When you take out student loans, you'll likely be repaying your educational debt for a decade or longer. But what if your financial situation changes during this time? Can you change the payment plan on your loans?
The answer to this question is more complicated than it may seem.
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Changing the payment plan on federal student loans
If you have federal student loans, it's actually pretty easy to change your payoff plan. You'll just need to contact your loan servicer and let them know you want to make a switch to a new repayment program that you're eligible for.
You'll have a number of different repayment plan options for federal student loans. Your choices include a standard repayment plan that has you making fixed payments over 10 years; various income-driven plans that cap payments as a percentage of income; and graduated payoff plans where you become debt-free after a decade but your payment increases over time. You can also gain access to more payoff options by consolidating your eligible federal loans through the Department of Education.
The ability to modify your payoff plan is one of the major benefits of federal student loans. There are also many options to pause payments through deferments or forbearances if you return to school, experience certain financial hardships, or meet other qualifying criteria.
Changing the payment plan on private student loans
If you have private student loans, you're not in the same boat as those with federal student debt. You made a commitment to your private student loan lender to pay your loan as promised when you borrowed -- and you can't just change the terms of your loan after the fact.
While most private lenders offer some limited forbearance options, you won't have as many options to pause your payments. And you can't switch to a different payment plan that has a longer or shorter term or a lower monthly payment. You must comply with the original requirements and pay off your loan on the pre-arranged schedule.
You can, however, choose to refinance private student loans. If you can find a new lender offering a better interest rate, more favorable repayment terms, or a different payoff timeline, you have the option of applying for a refinance loan from that lender. If approved, you'd use the proceeds from the refinance loan to pay off existing debt -- then start paying your new refinance loan under the new arrangement.
Refinancing federal loans usually isn't a good idea because only private lenders offer student loan refinancing. You probably don't want to give up the unique benefits federal loans offer by paying them off with a private refinance loan. But refinancing private loans doesn't come with this big downside since you're only changing from one private lender to a different one.
If you want to change the terms of your private loans, refinancing is the only real option, so it's worth considering. While this is more effort than simply contacting your federal student loan servicer to make a switch, the good news is you likely have a solution available that can alter your monthly payments and payoff schedule no matter what kind of student loans you took out.
