Here's How You Can Lower Your Monthly Student Loan Payment

April 28th 2016

Let's be honest. You have no idea what you're doing with your federal student loan debt and it scares you. Maybe you're a recent graduate and you're trying to figure out this "adulting" thing. Your student loans seem expensive and overwhelming.

Maybe you're getting closer to 30 and you still have no idea what's going on, and your monthly student loan payment still seems too difficult to pay.

This author can relate, and that's why we're going to figure this thing out.

The Department of Education offers Income Driven Repayment Plans that may be the answer if you're struggling to make the monthly payments on your federal student loans. Private loans are a completely different thing and this article will not fully address them, but it will give you some quick information about IBR plans and answers to some great questions about them.

You can also use IDR plans if you've gone to graduate school, and you should pay special attention, if you're married and have kids, or received loans during a certain time period. Go to the Federal Student Aid website to find out the details if you fall into these categories.

Who should pay special attention to IDR plans? Department of Education

Still have questions? Many other people do, too.

Here is a quick guide and five common questions from social media about federal student loan repayment plans with the basic answers that can help you get your life together.

IBR Comparison Department of Education

1. How much will I pay each month with an Income Driven Repayment Plan?

There are four types of IDR plans and the monthly payments for each are based on a different percentage of your discretionary income. Discretionary income is the amount of money left after taxes and personal needs like food, shelter, and clothing have been paid, according to Investopedia.


You can use the Department of Education's repayment estimator to figure out your personal situation. If you log into the Federal Student Aid website when you use it, the estimator can automatically use your loan information.

Repayment EstimatorFederal Student Aid in the U.S. Department of Education -

Revised Pay as You Earn (REPAYE) and Pay as You Earn (PAYE) plans are based on 10 percent of your monthly discretionary income. Income Based Repayment Plans (IBR) are based on 15 percent of your discretionary income and Income Contingent Repayment (ICR) plans are based on 20 percent of your monthly discretionary income. ICR plans can also be based on a combination of income and loan debt, whichever is less.

2. If I enroll in an IDR plan and make the lowest possible monthly payments, won't the total cost of my loan go up?

Yes, it probably will go up. Unless you're eligible for loan forgiveness, an IDR plan will extend the term of your loan and therefore end up costing more in the end because of interest. A standard repayment plan is 10 years and an IDR plan is generally between 20 to 25 years.

Department of Education Secretary John King, Jr. acknowledged in a press phone call that IDR may not be right for everyone. "Clearly, for some folks, the standard repayment plan and finishing paying off their loans in 10 years may be superior because they'll end up paying less interest over the time of repayment," he said. "So it's really individual-specific."

However, if you can't make your standard loan payments it could be a good idea to enroll in an IDR plan to avoid being late or defaulting until you're able to make standard payments again. King said that avoiding default is one of the reasons the department is pushing for more people to enroll in IDR. "What's clear, based on our analysis, is that there are student borrowers out there today who could benefit from income-based repayment and haven't yet taken advantage," he said. "We want to make sure that they get the information they need."

3. What happens if my monthly payments in my IDR plan aren't enough to pay off the loan? Will I be paying for the rest of my life?

No, you will not. After the end of the term for an IDR loan, which is either 20 or 25 years, the loan will be forgiven. However, if the law stays the same, then you will have to pay taxes on the amount that's forgiven. Although many young people think that 20 years is forever, it's not.

President Barack Obama didn't finish paying off his student loans until he was in his 40s, although it's unclear if they were public or private loans. He said in a VICE News roundtable that he and Michelle Obama didn't pay off the last of their student loan debt until 2004, when he was elected to his first term in the U.S. Senate.

4. Someone called my mom and said that their company could reduce my loans for money. Is this a scam? Should I be paying a company to reduce my federal loan payments?

Beware of Scams!

You absolutely should not pay to reduce your federal loan payments or to receive loan forgiveness. There are companies that use government logos and try to pass themselves off as legitimate organizations, according to the Department of Education. These are scams. King explained in a YouTube video earlier this year that some companies are even claiming free government programs as their own and asking you to pay for them.

"Don't be fooled. You never have to pay for help managing your federal student loan debt."

The Department of Education can help you consolidate your student loans, see if you qualify for student loan forgiveness, and give you advice on how to get out of default. It can also have you decide which IDR plan is the best.

5. If I refinance my loans with a private company, do the rules change? Are there better protections with federal loans?

If a private bank or student loan company is offering to refinance your federal student loans for a lower monthly interest rate or monthly payment, you might want to think twice and get all the information. ATTN: previously reported that there are some federal loan protections that could disappear once your loans become private, such as the ability to temporarily stop payments, reduce monthly payments, and receive some loan forgiveness if are a veteran or work in certain public service fields.

If you're interested in applying for an IDR plan, you can do that on the Federal Student Aid website. You'll need your FAFSA ID and other personal financial information, including your social security number.

Application for IDRFederal Student Aid/U.S. Department of Education -

RELATED: Elizabeth Warren Explains Why Student Loan Debt is Such a Mess

Share your opinion

Do you feel like you can't afford your federal student loan payments?

No 18%Yes 82%