If you’re wondering what you should do if you can’t pay your student loans, then this post is for you. We’ll go over several options that might help make your student loan more affordable and explain what you should do when you can’t pay them.
Failing to pay your student loan not only hurts your financial health but also affects your credit, so it is important to contact your servicer immediately after your grace period ends, which is typically six months after your graduation or after your enrollment status drops below half-time, to avoid delinquency and default. This article will examine What To Do if you Can’t Pay Your Student Loans.
What to Do if you Can’t Pay Your Student Loans
Being delinquent or in default can have devastating implications. It is in your best interests to do all necessary to prevent skipping payments. This part of the article will outline What To Do if you Can’t Pay Your Student Loans.
Contact the Student Loan Servicer
If you suspect you’re going to miss a payment, contact your student loan servicer right away and explain the situation. Early intervention can help you avoid missing a payment.
Consider Federal Student Loan Forgiveness
You may be eligible for a federal student loan forgiveness program. If so, you will not be obligated to repay any or all of your loans. Teachers, government employees, nonprofit workers, and some medical professionals may be eligible for loan forgiveness, cancellation, or discharge. You may also qualify if you are disabled or enrolled in an income-driven repayment.
Ask your employer whether they will compensate you for student loan installments.
Look into your work benefits to see if there are any debt aid advantages accessible.
Reduce your Spending
If you feel like you can’t pay your student debts right now, try cutting your costs. This can free up funds that you can apply to your monthly loan payments.
Track your spending to see where your money goes each month, and then see if there’s anything you can cut or remove. This can be anything from abandoned gym memberships to streaming services. These costs can accumulate.
Increase your Income
Look for strategies to increase your revenue. Picking up a side hustle is one method to boost your monthly income. Some choices are:
- Dog Walking
- Babysitting
- Selling artwork or other creative ventures online
- Tutoring
- Driving for a ridesharing service
- Freelancing in your professional industry
- Waiting tables and bartending
- Working part-time in a retail store
Asking for a raise or a one-time bonus at work can also be beneficial.
Change your Payment Plan
There are numerous repayment options for federal student loans. You most likely selected the basic repayment plan, or it was set as the default. This 10-year strategy will get you to the finish line faster than some of the other options.
However, if you are unable to meet your payments on this timetable, you may change your arrangements at any time. Several of them are income-driven, which means that the monthly payment is limited to a particular percentage of your monthly wages. After a certain period, the balance is forgiven.
Your repayment plan options for a private loan are fixed for the duration of the loan and differ from one lender to another. If you’re having trouble making your monthly payments, several lenders offer repayment aid options.
Get a Direct Consolidation Loan
This program allows you to consolidate various federal loans. It will not definitely cut your interest rate, as the new loan’s rate will be a weighted average of the loans you’re merging, but it may reduce your monthly payment. This helps you manage your monthly payments alongside your other financial commitments; however, keep in mind that it will increase the total cost of your loan because your loan term will reset. If you only have federal loans or if they make up the majority of your debt, this is an option to consider.
Consider Private Student Loan Refinancing
A private consolidation loan, also known as a refinancing loan, allows you to consolidate federal and private loans into one loan with a single interest rate and payment due date. However, you will forfeit the perks of federal loans, such as more flexible repayment options and progress toward loan forgiveness.
A private consolidation or refinance loan allows you to minimize your interest rate and monthly payment. Keep in mind that extending your repayment time may result in higher interest payments, even if the rate is lower. Do the math to see if this is the best option for you.
Pause your Loan Installments
Federal student loans offer deferment and forbearance options, enabling you to pause payments temporarily. Private loan possibilities may be similar to federal student loans, but they vary by lender, so check with your servicer to see what is available.
Most loans continue to accumulate interest during deferment and forbearance. You can pay the interest as it accumulates, or it will be added to your principal balance when your repayment plan resumes. This is known as capitalization, and it may increase your monthly payments as well as the overall cost of the loan.
Struggling to pay for your student loan payments can be stressful, but there are choices. With the correct remedies, you can get back on track and keep your loans in good standing.
Frequently Asked Questions
What if you never earn enough to repay your college loans?
If you stop working or start earning less than the payback criteria, your payments will stop until you earn more than the threshold. If you exceed the weekly or monthly threshold at any time during the year, such as when you receive a bonus or work overtime, you will be required to refund the amount.
Can student loans be stopped?
In certain circumstances, your federal student debts may be forgiven, canceled, or discharged. This means you will not have to repay some or all of your loan(s). The terms “forgiveness,” “cancellation,” and “discharge” are virtually synonymous.
Is it possible to pause student loan payments?
If you’re in a short-term financial jam, you may be eligible for a deferment or forbearance. You can use either of these options to temporarily halt your payments. However, keep in mind that both forbearance and deferment have advantages and disadvantages. Student loan installments and regular interest rates have resumed.