You’re probably browsing the internet looking for at least a few ways to stop that monthly student loan payment from eating up your paycheck, we get it and you’re not alone. As of the writing of this article a typical loan payment for 20-something year olds hovers around $350 per month. On top of that, some of us can even find ourselves on income-driven plans which might actually cause those loan balances to grow over time. Imagine that for a moment. You’re making payments each month in an effort to repay the debt but your balance is actually getting BIGGER instead of smaller… that’s enough to drive anybody into a desperate mindset.


Here’s How Student Loan Interest Rates Work

You probably know the basics already. You sign a contract which states something to the effect of you agree to pay back your loan with interest over an agreed upon time. The rates may vary from lender to lender and particular stipulations will always apply based upon the agreed upon terms. Let’s say for example that you require a loan for $10k and the interest rate is 5% over a 10 year plan. The terms state your payment each month would be $106 throughout the lifetime of your loan but as a result of the interest only $83 of that would actually be going toward your principal balance (that’s the $10k you took on loan) and the rest would be to pay the interest. That means you’re paying $23 a month on just interest alone!


So How Do You GET A Lower Interest Rate?

In many cases you’ll find it’s possible to meet certain criteria in order to lower your interest rate over time. The fact that you’ve signed a contract to repay a set amount over a specific period of time isn’t necessarily carved in stone, you could have options and here are three ideas to help you along.


Setup An Auto-Payment Plan

Yeah, I know… what on earth could this possibly do to lower your rates? Let’s walk through a brief example of how this can often times help you. A lot of finance institutes will offer a slight discount (usually in the 0.25% range) on your interest rate if you let them withdraw the minimum payment amount from your bank account each month. If that small fraction sounds insignificant to you right now just do the math. Referring back to our example of a $10k loan at 5% interest your loan would then become 4.75% interest and you’d pay back about $12,500 in all. Savings are savings and those extra few percentage points can add up over the length of your loan period.


We obviously know that any reduction in rates isn’t out of the kindness of anyone’s heart, it’s more of an enticing perk to let the bank pull money out of your account automatically so they know you’re far less likely to fall behind on payments. They’ll take the small hit in order to better ensure they get what they require back from you. You’ll obviously want to be sure you have enough money in your bank account to cover your auto-payments otherwise you might face overdraft charges or a denial of payment from your bank to your lender in which case you’ll probably be receiving a nasty little reminder in the mail that you’re past due on your payment.


Never Miss A Single Payment

Think of this as an extension to the point previously made above. In many cases some lenders will offer you a reduced interest rate, not much, typically around the same figure as above at just 0.25% but if you make your payments without missing a beat for 3 to 4 years, on time then you could be due for a small rate reduction. In many cases this slight rate decrease will be applied automatically as part of your terms but in some situations it may be best to inquire about it just to be sure.


Just be sure you don’t miss a single payment (setting up an auto-payment plan will help with this) or you could instantly disqualify yourself from becoming eligible for this perk. It’s not much but every bit can certainly help in the long run as well as lending itself to the peace of mind which comes with finally paying off your debts to be free & clear of them.


Hunt For Private Lenders To Refinance Your Student Loan

Let’s assume for a moment you’ve locked yourself into a loan with a higher rate than you care for and you just know you could go out and find a better rate if you really try. Well, why don’t you give it a shot with a private lender who specializes in refinancing student loans? Doing this will give you an opportunity to rework your current student loan with a new lender in an effort to pay off the current loan and pay an even lower interest rate with the new lender.


Working out a new plan with a new lender will basically be just like starting from the beginning. You’ll have a new plan with new interest rates and a new payment structure. Many times doing this is going to require good credit along with a steady income and often times you’re going to need a cosigner. A simple example of a respectable refinanced rate would be 3.5% compared to the original 5%. At that figure you would expect to save somewhere around $1k over the lifetime of your entire loan. That money could be put to better things such as a savings plan for your retirement.


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