When it comes to student loan repayment, there is no one way that works best for everyone. How much of your monthly payment you can afford to pay back depends on several factors, primarily your monthly income and the total cost of your rent and utilities. This can differ widely from one individual to another.
Those with higher monthly incomes may be able to increase their monthly payment, which will lower the total cost of their loan over a period of time.
However, those who do not earn as much may not have this option. They will have to continue making standard monthly payments. If they cannot afford even the standard payment every month, they can choose to lower this payment.
Lowering your monthly student loan payment is an option. However, it is not an option you should choose without giving it some serious thought.
What Happens When You Lower Your Monthly Payments?
When you choose to lower your monthly payments, you are in effect extending the life of your loan. You won’t be paying off your student loans faster, and higher interest gets accrued. By the time you have finished paying off the loan, you will have paid back much more than another student who increased their monthly payments or continued with their standard monthly payments. That is reason enough not to lower your monthly payments unless you absolutely HAVE to.
When Should I Consider Lowering My Monthly Student Loan Payment?
Lowering your student loan payments to pay back less may be the smarter choice under these 4 circumstances:
- You are not earning enough – If your monthly income is too low so that a major portion of it goes towards your student loan payments and you do not have enough left over to pay for your basic necessities, then lowering your payments may be your only option.
- You’ve been laid off from your job – If you’ve been laid off or you’ve lost your job for any other reason, you would have no money coming in. Dipping into your savings and paying back a lower amount every month may be an acceptable solution.
- You are at risk for being late with your payments – Late student loan payments can mar your credit history, making it more difficult for you to get any loan in the future. If you are at risk of being late with your payments because of insufficient funds, lowering the payment is far better than compromising your credit report.
- You are at risk for defaulting on your loan – When you miss multiple consecutive loan payments you will end up in loan default. This could have serious consequences. First of all, you will get extra fees and fines tacked on to your loan. That adds to the overall cost and makes it even more difficult for you to pay it back. This then creates even bigger problems with your credit history. If you are at risk of defaulting on your loan, don’t think twice about lowering your student loan payments.
Final Thought About Lowering Your Monthly Student Loan Payments
As far as possible you should not consider lowering your payments if you are earning enough to cover your payments and your basic necessities.
Use College Raptor’s Refinance Guide to help with your student loans after graduation.