Why is getting student loan help quickly so important? It’s not just the worried feeling in the pit of your stomach when you’re falling behind on your loan payments-or seeing a near-future date when you will. Miss enough payments and you could face serious consequences.
Along with damage to your credit score, you could have your wages garnished, be sued, or have your tax refund seized. Fortunately, both federal and private loan servicers have ways to help borrowers get back on track. Nonprofit organizations can provide assistance, too. And if those options don’t work, hiring a knowledgeable attorney could be money well spent. Here’s how to get help when you’re struggling with student loans.
Key Takeaways
- If you can’t make your student loan payments, there are several ways to get help, many of which are free-or at least cheaper than ignoring the problem.
- You can apply for an income-driven repayment plan for long-term relief or deferment or forbearance for a short-term break.
- If you’ve defaulted on federal student loans, consider rehabilitating https://badcreditloanshelp.net/payday-loans-nm/ or consolidating them.
- You may also be able to refinance any private student loans you have.
- A nonprofit credit counseling agency can provide advice on student loans and other debts.
Income-Driven Repayment
If you can’t afford your monthly student loan payments now, but a lower payment might be doable, you have several options.
If you have federal student loans, consider applying for an income-driven repayment (IDR) plan. That can be a good choice if your income is low relative to your student loan debt.
Your payment under an IDR plan could be as low as $0. Each year, you will need to recertify your income with the federal government, and your monthly payment will be adjusted based on your income and family size. There are four different IDR plans; the ones available to you will depend on the type of federal student loans you have.
When you choose an IDR plan, you will probably pay more interest in the long run because you’ll owe money for a longer period and be paying down principal more slowly than if you were on a standard 10-year repayment plan. IDR plans forgive your remaining balance after 20 or 25 years of payments, but you may owe federal income tax on the forgiven sum. It’s a good idea to set aside a little money each year so you’ll be able to pay that bill one day.
Income-driven repayment plans are free to apply for (although some private companies will try to get you to pay a fee). You can complete the paperwork yourself in about 10 minutes.
Income-driven repayment won’t solve everyone’s student loan problems. Some borrowers find that because the monthly payment is based on gross income and they have so many mandatory expenses, such as taxes and child support, they still can’t afford the payments. And if your loans are in default, you aren’t eligible for IDR (or for deferment or forbearance, for that matter). You’ll first need to fix the default through loan rehabilitation or consolidation, as explained below.
Deferment and Forbearance
Deferment and forbearance are two ways to temporarily stop making payments or lower your payments on your federal student loans. Some private lenders offer one or both of these options, but with different rules.
Borrowers with subsidized federal loans or federal Perkins loans don’t have to pay the interest that accrues during deferment. Forbearance, on the other hand, does not stop interest from accruing on any type of federal student loan. Private lenders can decide for themselves how to handle interest accrual under deferment or forbearance.