How-to Reduce Student Loan Payments: Lower Monthly Education Debt

The Department of Education is allowing qualifying individuals to reduce their monthly student loan payment under the new Income Based Repayment Plan (IBRP). This new program is primarily designed to benefit those people who owe a high amount of debt relative to their income and family size and those people eligible to participate in the Public Service Loan Forgiveness Program. Under IBRP, the minimum payment may be adjusted each year based on a borrower’s income and family size, however; the payment will never exceed the standard 10-year repayment amount. In some cases, individuals may even be allowed to temporarily stop making repayments.

What Loans Are Eligible to be Repaid Under the Income Based Repayment Plan Program?

There are several different types of federal student loans eligible to be repaid under the IBRP program. Stafford, Grad PLUS, or consolidation loans made under the Direct Loan or FFEL program are eligible to be repaid unless specifically excluded. Loan types specifically excluded are parent PLUS loans, consolidation loans that repaid a parent PLUS Loan, or any loans that are currently in default.

How to Apply for Lower Student Loan Payments Under the Income Based Repayment Plan Program

A borrower must first contact their lender to find out if they qualify for the IBRP program. The lender will verify that the type of loan is acceptable and will perform a calculation to determine the borrower’s eligibility to participate in the program. The calculation is based on the borrower’s annual gross income, family size, and state of residency. If this calculation yields an amount lower than the 10-year standard repayment plan, the borrower is eligible to participate in the IBRP program. The Department of Education has also released an Income Based Repayment Plan calculator for borrowers to use in order to estimate if they will benefit from the program.

Advantages of the Income Based Repayment Plan Program

There are additional advantages besides the obvious benefit of lowering a borrower’s monthly payment to less than what would be required under the 10-year standard repayment plan. Those other advantages include but are not limited to the following:

  • Assistance with Student Loan Interest – The Government will pay the monthly interest for up to three consecutive years if the new IBRP payment does not cover the interest on a Subsidized Stafford Loan (made under the Direct Loan of FFEL program).
  • Cancellation of Student Loan Amount – The Government will cancel the remaining loan debt after 25 years if all program requirements are met including making timely month payments under the IBRP program.

Disadvantages of the Income Based Repayment Plan Program

In addition to the benefits of this program there are some inherent disadvantages. The primary disadvantages are as follows:

  • Annual Documentation Requirement – Under the IBRP program, the loan payment may be adjusted each year based on a borrower’s annual income and family size. The borrower must submit updated documentation each year or the repayment amount will automatically revert back to the 10-year standard repayment plan which is not based on a borrower’s income or family size.
  • Increased Student Loan Interest – A borrower will ultimately end up paying more in overall interest the longer it takes for them to repay the loan. Since the payments are reduced under the IBRP program, it will extend the repayment period thus resulting in more interest being paid over the life of the loan. However, note that there is a student loan interest tax write-off available to many borrowers which can be taken on an individual income tax return.

Best Places to Find Student Loans for Borrowers with Bad Credit

If you have a low credit rating, it will be hard for you to obtain any type of credit, to include student loans. Many times, this lack of lenders will deter students from finishing up their education. If you have bad credit, you can still achieve your educational goals. Many lenders will be willing to work with you.

First, contact your local bank of credit union. Many times, these lenders will be more willing to work with you, since you have already established a business relationship with them. Explain your circumstances, and ask for assistance. You may have to agree to have your loan payments taken from your checking or savings account each month.

Another loan provider to contact is Sallie Mae. Sallie Mae works with all types of borrowers, and offers programs to students with bad credit or low incomes. Sallie Mae is a long-standing, reputable lender, and offers low interest rates to all borrowers, regardless of credit rating. You can visit their website to find out how to apply for a loan with Sallie Mae. is another online lender who offers student loans to borrowers with bad credit. If you don’t mind reading through a brief lecture on their site before you fill out an application for credit, this may help you solve your problem of how to pay for school. is also another site that loans money to borrowers with bad credit. They offer 100% guaranteed loans, with fast payout. The interest rates are a bit on the high side, but you can build your credit score by paying your payments on time. This can lead to refinancing your student loans with a company that offers better interest rates.


