Until Biden cancels student loan debt, here’s how to reduce your payments

There’s no sugarcoating it: Paying off student loans is a pain.

President Joe Biden has been mulling whether to cancel $10,000 or even $50,000 in federal student loan debt per person — but who knows whether or when that might actually happen?

In the meantime, you may be having trouble keeping up with payments or are simply wondering if you’re paying too much.

Maybe you’ve heard that choosing an alternative payment plan and consolidating your loans may lower your student loan payments. The problem is, these strategies can end up increasing the overall cost of your loan.

But is it possible to cut monthly costs and lower the total cost of your loan simultaneously? You bet.

The key is learning how to lower the interest on your student loans — and here are four simple ways to do that.

1. Sign up for auto pay

Many lenders — including the federal government and private financial institutions — offer a quarter-point (0.25) interest rate cut if you sign up to let them automatically deduct payments from your bank account.

Some private lenders, like PNC, take it a step further and shave half a percentage point (0.50) off your rate just for using automatic payments.

But saving money isn’t the only benefit of auto pay. It also helps you avoid accidentally missing payments, which can hurt your credit score.

And as you’ll see shortly, making all your payments on time comes with other perks, too.

To see if you’re eligible for an auto pay discount, contact your lender.

2. Look for loyalty discounts

Some private lenders also offer discounts if you or a family member already has a bank account or had another loan with the company.

For example, Citizens Bank will knock a quarter of 1 percentage point (0.25) off your interest rate if you or your co-signer has an existing account with the bank.

The key word here is existing. In most cases, you’ll be eligible for this discount only if you have an account at the time you take out your student loan — not after the fact.

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So if you’re still shopping around for a loan, make sure to consider loyalty discounts when making your decision.

If you don’t have existing accounts anywhere, consider opening a student checking account with a lender before taking out a loan there. It’s an account you’ll probably need anyway, right?

3. Ask for an on-time payment discount

As mentioned earlier, on-time payments are not only important for building good credit, but they also can save you money.

Some lenders will trim your interest rate if you consistently pay on time for three to four years.

If you’re fresh out of school, you won’t be able to take advantage of this discount right away. But it’s something to look forward to once you sign up for automatic payments.

Not all lenders offer this discount, but when they do, you’ll likely need to take some initiative. Odds are a lender won’t lower your rate unless you ask.

4. Refinance your student loans

The last, and potentially most powerful way to lower your student loan interest rates is to refinance.

Interest rates fluctuate over time. The reasons they go up and down are beyond the scope of this article, but here’s one important thing to remember: After interest rates are cut by the Federal Reserve, you may be able to refinance for a cheaper student loan.

A year ago, when the pandemic first hit, the Fed cut a benchmark rate nearly to zero — and has kept it there. As a result, the interest on student loans has been hitting all-time lows.

Refinancing is essentially taking out a new, lower-interest loan and using it to pay off your original, higher-interest loan. When you do this, the lower rate may significantly cut your monthly payment, reduce the overall cost of your loan and help you pay it off faster.

That said, there are a few caveats. To qualify for refinancing,…