How to Lower Discover Student Loan Payments

Many people have a hard time paying for Discover student loans because the interest rates can change a lot. It’s tough because Discover doesn’t have plans that let you pay based on your income, like federal student loans do. They can only give you a lower interest rate for a little while or let you stop paying for a short time using deferment or forbearance.

This situation leaves many people in a tough spot. They have to decide between paying their student loans or covering basic living costs.

In my experience, there are only two ways you can permanently lower Discover student loan payments:

1. Refinance with a new lender: Often the first choice for borrowers, refinancing can offer lower interest rates or extended repayment terms. But the eligibility criteria to get a new loan can be a barrier, as it often requires a strong credit score and stable income.

2. Negotiate a settlement: While having to miss payments or file student loan bankruptcy before you can negotiate a settlement is daunting, the payoff can be worth it. You could reach an agreement that lets you pay significantly less than you owe in a lump sum, over several months, or a combination of the two. Be aware that both options can affect your and your cosigner’s credit scores and expose you to collection efforts and wage garnishment.

We’ll go over both options and the temporary repayment options Discover offers.

Related: Discover Student Loan Default

If you’re facing challenges in making your monthly Discover student loan payments, there are several repayment assistance options to help manage your loans temporarily.

• Deferment: This lets you temporarily postpone monthly payments under specific conditions such as being enrolled in school, on military duty, engaged in public service, or undergoing residency/fellowship. Eligibility depends on your current situation, like school enrollment or military status.

• Early Repayment Assistance Program: This lets you temporarily postpone your monthly payments for up to three billing cycles. It’s mainly available to borrowers and cosigners within the first three months of their repayment period, subject to eligibility for certain loans.

• Payment Extension Program: If you’re past due on your loan, this program can help you become current by making three monthly payments or the equivalent amount within three months. It’s available to borrowers and cosigners if the loan has been in repayment for over six months. You can use it once in 12 months and twice in 60 months.

• Hardship Forbearance Program: This option temporarily postpones monthly payments for borrowers experiencing economic hardship. Eligibility depends on the specific circumstances of economic hardship.

• Hardship Assistance Program: If you can’t afford your monthly payment amount, this program offers a temporary reduction in the interest rate to lower your bill. Not all loan types are eligible for this program, and eligibility varies based on the borrower’s need for payment assistance.

• Loan Forgiveness: In unfortunate events like the permanent disability or death of the borrower (or the student, in the case of a parent loan), loan forgiveness may be available.

Call Discover at 1-800-STUDENT to learn more about these options.

Related: Discover Student Loan Forgiveness

Refinancing your student loan can be a smart strategy to reduce your monthly payments. It works by replacing your current loan with a new one, typically offering a lower interest rate, a longer repayment term, or both. Here’s how it can help you:

1. Lower Interest Rates: Refinancing can significantly reduce the interest rate on your loan, which can lead to lower monthly payments and a reduction in the total amount paid over the life of the loan. For example, dropping the interest rate from 10% to 5% on a $20,000 loan could save you over $6,000 across a 10-year term.

2. Extended Repayment Terms: Some lenders offer extended repayment terms, which can further lower your monthly payments. For example, stretching a $20,000 loan over 15 years can reduce your monthly bill by an additional $106.

3. Replacing Forbearance with a More Sustainable Solution: Refinancing can be a more effective long-term strategy if you’re using forbearance to manage your payments. Unlike forbearance, which merely delays payments, refinancing can reduce the overall cost of the loan.

4. Qualification Requirements: To qualify for refinancing, you typically need a credit score in the low 700s, steady employment, and enough income to cover your debts. If you don’t meet these criteria, applying with a cosigner can be an alternative.

5. No Federal Loan Benefits Loss: For private student loans, like those from Discover, there’s little downside to refinancing since they don’t qualify for federal loan benefits, such as payment suspensions under federal programs. You can refinance private loans more than once at no added cost. So you can refinance again once interest rates drop.

Using online marketplaces like Credible or approaching banks, credit unions, and private lenders directly are good ways to compare student loan refinancing offers. Shop around to find the best rate and terms that suit your financial situation.

When you’ve explored all other avenues, like temporary relief from Discover or refinancing, and find yourself at a dead end, negotiating a settlement might be the next step to consider.

This path is a last resort, as defaulting and filing for student loan bankruptcy can hurt your credit score and involve legal complexities. But if you’re left with no other alternatives, these options can offer significant debt reduction and a fresh financial start.

Here’s a breakdown of each:

Default and Negotiate

• How It Works: If you default on your loan, you may be able to negotiate directly with Discover or a collection agency to lower the principal balance you owe and make payments towards that reduced loan balance.

• Expected Settlements: In my experience, Discover usually settles for about 60% to 75% of the owed amount. Typically, they want this in a lump sum, but there have been deals where payments were spread over 24 months and sometimes even 60 months.

• The Catch: Settling isn’t guaranteed. Defaulting will hit your credit score hard and could lead to collection actions and wage garnishment. It’s a risky move but can lead to big debt reduction if it works out.

Related: Private Student Loan Debt Settlement

File Student Loan Bankruptcy

• Filing Early: You don’t need to miss payments to file for bankruptcy, and you can do so even if your only debt is your Discover student loans.

• Possible Outcomes: Bankruptcy might lead to your loans being wiped out, but that’s tough to achieve. More commonly, it can set the stage to negotiate your debt down.

• Big Decision: Filing for bankruptcy is a major step that greatly affects your credit. It’s usually seen as a last resort and should be approached with professional advice.

Related: Can You File Bankruptcy On Private Student Loans?

Know your options. That’s the first step to figuring out what to do with your Discover student loan debt. These loans aren’t eligible for income-driven repayment plans and student loan forgiveness programs. But there are things you can do to lower your monthly payment. Refinancing, negotiating a settlement, or even considering bankruptcy are significant steps. Still, they can lead to a more manageable financial future.

Tackling these challenges can seem daunting, but you don’t have to face them alone. Our expertise has helped many borrowers navigate these complex paths. We find solutions tailored to their unique situations. We’re here to guide you if you’re overwhelmed or unsure about your next step.

Book a consultation with us. We’ll help you find the best way to lower your Discover student loan payments.