Student Loans and Falling into the Trap of Higher Education

I have a love-hate relationship with higher education. I think from Elementary school up most of us were taught that higher education is the way to go, that we won’t amount to all that we can be unless we go to college, that we’ll end up working at a fast food joint forever, and so on and so forth. In some families, parents would almost have a heart attachk or react like you said a swear word if you told them that you were unsure about going to college, or that you didn’t want to go at all. As a culture, it is engrained in us that we “have to” or “should” pursue higher education after high school, but WHY? If you were to ask yourself this, in your answer would you be stating your own opinion (truly) or just quoting one or some of the many things that you had been told growing up? “You should go so that you can get a better job” or “You should go so that you can support your family” or “You should go so that you can have a better life than me” or for reason XYZ.

What bothers me is that they left out the part about how higher education still is truly only for those who can afford it. They don’t really talk too much about paying for the next 10 – 20 years or what the difference between a federal and private loan is, or what a good interest rate is. All we’re told is, “You should go to college.” But nothing about how to pay for it and what it really means to be able to afford it. For those of you who were able to get grants and scholarships, or have someone pay for the whole ride for you, I give you kudos. And also for those of you who only had to pay for a small part of your tuition or were able to keep it under $10,000 (or even $20,000), again, I give you a standing ovation.

But, then there’s the rest of us. There are the rest of us that didn’t fit into a category that qualified us for a grant or scholarship, or we got money that covered only a fraction of our tuition, or we only qualified for a certain amount of federal loans because of our parent’s income, even though our parents could barely get by. [So you’re telling me that even though my parents are struggling as it is, their income is too high for me to get more money for college? I wonder, would my parents rather pay their mortgage and have somewhere for all of us to live or would they rather pay my tuition for one class, which was actually more than their monthly mortgage payment? Hmmmm decisions decisions.]

Personally, I had to turn to private loans if I wanted to stay in school when I was in college, which, at the ripe young age of 19 – 20, I had NO idea what I was signing up for. Overall, I didn’t understand all the legal jargon and terms in the contracts since my financial counselor didn’t really describe what I was signing very well. Basically I was told that if I wanted to stay in school I needed to sign these papers so that I could pay for the next quarter, and so on and so forth. But I didn’t really understand what was all involved, all I knew is that I needed to stay in school. I won’t bore you with all the details, but my main motivation for staying in school was so that I could do exactly what I was told according to the brainwashing I had received my entire life: to get a better paying job so that I could live comfortably.

What they left out is that not only are you going to pay those loans back only 6 months after you’re done with school (employed or not), but that it is going to take a nice chunk out of your monthly income, you know, the income that’s supposed to be so high so that you can live “comfortably”. Even though your monthly income is about $2,500 after taxes (if you’re blessed enough to get a job like that or better just after graduating) they will be expecting about $400 of that please, and thank you. $400 is not too bad I guess if you have no real life expenses (or at least have very few), but not everyone can make that boast. I’m not going to lie, higher education did get me the job that I have now with a company that has been around for 125+ years and without my degree I wouldn’t have gotten the job and I’m thankful, but what good is a high paying job when you literally make just enough to be broke, with student loans payments being almost as much as your rent? Plus that is not counting the expenses of running a household and other living expenses.

Ultimately, I feel that student loans are a necessary evil if you have no other options. Once you have them you can’t live with ’em, but realistically, we most definitely could live without them – we would just have to ask ourselves if we are willing to then resort to plan C instead of plan B (where plan A is to just start working after high school, and plan B is going to college). Most of us nowadays don’t have a plan C unfortunately, and most of us are engrained to think that plan A isn’t good enough. I say, make your own choice and find your own path. No one will be able to write your life’s story better than you. Now I should probably get back to work so that I can earn my next payment for Sallie Mae.