The memory problems come from Xanax hitting GABA receptors, the same receptors that relieve anxiety. Therefore, lowering dose will resolve memory impairment, but you'll lose the anti-anxiety benefits too.
Similar drugs? Currently, there aren't any prescribable meds capable of anti-anxiety effects rivalling benzos, at least in the short-term. If you're willing to wait a bit, Nardil has been proven equally effective as Xanax (well, close enough), then there are other MAOIs, SSRIs, NDRIs, newer antidepressants, and any combination thereof.
If I were you, I'd look into more sustainable, less intellect-crushing medications. There are also supplements and stuff if you wanna take it into your own hands.
I was doing some research on this very subject Memory Problems from Benzodiazepines
found this very interesting article on Nootropics / Smart Drugs
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Memory Problems : Anterograde Amnesia #
Benzodiazepines are well known for causing memory encoding problems, so that from the time the effects begin until the substance is substantially metabolized and out of the blood stream, memories may be lost (new ones not encoded). Higher doses, mixing with alcohol or other sedatives, certain benzodiazepines, and individual sensitivies all set how strong the amnesia is.
There has been some work to try to reduce the amnesic effects of benzodiazepines and a variety of different chemicals have been tried to block this effect. Some success has been noted with:
* Ascorbic Acid (Vitamin C) : There is some preliminary evidence that high doses of Vitamin C may reduce or block benzodiazepine amnesia.
o Parle M, Dhingra D. Ascorbic Acid : a promising memory-enhancer in mice. J PHarmacol Sci. 2003 Oct; 93(2):129-135. [PubMed Abstract]
* Piracetam : Piracetam at high doses has been shown to reduce amnesic effects in several drugs, including benzodiazepines.
o Pan JC, Zhang SS. [Antagonism of piracetam on the amnestic effect of diazepam in mice]. Yao Xue Xue Bao. 1996;31(2):91-4. [PubMed Abstract]
o Lenegre A, Chermat R, Avril I, Steru L, Porsolt RD. Specificity of piracetam's anti-amnesic activity in three models of amnesia in the mouse. Pharmacol Biochem Behav. 1988 Mar;29(3):625-9. [ PubMed Abstract ]
* Vinpocetine : Some evidence that vinpocetine may reduce amnesic effects of benzodiazepines.
o Bhatti JZ, Hindmarch I. Vinpocetine effects on cognitive impairments produced by flunitrazepam. Int Clin Psychopharmacol. 1987 Oct;2(4):325-31. [ PubMed Abstract ]
o Storm G, Oosterhuis B, Sollie FA, Visscher HW, Sommer W, Beitinger H, Jonkman JH. Lack of pharmacokinetic interaction between vinpocetine and oxazepam. Br J Clin Pharmacol. 1994 Aug;38(2):143-6. [ PubMed Abstract ] (note this did not show memory improvements)
I would be very interested if anyone has any personal experience with any of these (Smart Drugs)?
http://www.ncbi.nlm.nih.gov/pubmed/8762467?dopt=Abstract
http://www.ncbi.nlm.nih.gov/pubmed/3693872?dopt=Abstract