Debt.com strives to provide our users with helpful information while remaining unbiased and truthful. We hold our sponsors and partners to the highest industry standards. Once vetted, those sponsors may compensate us for clicks and transactions that occur from a link within this page.
Question: I have $130,000 in private student loans with 6.65 percent interest. The minimum monthly payment (interest only) is $715. I am currently paying $750. I also have $35,000 in federal student loans with 4.63 percent interest. The minimum monthly payment is $103. I’m paying $105. This loan will be forgiven after 10 years if I don’t make additional payments. I currently make $2,320 monthly and have $2,500 in savings. How should I attack this debt? – Meisha in North Carolina
Actually, Meisha, I think you are doing a great job already.
The 10-year repayment plan is the fastest way out of federal student loan debt, and you will wind up paying the least amount of total interest. While there are other options that may lower your payment, you will wind up paying substantially more overall.
Why? Because no one is going to give you something for nothing. If you want a lower payment now, then the holder of that loan will want their money back later. That means extending the length of the overall loan – which means you’ll pay much more in interest since you’re adding years to the loan.
It’s not clear what the length of your private student loan is. Paying more than the minimum each month will go directly toward lowering your balance.
If I had a magic wand, I would help you to find a higher-income job to ease the pressure you may be feeling. You could then stash a bit into your emergency savings account and participate in any employer matching retirement savings plan.
Overall, it seems like you are at the minimum income point to service your student loan debt. The three primary ways to deal with debt are to increase your income, reduce expenses, or a combination of both.
I would bet you’ve already trimmed your expenses. But here is the inside scoop that most “experts” won’t tell you about reducing monthly payments on student loans or any kind of debt…
If you don’t lower the interest rate, then the only way to lower the monthly payment is to extend out the length of the loan. And as I’ve already said, that only makes the loan more expensive in the long run.
Solutions for student loan debt
Before you do anything, I’d recommend you read the Debt.com report, How to Pay Off Student Loan Debt Fast. It will give you some more in-depth advice on the topics I raised here. You can also compare student loan debt solutions – because if you must extend your loan to get a lower monthly payment, you should try to get the best possible deal you can.
You may also want to explore private student loan settlement, which can be hit or miss and comes with several reservations and caveats. Click the link to see if it’s something worth exploring.
Finally, his situation is Exhibit A for why federal student loans are easier to renegotiate. The federal government has several programs that offer relief. I urge students to be careful about rushing into private student loans.