minimum payment student loans

What to do when you can only afford the minimum payment

Michael Lux Blog, Student Loans 3 Comments

Making the minimum payments on your private student loans is an incredibly expensive way to pay off debt.  Going this route can often mean that your payments go mostly to interest and barely touch the principal balance on your loans. While it may be great news for your lender, it is bad news for your budget.

Caught in the middle

What makes this situation especially frustrating is that there is plenty of help available for seemingly everyone else.

If you cannot afford your payment, there are a number of programs aimed at helping people out who are struggling.  Sallie Mae/Navient, for example, will lower your interest rate down to 3% if you can’t keep up with the payments.  Other lenders have announced plans to offer similar programs.  Obviously nobody wants to be caught in a situation where they cannot afford even the minimum payment on their loans, but when this does happen, there is some help available.

On the other end of the spectrum, people who can comfortably afford their student loans, have some great options.  Not only can they make larger payments to quickly get rid of their debt, but there is a huge list of companies that offer consolidation at lower interest rates.  The borrowers can leverage good credit and a solid income relative to their debt and turn it into rock bottom interest rates.

What about the middle?

If you are caught in the middle… meaning you can afford to make payments on your loans, but only the minimum, things can be tough.

If you apply for the hardship interest rate reduction, you may get denied because you don’t need it in order to make your monthly payments.  Yet at the same time, you could get denied on your consolidation application because your income is barely enough to cover your debt.

In this circumstance, your best bet may be to approach things from all angles.  Try to work with your lender to get your interest rate lowered because money is so tight.  At the same time, reach out to student loan consolidation companies to see if you can get a lower interest rate elsewhere.  You will be fighting an uphill battle, and it could be filled with rejection, but a few phone calls could save you a bundle.

Even if you can’t get lower interest rates on your loans, there are options…

Make a Plan

Remind yourself that by only making the minimum payments on your student loans, you are just ensuring big profits for your lenders.  Commit to finding a way to make the debt disappear.

If you can’t get lower payments, your only other option is to find a way to free up some extra money to pay for your debt.  This is accomplished in one of two ways.  You can make more money or you can spend less.  Neither of these things are easy, but a little help in either direction can go a long way.

Attack your debt

The key to getting rid of debt is to find a way to pay more than the minimum.  Whether you can pay an extra $10 per month or an extra $1000, the approach should basically be the same.

Go after one loan at a time.  Make the minimum payment on all of your loans except one.  Attack it with every penny you have.  Once that loan is paid off, move on to the next one.  With each loan that you get paid off, you free up more money to go after your other loans.

Some people like to go after the loan with the smallest balance, others choose the highest interest rate.  There are pros and cons to both approaches, but in the end, they both work.

Bottom Line

Making minimum payments on all of your student loans only ensures frustration for you and profits for your lender. Even if you are not successful at locking in a lower interest rate, you still have options to make the debt disappear sooner rather than later.  It may not be easy, but it can be done.


  • Do you ever think that all the options are just intended to encourage you to pay off the loan faster?

    • I don’t. I tend to think lenders prefer that you pay as little as possible so that the loan takes forever to pay off. They make much more money that way. With student loans being nearly impossible to discharge in bankruptcy, they know they will almost always eventually get their money.

  • Minimum payments are certainly not ideal. Even if that’s all you can afford to make today, make sure that if more money comes your way tomorrow, you have it planned out to add to your payements. Raises, bonuses, side income opportunities, inheritances are all things that can get you over the minimum payment hump. The biggest challenge in this situation is avoiding the temptations that always come out when extra money becomes available.