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What Can You Do If You Can't Afford a Student Loan Payment?

Louis DeNicola

September 25, 2019

Uh oh, bills are due, and you don’t have enough money to cover everything. You need food to eat, a place to live, and a way to get to work, so the groceries, rent, utilities, car payment, and gas take priority. 

And your student loans? It would be great to make that payment as well, but it might have to be late — just this one time. After all, the loan servicer can’t take back your degree.  

Putting off a student loan payment might not be the worst option. But each missed payment could lead to fees and hurt your credit scores. Left unpaid for long enough, your student loans could go into default.

Once your loans are in default, you might be charged even more fees and bill collectors might even be able to garnish your wages or take your tax refund. Plus, you get kicked off your payment plan and suddenly owe your entire loan balance. In some states, your professional license could be suspended, and you might not be able to keep working. 

It’s a potentially ugly situation, and one you may be able to avoid by taking action once you realize you’re going to miss a payment. 

1. Figure out what types of loans you have 

To start, make a list of your student loans and separate them by loan type. This can be important because you may have different options depending on whether you’re repaying federal or private student loans, and the types of federal student loans you have. You’ll also want to make a list of your loan servicers. 

2. Contact your loan servicers 

Your loan servicers are the companies that manage your student loan payments. You’ll need to work with your servicer if you want to postpone or change your loan payments, and it’s often up to the servicer to determine if you qualify for one of the helpful programs. 

You could contact each of your loan servicers, explain you can’t afford to make the next payment and ask about your options. This step comes with a cautionary disclaimer, though.

Loan servicers aren’t always the easiest companies to work with, the representatives might not understand all the particulars of your situation, and in the past, some borrowers have gotten incorrect or unhelpful advice from their loan servicers. 

You should do your own research to understand all your options (which is, after all, what you’re doing right now. Good job!). But know that you’ll need to work with your servicer to put your plan into action. 

3. If you have federal student loans

Federal student loans have very clearly defined options depending on the type of federal student loan you have and your circumstances. They’re all also free for borrowers. 

If you’re having trouble affording a student loan payment, you may be able to lower or temporarily postpone your payments if you:

  • Switch repayment plans. You may be able to change which federal student loan repayment plan your loan is on and lower your monthly payment amount. Some plans even base the amount on your income, and your payment could be capped at 10 to 20 percent of your discretionary income. The Department of Education defines discretionary income as the difference between your adjusted gross income and 100 to 150 percent of the federal poverty guideline for your area for your family size.   
  • Consolidate your loans. You could consolidate your federal loans, combining them into a new Direct Consolidation Loan. Your overall monthly loan payment amount could decrease when you consolidate your loans, and you may have up to 60 days before your first payment is due after the consolidation is complete. The Direct Consolidation Loan also might be eligible for more repayment plans than your original loans. 
  • Apply for forbearance or deferment. Both forbearance and deferment let you temporarily stop making payments. However, with deferment, the government may pay the interest that accrues on subsidized federal loans. Aside from a few situations when servicers must grant you forbearance, it’s generally up to the servicer to determine if you qualify for forbearance or deferment.

You’ll need to meet the requirements for each option, which you can find on the Department of Education’s website

4. If you have private student loans

With private loans, your options can vary based on the loan servicer. However, private student loans are never eligible for the federal repayment plans, consolidation, or forbearance or deferment.

Some private lenders offer their own forbearance or deferment options. And a few may have hardship programs that can temporarily lower your interest rate or payment amount while you’re experiencing a hardship, such as a medical emergency or losing a job. However, you might not be able to find descriptions of these programs on the lenders’ websites, and they’re often granted on a case-by-case basis. 

Still, it’s worth contacting your loan servicer to explain the situation and try to work something out. Remember, it’s also in their interest to keep you repaying the loan on time, even if you can’t afford the full repayment amount. 

5. Start catching up on your payments ASAP

While delaying or lowering your payments is likely a good short-term solution if you’re having trouble affording your payments, it can also increase your overall long-term costs.

Interest generally continues to accrue at the same rate, but a smaller portion of each payment will go toward your loan’s principal balance. If you’re postponing payments or on an income-driven plan, your loans’ overall balance may actually be growing each month.

If you’re dealing with a temporary setback, try to start making larger payments as soon as possible to keep the balance under control. If there’s a long-term issue, such as a debilitating medical condition, you may be eligible for additional options that will forgive or discharge your entire balance. 

Action over willful ignorance

Ignorance isn’t bliss when it comes to student loans. In fact, it can be a costly mistake. While your student loans might sink to the bottom of the pile when bills start stacking up, you could have options that can make them relatively easy to handle in the short-term.

Unlike a landlord who may only give you a few days grace period, the alternative repayment plans, consolidation, and deferment or forbearance programs that can make it easier to manage your payments without incurring late payment fees or damaging your credit.

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