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3 strategies to reduce your monthly student loan payment

Mitchell Glass
·3 min read
3 strategies to reduce your monthly student loan payment
3 strategies to reduce your monthly student loan payment

The government has extended its freeze on federal student loan payments and interest through September, but if you've got a student loan through a private lender you're probably still stuck making your monthly payment. And, it can be a major financial burden.

Which begs the question: Is there a way to reduce your monthly bill? Is that a thing?

You bet it is. Here are three effective strategies for lowering the payments on private student loans.

1. Leverage lender discounts

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Lender discounts can cut your interest rate — and your monthly payment.

A good way to shave down your monthly payment is to take advantage of any discounts your private lender offers. Yes, discounts — which cut the interest rate on your loan, resulting in a lower bill each month:

Pay-on-time discounts

Some lenders will offer discounts if you make your payments on time. You’re basically rewarded for something you should be doing anyway. To qualify for the discount, you’ll need to earn it. This means maintaining a good payment record for three to four years. Not all lenders offer this discount, but it doesn’t hurt to ask.


Private lenders will give you a quarter-point (0.25) interest rate cut if your sign up to autopay your monthly bills. A quarter-percent may not sound like much, but it can equate to hundreds — or even thousands — of dollars in lifetime savings. And if you never miss a payment, you could qualify for the pay-on-time discount, too.

Loyalty discounts

If you or a family member already has an account or previous loan with a bank or other lender, you may qualify for an interest rate discount on a student loan. For example, Citizens Bank offers a quarter-point rate cut if you or your co-signer has an existing account there. This is similar to a popular car insurance discount that can cut your auto premiums.

2. Consolidate multiple student loans into one

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Consolidating multiple student loans into one can cut your monthly payment.

If you graduated with an assortment of federal and/or private student loans, you may want to consider consolidating them.

You'll no longer have to deal with multiple accounts, interest rates, minimum monthly payments and so on. Instead, you lump the loans together into one account. This not only makes budgeting easier, but it also could lower your monthly payment.

When you consolidate, your new interest rate will be a weighted average of the rates on all your individual loans — so you won’t necessarily save on your rate. But you may find that one consolidated minimum payment each month ends up costing less than multiple smaller, minimum payments.

3. Refinance your student loans

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StunningArt / Shutterstock
When you refinance, you swap your loan for a new one with a lower interest rate.

Refinancing can both shrink your monthly payment and reduce the overall cost of your loan. You take out a new, lower-interest loan that will pay off your existing one. You'll cut your rate, your payment and your lifetime interest costs.

The rates on private student loans have dropped to record lows, making now a perfect time to refinance. It helps if you meet the following criteria:

  • You have excellent credit. Your score should be at least in the high 600s. The higher your credit score, the better the interest rates you’ll get. Today, it's super easy to check your credit score for free.

  • You have a comfortable cash flow. There's no sense in refinancing if you won't be able to afford your payments. If your budget is tight, consider starting a side gig to boost your monthly income.

Whatever you do, don't default on your student loans. You have options. If you’re struggling with your bills, give your lender a call, because you're likely to find the company will be more than happy to help you find a solution.