Lowering Federal Student Loan Monthly Payments: Save Your Money

Wondering how you can lower your federal student loan monthly payments? Learn about how you can reduce the amount you pay on a monthly basis and your federal student loan interest rates.

Updated by B Harshitha on 18th February 2020

Repaying student loans can be quite an irksome task that has to be performed on a regular basis. Nobody would be pleased at the idea of having to set aside money on a monthly basis for something that is owed. This is likely to be even more exasperating if the money that is set aside is a large amount. 

Federal student loans have quite a few options to make monthly payments an affordable affair for their borrowers. The four main servicers for federal student loans are Navient, Nelnet, Great Lakes, and MyFedLoan.  

If you think your monthly payments are something you can not afford to pay, you may think about lowering your monthly payments. This can be done either by extending your repayment term or by lowering your interest rate.


Lowering your federal student loan monthly payments

Let us look at some ways by which you can reduce your monthly payments.

Extended Repayment Plan

You can extend the term of your federal student loan from the standard 10 years to 25 years. This is available to all federal student loan borrowers. Since this plan does not have a minimum income limit, it is a good option for all borrowers. It is likely to substantially reduce your monthly payments. But remember that the money that you pay over time may be greater due to all the interest accumulated.

Graduated Repayment Plan

With a graduated repayment plan, your repayment amount will be low initially. This will gradually increase after every two years. This comes in two versions, a 10 year graduated plan and a 25 year graduated plan. After the duration of your term, your loans are paid off.

You will likely pay more for your loan’s interest over time. This does not take into account your income or family size.

This again adjusts your monthly payment according to your repayment term and other parameters such as principal, interest, etc.

Income-Based Repayment

With a standard repayment plan on your federal student loans, your payments are not likely to change and are spread over 10 years. You are also likely to pay the least amount of interest and will repay your loan the fastest. But your monthly payments may turn out to be high.

There are about four income-driven repayment plans that you can look into.

  • Income Based Repayment (IBR): Under this plan, 15% of your discretionary income will be taken as monthly payment. This is the most common income driven repayment plan.

  • Pay As You Earn (PAYE): Most borrowers likely would not qualify for this plan. About 10% of your discretionary income will be taken as monthly payments towards your federal student loan repayment. This is only available for people who took out federal student loans after 1 October, 2007.

  • Revised Pay As You Earn (REPAYE): This plan can be sought after by borrowers who do not qualify for PAYE. It is stricter than other plans when it comes to spousal income but it does offer some leniencies for borrowers whose loans accrue more interest than their monthly payments.

  • Income Contingent Repayment (ICR): This plan is suitable for federal loans that do not qualify for IBR or PAYE.

Income driven repayment plans assign your monthly payments to be a percentage of your discretionary income. It takes into account factors such as your income, family size and loan balance left. If you do not have any income, your monthly payment could also be as low as $0.

But with an income driven repayment plan, you may end up paying more over the duration of your loan for interest than with other plans. 

Another perk that comes with income driven repayment plans is that you may qualify for student loan forgiveness after a certain period of time.

To qualify for income driven repayment, you will have to certify your income for every year that you apply for it.


People usually take out multiple federal student loans to cater to all their needs and expenses. These loans often have their own rates, terms, deadlines and payments which can be quite arduous to keep track of and handle. Loan consolidation may be a good option for people who are having a tough time with multiple such loans.

If you take out a direct consolidation loan, you will now have one loan that acts as a combined form or coagulation of all your previous loans. You will only have to keep track of a single payment and one deadline.

You may not necessarily get a lower rate but your new interest rate will be a weighted average of your previous rates.  But signing up for income driven repayment after consolidation f]may be a good idea. 

Lowering your federal student loan interest rates

You might want to think about reducing your interest rate if none of the above plans to reduce your monthly payments seem to work for you. 

Refinancing your federal student loans with a private lender may be the only way to go about it. But you will lose a number of federal protections and benefits that come with federal student loans. There is no reverting back to a federal loan once it becomes a private student loan.

The bottom line

Making federal student loan repayments on a regular basis can be quite challenging, especially if you are going through a difficult time and are not making much compared to what you are paying.

Instead of making no payments or thinking about making zero payments, you can explore repayment plans that are best suited to you, especially since there are many convenient plans offered by the government on federal student loans.