ll still have to repay the principal balance of the loan. For example, cutting the interest rate in half on a 6.8% loan will reduce the monthly payment by about 14% on a 10-year repayment term and about 25% on a 20-year repayment term. The monthly loan payments on a 10-year, $35,000 loan are $402.78 at 6.8% and $344.46 at 3.4%, yielding only about $58 in monthly savings. The percentage reduction in the monthly loan payment is about double the interest rate on a 10-year term (plus or minus a few percentage points) and twice that on a 20-year term.
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