What To Do When You Can't Pay Your Student Loans: A Guide to Managing Your Debt
The student loan crisis is real. An increasing number of Americans are struggling to repay their student loans, and the burden is leading many to delay marriage, kids, buying a home, or even new cars. In response to this uptick in struggling borrowers, the Department of Education has made it easier for those who can’t afford their monthly payments to defer them temporarily. After all, paying back your student loans should not be your primary source of stress as you navigate life. But what happens if you can’t pay your student loans? What are your options? In this blog post, we’ll explore what to do when you can’t pay your student loans in detail so that you know exactly what your next steps should be if you find yourself in that unfortunate situation.
What to do when you can’t pay your student loans?
If you can’t pay your student loans, it may be due to a number of factors. Maybe you’re currently employed in a field that doesn’t pay a lot, or perhaps you’ve been struggling with a bout of unemployment. Whatever the reasons may be, one thing is certain: You need to take action and figure out what to do when you can’t pay your student loans. The first step is to assess your situation and see if you can make any changes that might allow you to bring your loans current. You may also have other options, such as deferring or postponing your payments. If these don’t work, you’ll need to explore your options for deferment, forbearance, or student loan forgiveness.
Delay your payments with a deferment
One way to deal with your student loans is to delay payment. A deferment is when you temporarily suspend your payments. Typically, you’ll qualify for deferment if you are pursuing further education, are unemployed, are experiencing economic hardship, or are a member of the military. However, if your loans don’t fall under one of these categories, you may still be able to receive a deferment if you’re facing extenuating circumstances (such as death of a family member, divorce, or being fired). While receiving a deferment is not a long-term solution, it does give you some breathing room so that you can get back on your feet financially.
Try an Income-Based Repayment Plan
If you’re unable to qualify for a deferment, you may be able to qualify for an income-driven repayment (IDR) plan. IDR plans allow you to pay less on your student loans by setting your monthly payment as a percentage of your income. If you qualify for an IDR plan, you’ll receive a reduced monthly payment amount. For many, this reduced payment will allow them to avoid defaulting on their loans. While each IDR plan has its own repayment terms, the following example can help you get an idea of how it works:
Consolidate your loans
If you’re struggling to make payments on multiple student loans, then you may want to consider consolidating your loans. While the process may sound scarier than the Great Wall of China, it’s actually pretty straightforward and can be done online. If you consolidate your loans, you will combine them into a single loan, which will then be repaid by one monthly payment. Of course, this doesn’t mean that you’ll only have one payment to make — just that the payment will be much larger.
Ask for help from your lender
If you’re unable to make payments on your student loans, you should contact your lender right away. You don’t want to risk falling into default, which can negatively impact your credit score. While you should make an effort to bring your loans current, you may also have other options. For example, if you’re employed, your employer may be able to help you repay your loans. Additionally, your lender may be able to work with you to modify your payment plan.
Summary
Ultimately, there is no one-size-fits-all solution for what to do when you can’t pay your student loans. Your best bet is to speak with your lender to find out what options are available to you. Remember: It’s not the end of the world if you can’t pay your student loans on time. There are several ways you can get back on track, including deferment, income-driven repayment plans, and consolidation.
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