Lower your monthly student loan obligations

Folks, we’ve made it through another graduation season. The gowns and mortar boards are packed away, and now many graduates are focused on their finances during the first months out of college. Student loan repayment is just down the road.

As you look ahead to that first student loan payment, you may be realizing that it’s going to be a little tough to swing. You may have borrowed more than you can afford to repay or may not have secured employment quite yet. (Side note for those of you just starting to take out student loans: Make sure you budget properly so you don’t borrow more than you can repay.)

Whatever your situation, there are options available to help make it easier to pay your student loan. Here are some ways you may be able to lower your interest rate or monthly payments:

  • Choose a different repayment plan. For federal loans, there are a number of repayment plans other than the standard repayment plan. You may be able to have your payment based on your income, extend your repayment if you have over $25,000 in federal loans, or start out with smaller payments that gradually get larger over the repayment term. And check with your lender to see what repayment options are available for your private student loans.
  • Take advantage of discounts from you lender. Ask your lender if there are any interest rate discounts available for your loan. For example, you may be able to save money if you have your monthly student loan payment automatically deducted from your checking or savings account.
  • Consolidate your loans. By combining your federal student loans Click here to learn about third-party website links together into a new loan with a longer repayment period, you’ll usually lower your monthly payment. For private student loan consolidation you may even find that your interest rate is lower if your credit situation has improved or if you bring on a cosigner with excellent credit.

Remember that if you’re lowering your monthly payment by extending your repayment period or paying just the interest, you may end up paying more interest over the life of your loan. However, in the grand scheme of things, if it prevents you from missing payments and defaulting on your student loan, it might be worth it.

Looking for a way to postpone your student loan payment? We’ll talk about deferments and forbearances later this week, so stay tuned!

Meanwhile, hit me up with any questions you have about different repayment options.

This entry was posted in Budgeting, Federal loans, Financial education, Interest rates, Money management, Paying, Post-college, Preparing, Private loans, Remember, Student loans, Wells Fargo Bank. Bookmark the permalink.

16 Responses to Lower your monthly student loan obligations

  1. Bob says:

    How do I get student loans?

  2. Lila says:

    Barbara,
    Please help me get my student loans under control. I am up for default on one of my loans fri 5/29/09 and Im all out of options on how to get things right. I have made numberous attempts to try and set up arrangements with the student loan department, and they refuse to help me in any way. I have been hung up on, told my payment is doing nothing to my account, and harrased and I just dont know what to do anymore. PLEASE HELP!! Im afraid its already too late

  3. holde5 says:

    Where do I start? I want to go back to school part-time while employed Full-time, but may need financial assistance. What would be a good first step?

  4. Barbara Raus says:

    @ Bob – the process depends on what type of student loan you’re looking for. We recommend that you start with federal student loans (after you’ve exhausted all your scholarship and grant options). To qualify for those, you’ll need to fill out the FAFSA (Free Application for Federal Student Aid–fafsa.ed.gov), and they’re awarded by your school. If federal loans aren’t enough you may want to consider a private student loan. There’s a great resource at wellsfargo.com/student called “student loans step-by-step” where you can find more details on the process. Let us know if you have more questions!

    @ Lila – Are you student loans with Wells Fargo. If so, please contact us through the Ask the Expert tool so we can look into your situation in more detail.

    @ holde5 – If you know where you’d like to attend school, your best bet would be to start with the financial aid office there. They’ll be able to tell you if there are scholarships available and what types of financial aid you may qualify for. You could also start searching for scholarships to help pay for school, either through a online scholarship search engine or by finding scholarships specific to your interests and area of study. Don’t forget to check with your employer about tuition reimbursement or other education programs. Make sure you use all the money you don’t have to pay back (like scholarships and grants) before you turn to student loans, and with those make sure you consider federal first before private.

  5. Linda Johnson says:

    I need help understanding this. I don’t want to make a costly mistake.

    I’ve just started medical residency and will be applying for deferment for my federal loans. Should I consolidate my undergrad and medical school loans after July 1 and then apply for deferment?

    Thank you for this site.

    • Barbara Raus says:

      Linda — if you have variable interest rate federal loans (made before July 1, 2006) you’re smart to be looking at consolidation. With the rates adjusting to historic lows after July 1, it’s a good idea to be thinking about locking in that interest rate. Here are a few things to think about in your situation. With consolidation you’re usually extending your repayment period, which may mean paying more interest over time. Also, when you consolidate you’ll see the interest rate jump just a bit, as the interest rate for a federal consolidation loan is the weighted average of the loans you include rounded up to the nearest 1/8 of a percent. You may want to keep any federal loans that already have fixed rates (made after July 1, 2006) out of your consolidation loan since you don’t have to worry about the rate changing and you’d actually end up paying more for those with consolidation. If you have a subsidized loan(s), you’ll still receive that subsidy after you consolidate. As for the deferment, you’re probably looking at the Economic Hardship Deferment (to qualify for the Internship/Residency deferment you have to have a loan that was made before July 1, 1993) You can apply for this on your separate loans or your one consolidation loan. If your loans are with multiple lenders you’d have to request deferment from each of them. If you waited until after consolidating you could apply for deferment with your one consolidation loan. You could apply for deferment while your loans are separate and wait to consolidate. Just remember that the interest rates will change again July 1, 2010 and may not stay this low. If you don’t qualify for the deferment, you could also consider applying for Income Based Repayment (which is available after July 1 and allows you to base your monthly payments on adjusted gross income and family size) or try an Internship/Residency forbearance (just remember that unlike during deferment, you’re responsible for the interest on subsidized loans during a forbearance).

  6. Andy says:

    My wife has a private student loan with a high interest rate through Wells Fargo. I would like to pay it off with a credit card. Is that possible ?

  7. Debra Wright says:

    I currently have private student loans through Wells Fargo in the amount of $32,000.00 however, Wells Fargo is unwilling to assist me in lowering my monthly payments (unable to get co-signer). I also have over $130,000 in federal loans that I am paying. How can i get a lower monthly payment plan?

  8. Meg says:

    I have been trying very hard to make contact to work with Wells Fargo to lower my monthly payment. I graduated 6 mos ago. I work 2 jobs, 7 days a week. Including other lenders my monthly loan payments are 1300. per month. I still have to pay rent, utilities, grocery and car payment. I value my credit history and am just asking for consideration of current monthly payment reduction. Thank you.

  9. Jackie says:

    I don’t understand why I was approved for a car loan through Wells Fargo, but I was denied a private student loan consolidation. The car loan was for much more than I needed for the student loan refi. I’ve never been late on my federal or private loans. Also, the car loan I had with Wells Fargo was always in good standing. It’s very frustrating.

  10. Kristie says:

    I have 4 private student loans through WellsFargo with fixed interest rates between 4 %- 8.5% totaling $70,0000. I pay $685 per month and I also pay for federal loans. I can’t consolidate because I don’t make enough money (funny, because that’s the same reason I can’t make my payments… and my interest rates are probably better than any fixed or variable rate I’ll get now). I don’t have a cosigner because my mother is the only person I have and WellsFargo foreclosed on our house. I am NOT going back to school because I can’t PAY for anything so I will not be putting my loans into forbearance so they can continue to accumulate interest and get even more unmanageable. Any more ideas?

The Student LoanDown

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