For many college students, student loans are inevitable. That also means someday repaying those loans, budgeting for repayment, and dealing with interest rates. When it comes to whether or not you should lower your student loan payments, there is no one answer that is right for everyone. In general, lowering loan payments is not recommended as it increases the accrued interest and you end up paying much more than if you continue making the payments you agreed on. However, there are exceptions to that rule.
When not to lower your student loan payments
You should definitely not consider reducing your student loan payments if you can afford to make your current payments, or if you are not considering any of the careers that would qualify you for loan forgiveness. If you are currently financially comfortable paying off your loan, don’t lower your payment. There’s no point in doing that, so keep paying what you’re currently paying. You don’t want to end up paying more over time due to interest.
When to lower your payments
However, under the circumstances mentioned below, lowering your student loan payments may be the better. Sometimes, lowering is your only option.
- A major chunk of your paycheck goes towards your student loan payment, leaving little or nothing to cover your basic necessities.
- You are at risk of late payments or defaulting on your loan. Both of these will show up on your credit report and damage your credit history, making it more difficult for you to get any type of loan or mortgage in the future. Besides, you also incur late fees. If your paycheck does not cover your loan payment obligations, it makes more sense to lower your payments rather than miss a payment.
- You qualify for loan forgiveness. Take some time to check out the qualifying criteria of the various loan forgiveness programs. If you think you may qualify for any one of them, it may be a good idea to lower your loan payments as the balance will be forgiven.
Is lowering your payments right for you?
Before you go ahead and lower your student loans, it is always a good idea to speak to your lender to make sure that you are making the right decision and for the right reasons too. At the end of the day, it’s up to you whether you lower your payments or not. However, there’s a better time to lower your payments and a worse time. If you can’t afford your current monthly payments or risking default, lower it. Yes, you’ll pay for longer and more overall because of accruing interest, but that’s better than defaulting or stretching yourself too thin. On the other hand, if you currently have no issue paying every month, then keep on going. Don’t end up paying more money just because you want to lower payments, not because you need to.
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